On Jan. 6, 560 business leaders gathered at the Marriott Hartford Downtown for the annual Economic Summit and Outlook, hosted by CBIA and the MetroHartford Alliance and sponsored by Webster Bank. That same day the nation's unemployment rate dropped to 8.6%: the lowest in nearly three years.
Keynote speaker Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston, called that good news, noting that the country's GDP is also improving and that inflation should stay low.
He cautioned, however, that the labor market is still weak and that escalating tension with Iran and its possible impact on oil markets, the European Community's financial troubles, and the possibility of "excessive fiscal austerity here and abroad" are lurking as major downside risks.
Rosengren was joined at the Summit by speakers Susan Herbst, president of UConn; Nick Perna, economic advisor to Webster Bank; Benjamin Barnes, secretary of Connecticut's Office of Policy and Management; and Rep. Craig Miner (R-Litchfield), ranking member of the legislature's Appropriations Committee. Barnes and Miner spoke on a panel with moderator Keith Phaneuf, State Capitol reporter for the Connecticut Mirror.
Despite the drop in unemployment, Rosengren noted that small businesses are still not hiring and have been "severely hampered by the decline in house values and the tightening of credit standards.
"We're just not seeing the creation of new businesses," he said, pointing out that employment and business growth nationally have been mainly in midsize and larger companies, where credit has been more available.
Overall, said Rosengren, the jobs recovery has been very slow, with the U.S. still far away from its previous peak employment, and the longer our unemployment rate stays high, the harder it will be to get back to pre-recession levels of 5%-6%.
He told the audience that he expects the Federal Reserve to continue promoting growth and encouraging employment, looking for ways to target improvements in housing and small business especially.
Perna explained that Connecticut's rate of jobs recovery has been about the same as the nation's: both getting back about 30% of the jobs lost in the recession: but that our state's recent jobs growth has been about half that of the U.S. rate of 1%.
Nevertheless, Perna noted, Connecticut's GDP growth has kept up with the nation's, largely because of our state's higher per-worker productivity. He said that Connecticut's productivity has historically outpaced the nation's and will continue to do so.
"In the last five years, Connecticut's per-worker GDP grew 2.5% annually versus 1.5% nationally, putting us near the top of all states," said Perna. "Looking ahead, about two-thirds of the state's overall economic growth will come from productivity and one-third from jobs."
Perna agreed with Rosengren when it comes to international threats, arguing that Connecticut's economic health, like the nation's, is very sensitive to global economic developments: particularly in Europe, because of our state's strong trade ties to that part of the world.
The Research Connection
If UConn President Susan Herbst has anything to say about it, Connecticut's economic health will be getting a big boost from the state's flagship university.
She described plans for bringing together "world-class scholars and researchers with men and women who are creating startup businesses," adding that UConn is already home to 22 incubating companies and has a "strong pipeline of additional requests."
UConn's ramped-up role as an economic driver centers on two major programs that have received financial backing from the Malloy administration and the General Assembly: a new technology park in Storrs and the Bioscience Connecticut initiative at the UConn Health Center in Farmington.
The tech park, said Herbst, "is designed to spark the development and commercialization of new ideas for manufacturing and advanced product development in the aerospace, defense, biotechnology, and energy industries."
Its anchor facility: slated for completion in 2015: will be built on a 300-acre parcel on the UConn campus and provide large, flexible-use laboratories with highly specialized equipment to top academic researchers and industry scientists. It is expected to generate hundreds of jobs during design and construction and many more going forward.
The Bioscience Connecticut initiative will leverage the UConn Health Center "to advance our state's economic and healthcare goals by making Connecticut a leader in bioscience," Herbst explained.
The project includes increasing the enrollment in the Health Center's medical and dental schools, upgrading its patient care facilities, and increasing its research innovation capacity through upgrades to the existing research facility and doubling the amount of incubator space for small-business startups in the bioscience field.
Herbst noted that the Bioscience Connecticut initiative is already paying off, referring to the state's investment in bringing The Jackson Laboratory to the Health Center campus. The deal struck with the global genetics research firm includes a commitment by the company to create 300 jobs over ten years.
The Fiscal Factor
Attracting more high-growth companies like The Jackson Laboratory will depend in part on the state's ability to address the fiscal problems that have long contributed to its high-cost, business-unfriendly reputation.
State budget director Benjamin Barnes told the Summit audience that the Malloy administration is committed to solving those problems and has set the state "on a course to deal with its unfunded and underfunded pensions, the debt in the state's unemployment compensation fund, and the move to GAAP accounting." The way to do that, he said, is to have "positive financial results and then apply excess revenues to the long-term gaps over time."
Questions persist, however, about whether the state will achieve all of its targeted budget savings in order to balance this year's budget, including $160 million from cost-saving actions and suggestions by state employees.
Barnes' fellow panelist Rep. Craig Miner argued that the state's recent borrowing from bond funds to pay operating costs "should set off alarms" and that while the state continues to await cost-saving ideas from state employees, "money continues to go out the door, and we're having to borrow to pay our bills."
Barnes, who is confident that the state will hit its savings targets, countered by saying that temporarily using bonds proceeds to pay operating expenses is "perfectly appropriate" and that if the state had been using GAAP over the past decade, there would have been enough cash on hand.