The deadlock over the national debt in Washington, a stalled economy, and an unemployment rate above 9 percent are causing big concerns for Connecticut businesses, according to the Connecticut Business & Industry Association’s second-quarter 2011 economic survey.

Connecticut and the nation are facing a jobs crisis. In the last two months alone, Connecticut lost nearly 10,000 jobs and production indicators have weakened.

What’s more, Connecticut employers are adjusting to new withholding requirements for personal income taxes, and coping with additional assessments on unemployment taxes.

“The downturn is being largely driven by national factors that we hope will be resolved in the coming weeks,” says CBIA Vice President and Economist Peter Gioia.

“Connecticut’s economy had been showing slow but modest growth coming out of the recession. We hope this report is just a short-term dip and that our economy will bounce back and businesses will report improvements in the next quarter survey.”

Nearly three-quarters (74 percent) of business respondents expect the state’s economy to worsen. That’s up from 46 percent last quarter and the highest rating since fourth-quarter 2008, the peak of the recession. Only 6 percent expect the state economy to improve, the lowest number since fourth-quarter 2008.

The numbers are slightly better for the national economy. Nearly half (48 percent) expect the U.S. economy to worsen, up from 43 percent a year ago. Twelve percent expect improvements down from a high of 45 percent in the fourth quarter 2010, but the lowest number since fourth quarter 2008.

The expectations of business leaders for their own firms aren’t much better. Only 19 percent of respondents said conditions will improve in their businesses, the lowest number since the second-quarter 2009.

Nearly a third (31 percent) expect conditions within their own firms to worsen, the highest number since third-quarter 2010. Fortunately, more than half of respondents (52 percent) don’t see any downturn and expect conditions at their firms to remain the same. That’s the highest number in more than three years.

“The economy is clearly impacting Connecticut businesses and negatively affecting performance indicators, including production, sales, productivity, and the size of a firm’s workforce, which help predict company performance going forward,” says Gioia.

“Because businesses are unsure about the economy, many still are reluctant to take risks, invest in their companies, and hire new employees.”

Performance indicators:

  • Nearly a quarter of respondents (22 percent) said sales and production decreased, up from 10 percent and 15 percent in the first-quarter 2011 and fourth-quarter 2010, respectively.
  • More than a third (35 percent) of respondents reported increased sales and production, down from 49 percent last quarter.
  • Thirty-six percent said productivity has increased, down from 45 percent last quarter.
  • Twelve percent said productivity decreased, compared with a low of 8 percent in the fourth-quarter 2010.
  • On the hiring front, 19 percent of business executives expect to increase their workforce in the next quarter, down from the past two quarters. Twenty percent expect to cut their workforce, the highest percentage in more than a year.

“We’re not seeing the type of job growth we certainly hoped to see coming out of a recession,” Gioia said. “The recovery for jobs so far has been very anemic, and the state’s latest employment report further highlights the importance of Governor Dannel Malloy’s proposed special fall legislative session focused on jobs.”

Gioia added, “The business community is hopeful that the legislature will respond to the jobs crisis and really be aggressive in putting a better business climate together in Connecticut that will encourage employers to invest here, to grow here, and ultimately create jobs here.”

The survey was conducted by CBIA in June 2011. A total of 397 businesspeople responded, for a 15 percent response rate and a margin of error of +/- 5 percent.