Washington’s political gridlock, and the corresponding “economic shocks” it has dealt the nation, effectively has prolonged Connecticut’s recovery from the Great Recession by about a year, the University of Connecticut’s quarterly economic journal reported Tuesday.

The winter issue of “The Connecticut Economy” found that more than a half-dozen partisan battles between 2009 and last October’s federal government shutdown have taken a steep toll on job growth in the Nutmeg State.

The journal also reported that while Connecticut had solid job growth in the third quarter of 2013, there remain signs of weakness with losses in key areas such as manufacturing and financial services.

“You could say we’ve lost a year of recovery because of the artificial uncertainty that’s been injected into the economy,” economist Steven P. Lanza, the journal’s executive editor, said during a presentation Tuesday at the Capitol.

Lanza worked with an “economic policy uncertainty index” — a formula developed by economists at Stanford and the University of Chicago — that assesses very specific downward economic trends.

In particular, the index tracks these problems in the wake of daily news media reports regarding economic policy battles on Capitol Hill, federal tax breaks set to expire and forecasts for inflation and future government spending.

The analysis was especially telling, the journal reports, given the partisan brinksmanship that has dominated Washington politics since the depths of the Great Recession more than four years ago.

Among those times of “economic shock” analyzed in the latest UConn journal were:

  • The weeks just before the February 2009 passage by Congress of the $787 billion economic stimulus plan;
  • The late 2010 deal that extended Bush-era tax cuts through 2012 in exchange for a federal payroll tax holiday and extension of emergency unemployment benefits;
  • The near shutdown of the federal government in April 2011, and the debt crisis that followed four months later. This also led Standard & Poor’s, a major Wall Street rating agency, to downgrade the nation’s credit rating;
  • The near-plunge over the so-called “fiscal cliff” in January 2013, which would have involved a series of across-the-board income tax hikes as well as major federal budget cuts. Those cuts, part of the sequestration effort, would begin two months later;
  • And, October’s federal government shutdown during which 800,000 workers were furloughed. At the same time, a partisan standoff over raising the federal debt limit wouldn’t be resolved until Oct. 16, one day before the United States would have exhausted its borrowing capacity.

The uncertainty index showed that job growth generally would weaken shortly after these “shocks.” And while the damage generally would peak after about nine months, its effects would be felt for as long as three years

“The inability of federal lawmakers to manage the country’s fiscal affairs in an orderly way has done more than provide grist for newspaper headlines and cable TV talking heads,” Lanza wrote. “It has hobbled the economy’s ability to recover from its worst recession since the Great Depression.”

Connecticut lost nearly 120,000 jobs during the last economic downturn and has regained only about half of those positions to date.

“Absent any shocks, … Connecticut would have added jobs significantly faster than it did,” Lanza said, projecting that roughly 20,000 more jobs would have been added between early 2009 and now had there been a more stable political climate.

Given that Connecticut has added about 4,600 jobs per quarter since the recession ended, this 20,000 gap represents about one year’s worth of job growth squandered.

Similarly, the average unemployment rate of the past two years likely would have been about 0.5 percentage point less, he said.

Connecticut gained 5,300 jobs during the third quarter of 2013, Lanza said, calling this solid improvement. But while he said there is the potential for job growth to accelerate modestly in 2014, “there are some worrying signs.”

All of the job growth in the third quarter occurred in July, with Connecticut losing jobs in August and September, and remaining relatively flat in October.

More importantly, the Nutmeg State lost jobs in the third quarter in key areas such as financial services, manufacturing and construction. And much of the growth has been in retail jobs, which generally pay lower salaries.

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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