Forecast: State’s Economic Growth Trails Region, Country
The New England Economic Partnership released its biannual economic forecast this week. The bottom line for Connecticut? Some progress, sluggish pace.
NEEP says the state’s recovery will continue to trail the region and the United States over the next four years, constrained by a weakened financial services sector, a “business climate perceived to be anti-commerce,” federal sequestration, high energy costs, and uncertainty in the defense industry.
“You’re going to see a decent three or four years for the state of Connecticut,” Edward Deak, chief economist for the partnership’s Connecticut forecast, told the Connecticut Mirror.
“I think it’s pretty good. It’s just not as effervescent as the region’s or the nation’s economic track.”
NEEP expects slow growth in the state’s financial activities, retail, construction, government, and healthcare and few if any net job gains in manufacturing and information services.
The non-profit research group believes the federal shutdown and sequester, along with higher federal and state taxes, will limit job growth to 14,400 positions this year, about the same as for 2012.
Expectations are more optimistic for 2014 and 2015, with NEEP predicting 18,700 jobs next year and 24,900 new positions the following year.
By the second quarter of 2016, NEEP expects the state will recover all jobs lost in the recession — through August 2013, Connecticut regained 62,200 of the 121,000 positions lost in the economic downturn. (The U.S. economy has recovered 78% of the 8.6 million jobs lost in the recession.)
Trailing region, country
And, by the last quarter of 2017, NEEP forecasts employment in the state will reach the March 2008 peak of 1.713 million jobs, with a 6.4% unemployment rate (it was 8.1% in August 2013).
Those projections are much lower than NEEP’s regional and national forecasts. For instance, NEEP predicts a national unemployment rate of 5.4% at the end of 2017 and average national job growth over four years of 2.1%, compared with 1.2% in Connecticut.
Deak told the Mirror‘s Keith Phaneuf that while the state added some jobs through major state taxpayer-funded investments, most post-recession job growth was “because we’re being dragged along by the national recovery.”
“We are an old state and our workforce is not growing,” he said. “We are a high tax state. We’re a high cost to do business state.”
The NEEP report notes that as of August this year, Connecticut accounted for 1.205% of the country’s non-farm jobs, down from 1.223% the previous August and 1.26% in 2001.
That raises concerns about growth prospects, with the report warning “a prolonged downturn in the Connecticut economy followed by a repeat of earlier jobless recoveries could leave Connecticut further behind in terms of relative job growth.”
“The financial activities, business services, and healthcare super sectors are being squeezed in Connecticut,” the report says.
“Therefore, the quality, along with the quantity, of near-term job growth becomes an important issue.”
NEEP says national and global events represent potential obstacles to Connecticut’s recovery, along with additional state-specific factors, including:
- Pre-recession history of employment and income growth heavily dependent on wage and bonus gains in the still weakened financial services sector;
- State and local budgets still under stress from a slow recovery in tax revenues combined with rising social service demands;
- Rising taxes at the federal level and the increased state income tax rate on Connecticut’s high income earners;
- The budgetary continuation of the federal sequester which holds potentially significant negative effects for Connecticut;
- A housing recovery constrained on the construction side by the high cost of available land and permitting delays;
- A state business climate perceived to be anti-commerce, especially by small firms;
- High cost of energy.
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