Will Budget Issues Threaten Job Growth?

11.20.2014
Economy

Connecticut added 3,600 new jobs in October. And while our post-recession recovery still trails much of the region and the nation, it does represent a steady growth pattern over the last year.
In releasing the monthly employment figures, the state’s Department of Labor said October marked the eighth month of gains in 2014, with growth in 10 of the last 12 months.
The agency did revise September’s figures, lopping 1,000 jobs off its originally reported gain of 11,500 positions. Even with the revision, that still represents one of the best months in the last two decades.
The unemployment rate for September remained unchanged at 6.4%, the lowest it’s been since November 2008, while the size of the labor force now has grown almost 2% this year.
‘Long way to go’
“This is a very positive number,” said CBIA economist Peter Gioia. “This means the unemployment rate that has dropped through the course of the year is real and not brought about by labor force changes.”
“While this is good news and continues a pattern of growth for the Connecticut economy, we still have a long way to go.”
Connecticut’s unemployment rate remains above the national rate of 5.8% and is the second highest of the New England states: Rhode Island is at 7.6%, while New Hampshire’s 4.3% jobless rate leads the region.
The state now has recovered almost 74% of all jobs lost during the recession. Massachusetts has regained 150% of the jobs it lost, while the U.S. crossed the 100% mark earlier this year.
Fiscal challenges
October’s employment report interrupted a post-election period of bleak news about the state’s short-term and long-term fiscal health.
Governor Dannel Malloy this week ordered nearly $48 million in emergency budget cuts, the first step in offsetting a projected $100 million shortfall for the current fiscal year.
His budget chief, Ben Barnes, told reporters “we have entered into a period of permanent fiscal crisis.”
“These rescissions are painful for some, but tough decisions are necessary to keep the state on firm fiscal footing. State government will live within its means, and we will not raise taxes,” Barnes said.
“As difficult as some of these reductions are to make now, there are more, even tougher choices as we look ahead to next fiscal year.”
The current year’s fiscal problems and projected multi-billion dollar budget deficits for the next budget cycle will challenge the state’s ability to grow the economy and sustain strong job growth.
“It’s critical that we make smart decisions to improve Connecticut’s economic competitiveness if we want to see continued positive job growth,” Gioia said.
Tax relief?
Despite the budget concerns, Governor Malloy this week said he expected to implement planned tax relief, including restoration of sales tax exemptions for clothing and footwear under $50; a new income tax credit for retired teachers; and an increase in the Earned Income Tax Credit for working poor households.
However, he told the Connecticut Mirror he had “not taken a position” on allowing the 20% corporation tax surcharge to expire at the end of this year. That surcharge, imposed as a temporary measure in 2011, was already extended once.
Malloy also repeated a pledge not to raise taxes, with a number of lawmakers voicing concerns about the direction the administration and legislature will take next session in addressing the state’s fiscal problems.
“I’m scared every day that there are going to be increases in taxes, fees, and regulations that are going to put a damper on the economy and the business community,’’ Senator L. Scott Frantz (R-Greenwich) said.
“Ultimately, the state of Connecticut will end up losing, rather than gaining, because they are alienating those who are the tax base.’’
Industry sectors
Four of the state’s 10 industry sectors added positions in October, led by education and health services, which posted 2,400 new jobs for the month.
Trade, transportation, and utilities gained 1,500 jobs, followed by leisure and hospitality (1,000) and professional and business services (700). Other services was unchanged for the month.
Government led the five declining sectors, with a loss of 1,300 positions, followed by financial activities (-400); manufacturing (-100); construction and mining (-100); and information (-100).
Four of the six labor market areas added jobs, led by the 1,100 new positions in Norwich-New London.
Waterbury added 600 jobs, New Haven 700, and Danbury 300, while Bridgeport-Stamford-Norwalk was unchanged.
Hartford lost 600 jobs in October.

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