UConn journal: Job growth may lag until second half of 2013 — or later if fiscal cliff isn’t averted
Connecticut was able to slow its loss of jobs — if not reverse the trend — in the third quarter of 2012, and might have to wait until the second half of 2013 to see significant growth, the University of Connecticut’s quarterly economic journal reported Wednesday.
But the winter issue of The Connecticut Economy also warned that even this dour forecast might be scrapped for something worse — including as many as 20,000 job losses — if the Nutmeg State tumbles, along with the rest of the nation, over the fiscal cliff Jan. 1.
“The U.S. economy has toiled mightily to recover from its worst recession in two generations,” wrote economist Steven P. Lanza, who added that the gross domestic product — the value of all goods and services produced — has averaged just 2.2 percent annual growth over the past three years. “Connecticut hasn’t done half bad, considering.”
The state has gained 30,000 jobs since the recession ended just over three years ago, but the employment outlook has been poor for more than a year, and particularly in the second and third quarters of 2012.
Connecticut lost 1,700 jobs between July and September “following a 4,000 job swoon” between April and June, the journal notes.
Citing a survey of four dozen economists polled by the Wall Street Journal, the national economy is expected to grow at 2 percent for most of next year. “The problem is that with momentum building so slowly, Connecticut’s economy will struggle to post more than nominal job gains” the next year, wrote Lanza, who projected that about 7,500 positions would be added.
Employment remains high in Connecticut.
Connecticut’s unemployment rate rose marginally in October, climbing to 9 percent. The November numbers are expected next week.
Besides high unemployment, other problems Lanza cited include flat wage growth and an unresolved European debt crisis that is slowing economic growth globally.
If any of those factors proves to be more damaging than expected, Connecticut could add as few as 4,000 new jobs next year, or even see more losses.
But Lanza quickly added “that dour outlook assumes we avoid the dreaded ‘fiscal cliff,'” referring to the series of federal tax increases and budget cuts mandated by law if Congress and President Obama fail to compromise on deficit-reduction measures by Dec. 31.
“The consequences for Connecticut employment would be disastrous,” Lanza wrote.
And the estimate of 20,000 jobs lost doesn’t include further reductions that would result if federal deficit-reducing measures include dramatic cuts in the military budget, which would slam hard into Connecticut’s defense industry.
“Political analysts are cautiously optimistic that, in the wake of the president’s re-election and modest legislative gains for the Democratic Party, recalcitrant Republicans will negotiate an agreement to avert disaster,” Lanza wrote.
In that event, he added, the state could begin adding as many as 1,000 jobs as soon as the next quarter, and could set a pace to grow up to 10,000 new jobs by the end of 2013.
“That’s not a particularly remarkable performance,” Lanza wrote, “but it sure beats cliff-diving.”
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