Although Connecticut’s economy grew throughout 2010 and is expected to continue growing at a “glacially slow” pace, progress isn’t going to heat up a lot next year, according to CBIA Economic Pete Gioia.
However, he says a double-dip recession is unlikely and jobs will increase in the months ahead. Various estimates have the state adding between 6,000 and 22,000 net new jobs in 2011. That’s just a fraction of what is needed—Connecticut lost more than 100,000 jobs in the recession—but it’s a start.
Gioia sees economic growth averaging less than 3% of GDP and Connecticut GSP (gross state product) for 2011. Bright spots will be in exports and business-to-business sales. Service and manufacturing firms tied to international activity will outperform the average company, and some may even have excellent years, but they will be outliers.
Another positive is that fewer firms will fail or suffer substantial losses. Most, however, will continue to struggle, showing small year-over-year gains or flat sales, because consumers of all kinds are still worried.
Personal income influences spending, and after a year of negative personal income growth, positive growth is expected in 2011. With low inflation, any growth above 2% (which is likely) adds to consumer spending power.
The Jobs Picture
Recent job growth in Connecticut has been uneven, with a gain of 5,300 jobs in October but a net loss of 800 jobs year over year. Job gains were posted in retail trade, professional and business services, education and health services, and leisure and hospitality.
Sectors that lost jobs included construction, manufacturing, wholesale trade, transportation and warehousing, utilities, information, financial activities, and government. Hindering job growth is weak business confidence and continued uncertainty regarding federal and state policy decisions that impact businesses’ return on investment.
Policymakers in Washington and Hartford must make decisions that will improve the business climate and boost confidence if we are to grow our economy faster than 3% and get people back to work.
Other Indicators to Watch
Recent CBIA surveys show that about half of executives expect their firms to be profitable over the next year, about 20% expect a net loss, and 30% expect to break even.
On the positive side, companies are making investments to innovate, develop new products and services, and update equipment.
One Variable We Can Control
Daunting fiscal challenges at the federal, state, and municipal levels continue to be a drag on business investment and economic growth.
Connecticut has to solve its fiscal crisis, but in a way that will encourage business investment and job creation. Lawmakers need to focus on reducing the size and cost of state government while minimizing revenue-enhancement measures.
Those are important pre-conditions for when conditions truly start to improve in 2012 (as many economists predict) and companies begin deciding where to invest and add jobs.
Connecticut should not risk losing that investment or those jobs to other states or countries with more favorable business conditions.
For more information, contact CBIA’s Pete Gioia at 860.244.1945 or firstname.lastname@example.org.