Personal income surged nationally this year in a way not seen since 2011 — but growth in Connecticut still lagged most of the nation, according to a new analysis from Pew Charitable Trusts.

Personal income in the U.S. rose by 2 percent in the first quarter of 2019 compared with the same three-month period in 2018. Connecticut’s growth was only about one fourth of that.

More importantly it marked the second consecutive quarter that personal income grew in all 50 states — a benchmark not reached in eight years, according to Pew analysts.

Personal income includes wages and interest earnings, income from rent and public assistance programs — but not capital gains — This is an important distinction, especially in Connecticut and other northeastern states with economies heavily reliant on investments and financial services. For example, nearly one-third of all Connecticut state income tax receipts come from quarterly filings, which are heavily influenced by capital gains and dividends.

Still, personal income is an important benchmark that shows changes in most of the earning capacity for a significant portion of the population.

Twenty-four states tied or exceeded the national average growth rate of 2 percent led by West Virginia, where personal income rose 4.3 percent between the first quarter of 2018 and the first three months of 2019.

But over the same period, growth in Connecticut was just 0.6 percent, tied with New York for 48th, only Rhode Island (0.3 percent) and New Hampshire (0.2 percent) ranked lower.

“It kind of mirrors what we’ve been saying to policymakers: Our growth still hasn’t been measuring up to the rest of the country,” said Joseph F. Brennan, president and CEO of the Connecticut Business and Industry Association.

University of Connecticut economist Fred Carstensen Ryan Caron King / Connecticut Public Radio

Brennan added that while there are good things happening with Connecticut’s economy, “when you look at the macro numbers, we’re not keeping pace.”

Economist Fred Carstensen, who heads the University of Connecticut’s economic think-tank, said this state still is feeling the effects of the first few years after the last recession ended. Between 2010 and 2014 Connecticut badly lagged the nation, not only in jobs recovered, but also in wages regained.

In other words, the state lost many high-paying jobs during the recession, particularly in key areas like financial services and advanced manufacturing, and replaced them with lower paying service jobs.

“We haven’t recovered yet, in real terms, in jobs or in output,” Carstensen said. “This recovery has been extraordinarily weak.”

Office of Policy and Management Secretary Melissa McCaw

According to Pew analysts, Connecticut ranks dead last among states in personal income growth between the fourth quarter of 2007 — just before the last recession began — and the first quarter of this year.

While the nation has averaged 1.9 percent growth over this period, Connecticut is up just 0.8 percent.

“There is no question Connecticut has struggled to recover from the Great Recession,” said Office of Policy and Management Secretary Melissa McCaw, Gov. Ned Lamont’s budget director. “Even as our state’s private sector has recovered all of the jobs lost during that contraction, the data has shown that we have replaced the lost higher-wage jobs with lower-wage positions, which would stymie a measure such as growth in personal income across our entire state.”

McCaw added that “our work is not done. We must focus our efforts on making our state a place where businesses can grow and thrive, where we can provide a pipeline of talented employees, and where our public and private universities and community colleges produce the next generation of employees with the specialized skills our businesses need. We need to continue to invest in workforce development, whether it is providing training to someone pursuing a new career, supporting growth in Advanced Manufacturing Technology Centers, creating a fertile environment for investment in startups, and increasing access to and opportunity for education beginning with preschool.”

Don Klepper-Smith, an economist with DataCore Partners, said even as Connecticut’s recovery began to pick up steam in 2015 and later, it hasn’t been enough to overcome all of the problems during the last recession and the initial years of sluggish recovery,

Economist Don Klepper-Smith CTMirror.org file photo

“Jobs create income, spending and consumer confidence and those linkages play out over time.” said Klepper-Smith, who was Connecticut’s chief economic advisor under former Gov. M. Jodi Rell.

“Job numbers drive the income numbers,” he said, adding that Connecticut is one of just two states that still hasn’t recovered all jobs lost during the last recession.

And while Klepper-Smith and Carstensen both said Connecticut is at risk of slipping into recession over the next year, Carstensen added this state still has some positive economic momentum in one key area.

“There may be a silver lining in that we are real strong in the defense industry and they are ramping up right now,” he said, referring to job growth at Electric Boat in Groton, Pratt and Whitney in East Hartford and Sikorsky Aircraft in Stratford. “This could carry us a long way.”

