After growing modestly over the past three years, the state’s economy is ready to shift into high gear in 2015, according to a quarterly report Wednesday from the University of Connecticut’s economic think tank.
And while the director of the Connecticut Center for Economic Analysis says the 8.1 percent growth projected for 2015 probably is too good to be true, achieving even most of that would allow the state to far outstrip the national economy.
Similarly, this year’s growth – and another 3.2 percent increase estimated for 2016 – could help Connecticut add as many as 44,000 new jobs by the close of next year.
“We haven’t seen growth like that in 40 years, maybe longer,” said UConn economist Fred V. Carstensen, who heads the center. “Anything close to 8.1 percent is phenomenal.”
But while Carstensen said it might be difficult to achieve such unprecedented growth, even a 6 percent surge in the state’s economy next year would double the likely national average.
“We still haven’t enjoyed that kind of growth in a very long time,” he said.
A healthier financial services sector and more robust growth in the national economy should play a key role in bolstering economic activity here, the report states.
Surging construction employment, as evidenced in part by rising housing permits, also should drive more job growth.
But another key component, Carstensen said, is the economic seeds planted by the state over the past four years.
Chief among those are the new Farmington-based bioscience initiative, which includes The Jackson Laboratory and expanded research efforts at the UConn Health Center, as well as a capital expansion of United Technologies Corp. facilities in Connecticut, backed by up to $400 million in state tax incentives.
“We are finally getting a very important confluence of positive factors,” the UConn economist said.
Citing plans for a new genome sequencing lab in Branford as one example, Carstensen said, cutting-edge businesses in other states are following Connecticut’s bioscience and aerospace industries more closely.
“Venture capitalists are paying attention to what is happening in Connecticut,” he added.
After a four-year economic contraction that was among the worst in the nation, Connecticut didn’t truly emerge from the Great Recession until 2011.
But since then, the state has enjoyed “continuous, month-over-month job growth, adding a stunning 25,000 jobs in 2014,” the center wrote. The Nutmeg State’s growth since 2011 has outpaced that of all of its neighbors except for Massachusetts.
And if Connecticut gains about 40,000 new jobs over the next two years, it finally would have recovered the full 121,000 positions lost in the last recession.
But Carstensen added that this growth potential, while huge, “is still fragile. We need to build on this success. We cannot do as we have often done in the past and say, ‘That’s great. Now we can sit back and enjoy it’.”
Connecticut still faces several challenges, the report states.
Once known for the strength of its manufacturing sector, the state now relies on services to account for 72.5 percent of its private-sector employment.
Between 2007 and 2013, wages in most service sectors grew more slowly than the national average, or shrank.
“We need to consider that the reality we live in is an increasingly unstable and uncertain world,” the report states. Analysts cited political tensions in the Ukraine, the Middle East and other global “hot spots” as just one of the variables that could affect economic growth projections at any time.
Similarly, volatile currency markets, the threat of deflation in European markets, and stunning drops in oil prices and most other commodities, all pose a serious risk.
All of these risks, Carstensen added, highlight the need for heightened and sustained state investments in its transportation and information technology infrastructures, both of which lag those in many competing states.
“This report indicates that because of the governor’s work, we’re on the right track and poised to grow even more this year, even if the state meets just a portion of the projected growth,” Malloy spokesman Devon Puglia said. “That’s exactly why he’s proposing smart choices today for a better Connecticut tomorrow – a historic vision for a best-in-class infrastructure that would boost our economy, an overhaul of the sales tax that would reduce the rate to the lowest point since the ‘70s.”