Millions in federal unemployment benefits end in September. That spells trouble for CT’s economy.
Connecticut’s economy faces a major test later this summer when millions of dollars in supplemental federal unemployment benefits expire.
And while the state already has recovered more than 60% of the jobs it lost since the pandemic began in March 2020 — and job growth has been strong in recent weeks — economists are mixed in their assessments.
“We’re definitely moving in the right direction,” said state Department of Labor economist Patrick J. Flaherty, adding that Connecticut’s successful COVID vaccination program has been vital to the recovery. “That has really been the driver for economic growth.”
The state has regained about 185,000 of the 292,000 jobs it lost during the pandemic — most of which disappeared in March and April of 2020 when the virus hit Connecticut the hardest.
But getting people re-employed quickly is crucial: Massive supplemental federal unemployment benefits, which helped keep Connecticut families financially afloat during 2020 and the first half of this year, are scheduled to expire on Sept. 4.
The largest of these, the Federal Pandemic Unemployment Compensation program, added $300 per week to state benefits — which also max out at $300 weekly — for hundreds of thousands of households.
According to the state labor department, which administers all of these programs, more than $9.1 billion in benefits — 72% of which were federal and 28% funded by the state — were paid out between March 2020 and the first week of July of this year.
Unemployment benefits from all federal programs were worth about $74 million per week to Connecticut households in early July.
The most recent employment news has been promising: The state labor department recently reported a 7.7% unemployment rate for May, down from 8.1% in April, as Connecticut gained 7,800 jobs in one month.
During normal, non-pandemic times, “We would say, ‘Oh My God, the economy is overheating!” Flaherty added.
“These are good signs that people are able —and feel safe enough— to return to work,” said Labor Commissioner Dante Bartolomeo, who said those job numbers stem partly from a vaccination program that leads the nation.
Through June 30, nearly 2.1 million Connecticut residents, about 57% of the population, were fully vaccinated, and almost 2.3 million or 62% had received at least once dose of a vaccine.
Bartolomeo noted that the state’s child care service industry, which suffered greatly during the pandemic, still is recovering, and the lack of program slots remains an impediment to job growth. But it is targeted to receive additional state support through the new two-year budget Lamont and lawmakers approved last month.
And many employers, buoyed by the increased economic activity this summer, are nonetheless looking to add help quickly.
“This is a job-seekers market right now,” Bartolomeo said. “The jobs are available, and employers are trying to fill them.”
But filling another 107,000 jobs, to reach pre-pandemic employment numbers, is no easy task.
Connecticut lost about 120,000 jobs during the Great Recession, which ran from late 2007 through mid-2009. And even after a decade — right up until the pandemic began — Connecticut still had recovered about 80% of those positions, about 95,000 jobs.
In other words, Connecticut needs to regain about 130,000 jobs just to get back to where it was in mid-2007 before the economy tanked.
Flaherty said his projections show those jobs could be regained by mid- to late-2022, but he added “those are a little optimistic.”
University of Connecticut economist Fred Carstensen warned in May that it could take the state up to a decade to fully recover, and economist Donald Klepper-Smith, who was Connecticut’s chief economic advisor in the late 2000s, quickly agreed with Carstensen that any recovery would likely take the long route.
“We’ve had the worst-performing state economy over the past decade,” Carstensen said, adding a lack of state investments in transportation and information-technology infrastructure over the past 10 years will slow our recovery as well.
Further compounding matters, most of Connecticut’s job growth during the prior decade was in retail and hospitality, two of the sectors hit hardest by the pandemic.
“It’s harder and harder to create jobs in Connecticut,” Klepper-Smith said, adding the federal pandemic relief — granted not only to the unemployed, but also to state and local governments here — is “creating a false sense of security, giving the impression that our economic situation is copacetic. It’s not.”
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