Recession expands Connecticut’s pockets of poverty

Though Connecticut’s overall economic health remains higher than that of most states, the last recession dramatically expanded the income gap that sparked the Occupy movement, both in Hartford and nationally, according to a new report from the University of Connecticut.

University economists, who released the latest issue Monday of their quarterly economic journal, also warned that the modest job growth from the first half of 2011 plunged to “paltry” levels between July and September as public-sector job losses took their toll.

“Connecticut, along with most other northeastern states, has gotten off fairly lightly in absolute terms” compared with other sections of the country, economist Arthur W. Wright wrote in the latest issue of The Connecticut Economy. But “the data also suggests a longer-term increase in the incidence of poverty within the Nutmeg State and shows that the recession has hit several counties particularly hard.”

Most economists say that what has become known as The Great Recession began nationally in December 2007 and ended by July 2009. In Connecticut, which tends to both enter and leave economic downswings later than the national average, the recession generally is charted between March 2008 and the first few months of 2010.

For more than three decades, national poverty rates — generally a measure of a household’s ability to buy basic food supplies — have largely tracked recessions closely. Those rates usually spike early during a downswing, then inch slightly higher as it nears its end.

Between 2006 and 2010, the national percentage of households below the poverty margin rose from 12.3 to 15.1 percent. By comparison, Connecticut’s rate jumped from 8 percent in 2006 to 8.9 percent in 2007, but it had fallen back to 8.3 percent by 2010.

But using a fairly recent U.S. Census Bureau methodology for estimating poverty rates on a sub-state basis tells a different story, Wright wrote.

The poverty rate for New Haven jumped by one-fifth during the last recession and now hovers close to 12 percent. In Hartford and Windham counties, the rates grew more modestly, but still reached 10 percent.

And the pockets are starting to spread beyond their traditional centers. Though the overall poverty rate for Fairfield County remains at about 8 percent, it was less than 7 percent before the last recession. In proportional terms, the Fairfield County rate grew faster than that of any other county.

Between 2009 and 2010, the state’s household income dropped 6.7 percent, tied for worst nationally with Vermont and Nevada. At the same time, statistical measures of income inequality for Connecticut worsened, said economist Steven P. Lanza, publisher of The Connecticut Economy.

The causes of the inequality are the result, in part, of the state’s failure, over the past two decades, to recognize the situation, Wright said.

“Connecticut has been resting on its laurels,” he said. “We are a relatively high-cost, high-income state. We haven’t really been getting the job growth or the income growth that we would need to change this for some time.”

That problem is compounded, at least in the short term, by an end to the modest job gains the state enjoyed this year, Lanza said.

After gaining about 4,000 jobs in the first half of the year, the state lost 1,400 jobs in the third quarter of 2011. That has left Connecticut with a “paltry” growth average of 800 jobs per quarter, Lanza said.

What changed dramatically between July and September? The federal, state and municipal governments are balancing their budgets by reducing staff.

“It’s really the public sector that is, in many ways, hamstringing this recovery,” Lanza said, noting that public sector employment dropped by 1,500 positions in the last quarter. That drop coupled with continued losses in professional and business services and the financial services sector overwhelmed modest gains in health care and manufacturing.