Economic Forecast 2014: Warming Up?

Policy decisions could impact whether state is part of national upturn

By Lesia Winiarskyj and Dave Conrad

Nick Perna, economic advisor to Webster Bank, discusses his expectations for Connecticut’s economy over the next few years.

It’s been a long time coming, says Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston, but he’s now “reasonably upbeat” about the U.S. economy and the forecast for 2014.

Speaking at the 2014 Economic Summit & Outlook in Hartford last month, Rosengren said he expects the economy to grow at a rate of about 3% in 2014: a nice step up from the average 2% growth in 2013.

Driving the uptick is greater consumer confidence, a housing market on the rebound, and the waning impact of fiscal austerity measures such as the sequester.

The recovery “still has a long way to go,” Rosengren cautioned, noting that the Fed would like to see a return to full employment (an unemployment rate of 5.25%, as compared to the current 7.3%) and an inflation rate of about 2%.

Upward Trajectory

Nick Perna, economic advisor to Webster Bank, is cautiously optimistic too.

Though interest rates will likely remain at or near zero for the short term, Perna predicts a potentially significant increase by 2016-2017. He also expects 15,000-25,000 new jobs in Connecticut over the next year (about the same as last year), 25,000-35,000 new jobs in 2015, and greater increases later: in 2017. Income, he estimates, will rise about 6% per year over the next two years, outpacing the cost-of-living increase, at 2%.

Personal bankruptcies should also fall to half the level they were at the lowest point after the Great Recession.

But, Perna notes, Connecticut’s comeback has been tepid compared to that of neighboring states New York and Massachusetts, whose recoveries have been more robust. He blames Connecticut’s lagging recovery on its severe budget deficits: $3 billion in 2011 and over $1 billion a year for the next biennium.

“I agree that the U.S. economy is on an upward trajectory, that we are on an upward trajectory. But [Connecticut’s legislature] has the capacity to change that trajectory for the worse or better.”

“It’s important to help Connecticut legislators understand the impact of their policy decisions on jobs in Connecticut,” says Jason Howey, president of OKAY Industries.

Howey was part of the 2014 Economic Summit and Outlook panel discussion on advanced manufacturing that also included Chris DiPentima, president and CEO of Pegasus Manufacturing; Sean Crowley, vice president of global manufacturing for Covidien; and Elliot Ginsberg, president and CEO of the Connecticut Center for Advanced Technology.

Connecticut doesn’t necessarily have to be “the cheapest place to do business,” said DiPentima, “but we need to be cost-competitive.” While 2014 looks like a relatively flat year, he adds, his customers: companies like Boeing, Airbus, UTC, General Electric, and Rolls Royce: see steep growth starting in 2015, as a result of private research and development investment. “They’re looking to go from zero to 60 in a two-year period,” he said, and they expect a quick return on their R&D investment.

Ginsberg and Crowley also forecast a significant ramp-up in manufacturing and the need to expand capacity. Without a pipeline of qualified workers, they say, the industry’s workforce shortage threatens to undermine its potential for growth. (CBIA is conducting a survey on manufacturing workforce issues early this year; we will present our findings at Made in Connecticut: 2014 Manufacturing Strategy Summit in Cromwell this spring.)

Sponsored by Webster Bank, the 2014 Economic Summit & Outlook was presented by CBIA and the MetroHartford Alliance.

Lesia Winiarskyj, a writer and editor at CBIA, can be reached at lesia.winiarskyj@cbia.com. Dave Conrad is a senior writer at CBIA. He can be reached at dave.conrad@cbia.com.