Connecticut’s economy recovered faster than the nation’s in 2011, an uncharacteristic development that could continue in 2012, according to the latest analysis from the University of Connecticut’s economic think tank.
But the Connecticut Center for Economic Analysis also reported Friday that the new bioscience initiatives and the New Britain-to-Hartford busway launched by Gov. Dannel P. Malloy and the General Assembly may offer positive signs for Connecticut’s economy as early as next year, even though they won’t be complete.
“Even with the short-term pain caused by initiatives to rebalance the state budget, CCEA projects the Connecticut economy’s real output and employment will continue to grow modestly,” UConn economists wrote. They were referring both to $1.5 billion in new state taxes and approved spending for 2011-12 that — despite being 5 percent over last fiscal year’s level — still is more than $1 billion below the level needed to maintain current services.
Unlike several other states, Connecticut deferred tough decisions about spending cuts and tax increases in 2009 and 2010, relying on billions of dollars in revenues from one-time sources to support ongoing programs. When Malloy took office in January, the built-in deficit he inherited for 2010-12, according to nonpartisan legislative fiscal analysts, approached $3.7 billion.
This state’s efforts to climb out of the recession also were buoyed in the early going by a modest recovery on Wall Street. Nearly 40 percent of all state income taxes come from quarterly filings — the primary means used to report capital gains, dividends and other major investment income.
The Dow Jones Industrial Average, the leading indicator of the health of blue-chip stocks, reached its low point during the last recession on March 6, 2009, when it closed at 6,626. The Dow entered 2011 at just under 11,600 points.
Connecticut’s real gross domestic product, the value of the state’s economic output after adjustments for inflation have been made, should finish this year at 2.64 percent, compared with just 1.85 percent growth for the nation.
But over the 2012 and 2013 calendar years, this state’s economy should slow, “returning to the historical pattern in which the Connecticut growth rate lags (behind) America’s national rate,” the center wrote.
Connecticut’s growth rate could shrink to 0.7 percent while the nation’s rises to 2.6 percent.
But the center, which is led by economist Fred V. Carstensen, also said that some major initiatives taken by Malloy and the legislature should begin fighting that downward trend — right away.
Malloy and the legislature agreed during the regular legislative session to invest $864 million to revitalize the UConn Health Center’s Farmington campus, then committed another $291 million in an October special session to help develop a new genetic research facility for Jackson Laboratory on the campus.
Plans also are progressing for a $567 million rapid transit bus line linking New Britain and Hartford, a project expected to relieve commuter congestion on Interstate 84 in Greater Hartford.
These initiatives alone will add another 7,000 direct and indirect jobs to the already expected job creation of 11,000 over the eight quarters from September 2011 to September 2013, particularly through the addition of construction jobs, the center wrote.
“Further building on this emerging (economic) cluster and the acceleration of other major projects” will further stimulate the economy, the report states. These initiatives alone could bump up the modest, 0.7 percent growth projection closer to 1 percent in 2012, with more expansion in 2013.
“These initiatives more than double the rate of job creation the CCEA baseline projection anticipated,” the report adds. “This high level of payoff from these strategic public sector investments serves as a powerful reminder of the scale of benefit such government initiatives can deliver when properly designed.”
“It’s obviously good news and an indication that Connecticut appears to be headed in the right direction,” Malloy’s senior policy adviser, Roy Occhiogrosso, said Friday.
“I think it’s an indication that Governor Malloy’s commitment to an honest, balanced budget is paying off,” he said, adding that the administration’s plan to focus state investments in construction jobs and growth industries such as bioscience also are clearly paying dividends.
“But the governor also has been very clear that Connecticut has a long way to go and that there is more work to be done,” he said.