Even as challenges continue to confront Connecticut’s economy, several factors could be moving into place to help speed the state’s recovery, says a national economist--and there are some things the state could do to nudge them along.
Speaking via video to Governor Malloy’s recent Economic Summit, Moody’s Analytic’s director Steve Cochrane had good news for the 600 political, business and academic leaders anxiously waiting to hear some.
Cochrane said he sees four positive factors supporting a Connecticut economic recovery:
- Midsize and larger businesses are in good financial shape, after shedding debt and increasing their cash liquidity. Consequently, many companies are in position to grow and expand their workforces.
- Productivity growth is strong, with unit labor costs falling.
- Households are deleveraging their debt, too, increasing their ability to address costs other than credit.
- The banking industry is well capitalized, and their current lending portfolios in positive shape. This “should provide the fuel to grow the economy,” said Cochrane.
He also observed that many businesses have kept tight reins on spending over the last several years and are now finding themselves in need of many upgrades. That should lead to new spending on equipment, software and other aspects of their capital stock.
Cochrane also sees exports driving growth. Connecticut’s export share jumped from 5% of GSP in 2005 to its current 7%, and there’s room to grow even more, he said.
One of the ways to expand exports is to widen the playing field for potential markets, said Cochrane. Connecticut is heavily concentrated in exports to Europe, but that’s a little risky with the region’s unstable financial condition.
Expanding the state’s industrial base could also help in spurring the economy and jobs. While most states get job growth from 70% to 80% of their industries during expansions, said Cochrane, Connecticut generally sees growth from only about 50% to 60% of its industries. That’s a limited base of potential job creation.
A wider range of industries would give the state a “more effective, more stable path of economic growth,” he added.
Another area for improvement in Connecticut is expanding the size and quality of the labor force. With the state’s aging population, and large numbers of baby boomers nearing retirement, Connecticut will be pressed to maintain a pipeline of skilled workers.
One way to do that, said Cochrane, is to focus on developing the community college system as a feeder for the next generation of workers. Other states, he said, have successfully used their community colleges to support new and growing industries, and as a practical path to move new talent into the workforce.
Most important, said the economist, if Connecticut is to make the improvements necessary and position the state for long-term economic and job growth, there has to be communication “across all sectors”—including government, academia, and the business community.
And that, of course, was the reason for the Governor’s economic summit.