Fed projects economic slip for CT in first half of 2020
The new forecast from the Federal Reserve Bank of Philadelphia lists nine states, including Connecticut, that could suffer economic contraction.
While state officials remain hopeful that government coffers will continue to swell for another four years, a new federal forecast warns Connecticut’s economy is poised to slip over the next six months.
The latest monthly projections from the Federal Reserve Bank of Philadelphia identified nine states at risk of contraction by mid-2020, the most in more than a decade.
And while the 0.13 % decline in Connecticut’s economic index is the mildest of the nine falling states — far less than West Virginia’s 2.56% drop — it still casts a negative cloud over a state that lagged the nation in recovering from the last recession.
Other states at risk of contraction include: Montana, Oklahoma, Pennsylvania, Delaware, New Jersey, Vermont and Kentucky.
By comparison, the Philadelphia bank’s economic index for the nation is projected to grow 1.4% over the coming six months.
“I think it’s accurate. I personally expect the state to contract unless it gets its job numbers up.”
CBIA Economist Peter Gioia
The economic forecast is based on the coincident index, which is calculated largely on the unemployment rate and payroll. The state leading indexes are also based on manufacturing surveys, unemployment claims, housing permits and the interest rate spread between the 10-year Treasury Bond and the 3-month treasury bill.
It may or may not lead to a recession, which is a significant economic decline in national gross domestic product lasting for at least two consecutive quarters.
Even though Connecticut’s projected slip was the smallest of those on the list, an economist for the state’s leading business lobby was taking it seriously.
“I think it’s accurate,” said Peter Gioia, economist for the Connecticut Business and Industry Association. “I personally expect the state to contract unless it gets its job numbers up.”
Connecticut still has recovered only about 85% of the 120,000 jobs it lost during the last recession, which ended in mid-2009, according to some economists, or early-2010 according to others.
And early job losses in 2019 helped Connecticut to close the year, according to unofficial totals from the state Department of Labor, with job growth of just 0.2%. By comparison, job growth nationwide is estimated for 2019 at 1.5%.
Gioia noted Connecticut not only has been slow to recover jobs, but also to regain wages, often replacing high-paying positions with retail and other service jobs.
“We’re growing and replacing manufacturing jobs, which is good, but we’re much weaker at replacing financial services jobs, which pay well,” he said. “I think we have a very fragile economy.”
Monica Jorge
Rep. Jason Rojas, D-East Hartford
Gioia stopped short of forecasting Connecticut’s entry into a recession in the next six months, but said when the next major downturn happens, Connecticut could be one of the first states to enter it.
Gov. Ned Lamont’s budget office did not comment on the federal reserve bank’s projections, but the House chairman of the General Assembly’s tax-writing committee said state officials need to be wary.
“I’m taking a far more cautious approach to how we handle the next legislative session, and how we think of the state of the state,” said Rep. Jason Rojas, D-East Hartford, who co-chairs the Finance, Revenue and Bonding Committee.
Both the governor’s budget agency and the legislature’s nonpartisan Office of Fiscal Analysis issued a revenue forecast in mid-November that projected Connecticut can expect state income tax receipts to grow 13% over the next four years.
This would help Connecticut push its $2.5 billion emergency budget reserve over its statutory limit — equal to 15% of annual operating costs or about $3 billion — and allow officials to use hundreds of millions of additional surplus dollars to reduce the state’s massive pension debt.
But both legislative analysts and the governor’s budget office base their revenue forecasts on short-term economic trends.
In other words, neither agency can project when Connecticut is likely to enter a recession, and all revenue forecasts are conditional.
Rojas agreed with Gioia that Connecticut has strengthened its manufacturing sector. But the East Hartford lawmaker also said, “We took our legacy industries for granted for a long time,” adding that government must do more to support the insurance, financial services and health care industries.
CT Mirror Reporter Ana Radelat contributed to this story.
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“We took our legacy industries for granted for a long time”. True statement by Rep. Rojas with “a long time” meaning decades. A more accurate statement, however, is that the state tax and regulatory policies continue to burden ALL industries, large and small, to the point of fleeing Connecticut. What state would impose a mandatory wage and a disastrous FMLA on a business community yet to recover jobs from the last recession 11 YEARS AGO?!! Only Connecticut.
Rep. Rojas, seems to be showing a far greater understanding of how serious our competitiveness problem has become (better late than never) let’s hope that is contagious with other Democrat leaders. The commission on fiscal stability and growth already gave our politicians the blueprint to fix our competitiveness problem. Our politicians have not taken the really difficult steps yet because those steps will be very unpopular with their base (especially in urban centers) but they are necessary. Waiting makes the problem worse and our economy will never magically correct itself, decades of bad economic policy must be repealed, starting with lowering taxes for the middle class and major reducing the overall cost of living here.
Clearly we need to vote in more Democrats, enact tolls, continue to increase taxes, and ignore spending cuts. Our tax and spend Government and their state union allies will surely pave the way for newfound prosperity in the land of steady habits.
Dont worry. Tolls are going fix this. Also it has been 6+ months since this and minimum wages came to be. Where is the announcement from companies coming here? I don’t see any new foundations or cranes up in any city for the buildings for us to grow. Please understand this does not make happy. I want CT to succeed. I live here too but our government has to change direction or we are going to die
We should remember two critical points: 1) Adding jobs does NOT translate into economic growth unless they are high-quality, good paying jobs. CT has added thousands of jobs since 2010–and our economy mostly shrank measured in terms of output. Adding jobs in hospitality and health care (home health aides) is not growth, but that is where we added jobs. 2) Connecticut has been shrinking in most dynamic sectors: finance, insurance, manufacturing, information. We have not yet implemented a coherent economic development strategy that exploits our strengths (e.g. genomic research) or address our weaknesses (e.g. IT infrastructure). CT has very valuable assets, but we seem to build two legged stools: the result is a whole much smaller than the sum of the parts.
Fred, did you count the $1M per Jackson Lab job that Governor Malloy paid for with our tax dollars?
All the data and analysis aside, where other states have made significant gains, the fair market value of my house hasn’t moved since the 2009 recession despite maintenance, investments and improvements. Tolls and taxes on everything imaginable including the air I breathe is not going to bring large scale employers to the state. Amazon came and what’d we get? A lot of warehouse jobs to employ those losing their jobs in retail brick and mortar buildings. That the State of CT is the state’s largest employer is a significant indicator that something is amiss. That the state won’t get a control over its employment costs is the cement shoe that won’t stop drowning the taxpayer. The cost of living here is simply too high. I’m looking to leave this sinking ship called CT.
“[state] government must do more to support the insurance, financial services and health care industries.” Really?
The insurance and financial services companies in downtown Hartford have a cumulative revenue of over $300BN per year – that’s $1BN (BILLION) DOLLARS PER DAY. And the healthcare industry is more than healthy.
Whether the state economy gains infinitesimally or loses infinitesimally doesn’t matter much. The state will continue to muddle through, supported by its legacy industries and Fairfield County. In the meantime the population will continue to get older, higher wage recipients will continue to leave, and new jobs will continue to be lower paying.
Given that economic growth is now concentrated in a few large cities, the future will resemble the present, though with slow erosion. CT is unlikely to recover, whatever the state government does, until growth again occurs in smaller places.