UConn journal: Larger forces than CT leaders shape state’s economy

As the 2014 gubernatorial race takes shape, the contenders are quick to assign credit or blame to Gov. Dannel P. Malloy’s administration regarding gains and losses in Connecticut’s economy.

But according to the University of Connecticut’s latest quarterly economic journal, state policy decisions play an increasingly subordinate role to regional, national and international forces — particularly when it comes to any economic trend lasting longer than six months.

The Fall 2013 issue of The Connecticut Economy, presented Wednesday morning at the Legislative Office Building, also tracked a state economy that built some much-needed momentum during the second-quarter of 2013.

But it also warned that the Nutmeg State likely will wait until 2017 to regain most of the jobs it lost in the most recent recession, lagging two years behind the national average.

“Policymakers are often preoccupied with efforts to grow jobs,” economist Steve Lanza, the journal’s executive editor, wrote in the latest issue.

Job growth not only gives workers “a shot at the American Dream,” but “also improves the re-election chances of current officeholders.”

Yet “in a small state like Connecticut, with 1.5 percent of the nation’s population and barely one-tenth of its land mass, how much of our economic fate lies in our own hands?”

Connecticut has lagged behind the nation in terms of job growth for seemingly the entire seven decades since World War II, just as its wages — and cost of living — have topped the U.S. average.

Over that period, the nation has added jobs at a yearly rate of 2 percent, while Connecticut jobs have grown at 1.3 percent. And since 1991, the average national growth has been 0.9 percent, while Connecticut has seen barely any growth.

Even during the height of the Cold War, when Connecticut was adding jobs at an annual clip of 1.9 percent, the national growth was 2.2 percent.

So how surprising is it that, locally, the economy has recovered just under half the jobs lost in the last recession while the national overall has recovered almost three-quarters? 

Connecticut’s job market “spent most of last year without doing much of anything, just treading water,” Lanza said.

But recently the local picture has begun to improve. The state gained about 6,800 jobs in the second quarter of 2013, the journal reported, more than double the 3,000 jobs added in the first three months of the year.

“We do get a sense that the economy is building some momentum,” Lanza said.

On a broad scale, there is much consensus over the reasons for the state’s lag, Lanza wrote. These range from high taxes and a crumbling infrastructure to educational achievement gaps and inadequate investments in strategic industries.

“What’s not clear,” the economist added, “… is how much we can control local outcomes, even under the most enlightened of policy regimes.”

Connecticut’s economy is part of a Northeast regional system that is embedded in a national structure competing on a global scale.

Factory jobs, which accounted for 30 percent of our workforce in 1969, are now just 10 percent. Financial activities, as well as leisure and hospitality, play a larger role now than they did in the early 1990s.

Have they made us more sensitive to regional, national and international trends? Or have those trends shaped the labor demographics in Connecticut?

Using a model that charts quarterly economic data, Lanza posited that “Connecticut-specific innovations” could drive a shift in, say, job numbers, but typically over just a short period, such as six months or less.

“As the timeline lengthens, however, the picture reverses,” he said.

Continuing to chart Connecticut jobs over one year, the fluctuations tend to coincide more with national factors, such as changes in the gross domestic product — the value of all goods and services produced by U.S. businesses.

Go two years out, and state forces play an even smaller role, according to the UConn journal model, which projected an impact of less than 10 percent on job growth trends.

“In the medium and long run, … national and regional effects reign supreme,” Lanza wrote.

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