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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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13 Comments

  1. And the state’s solution as articulated by McCaw are more “programs” (aka spending) on the “pipeline” of future employees.

    You cannot have future employees without employers. And employers do not find Connecticut an attractive place in which to do business. All real estate and entertainment development in Hartford is heavily subsidized by the CDRA – no company invests in the state otherwise.

    Cut spending and taxes and we don’t need more ineffective “programs” to provide employees – they’ll come when the economics make sense. Which they don’t now.

  2. Secretary McCaw, your bosses budget is NOT pro-growth, it is anti growth. These income numbers would be much worse if the defense industry was not here and progressive democrat policies do very little to convince large employers to come here but more importantly stay here.

  3. Great article. However, the message is somewhat depressing. Additionally, the unmentioned impacts of excessive property and income taxes, combined with one of the highest public utility costs in the nation, may be keeping both employers and employees from contributing to income growth. Unfortunately, if things don’t soon change for the better. The situation in the State of Connecticut could become grave, very grave.

  4. What angers me about these click bait doom and gloom articles is that they fail to mention that Connecticut already has among the highest median incomes in the country. Add to that we are No. 1 in disposable income which means when cost of living verses income is considered we are at the very top. Hard to push salaries even higher when you are already there.

    1. Those high median incomes largely reflect the Gold Coast adjacent to New York City whose incomes are typically not earned in CT businesses. Excluding the income of Gold Coast residents CT is just an average income State. One lacking modern middle class cities with public employment its largest industry. Not much integration into the burgeoning hi-tech world. Not a promising future. Especially given its stagnant economy for an entire decade – unique in the nation. Continued “tax and spend” policies are not poised for relief.

      1. That is not true. All of Connecticut’s counties have median incomes well above the national average. Studies have shown that even without a Fairfield County, Connecticut is a very wealthy state.

      2. Take a look at the per capita incomes of our largest cities – Bridgeport, New Haven, Waterbury, Hartford, etc – where almost 1 in 3 CT residents live, many at or below poverty levels, and then see how CT stacks up.

        The usual figure is that several hundred thousand Gold Coast families provide about 40% of CT’s income. BTW CT has 3.6 million residents. Omitting the Gold Coast – essentially an appendage of NYCity’s economy – CT is not one of the nation’s highest income States. Not surprising when it lacks modern cities and public Unions by numbers are its largest industry category.

        Finally, world over growth takes place in cities. Without modern cities CT’s future is glum. Especially since we’re exporting our college grads to other States seeking real opportunities. If CT was “well fixed” they’d be looking for good jobs right here in CT.

      1. I don’t have to check my sources. I have done extensive research on this. Connecticut is No. 1 in Real Disposable Income in the country even when you consider the high cost of living and taxes. We have the third highest Real Gross Domestic Product. We are among the highest in median incomes. Our unemployment rate is under the national average and is well under what is commonly considered full employment. Unlike other states, during the recession our economy never hit the lows those high growth states had. We don’t need to have a high growth rate because we are already in a very good place economically.

        https://datawrapper.dwcdn.net/DkNFP/1/

  5. There’s something else going on in CT’s job market. Though the numbers reported by employers have been abysmal, the (statistically weaker) household survey has been showing much better growth.
    From an article on the subject by Dan Haar in CT Insider at the CT Post, the household survey has shown an increase of 125,500 more people who say they’re working since 2013. He speculates that the difference might be caused by people whose jobs are in other states and those working in the gig economy who are not reported by employers. Some (probably large) part of the difference is statistical noise, but irregular jobs and being employed where the jobs are both exist.
    People living in CT are doing what they can to survive, at least until they can move.
    By the way, I’m glad the article mentions the gains in defense industries. Policies in Washington have been a (maybe the) bright spot for the state.

  6. The numbers presume private employers. The article fails to take into account that the largest employer in the state is the State itself. https://yankeeinstitute.org/2018/03/16/ninety-four-percent-of-connecticut-state-workforce-is-union-controlled/

    There are no significant new employers coming to the state and the state employees have had dismal wage growth due to the pressures on the budget. The lack of personal income growth in CT is easy to understand.

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