Economic Recovery Remains Slow and Problematic in the StateJune 17, 2011
Peter M. Gioia
Vice President & Economist
ConnecticutBusiness & Industry Association
The economic recovery is in its 24th month, but growth has been disappointing due to frequent obstacles, including surges in oil and commodity prices that have prevented steady improvement or noticeable acceleration. While some areas of the economy are strong, including exports and commodities, others, especially housing and general construction, seem stuck.
The latest employment figures showed growth, but at a subpar rate. U.S. job growth accelerated in April with 268,000 private sector jobs added. Connecticut also did well in April, adding 7,900 jobs with most industries creating jobs, including manufacturing. In March, however, the state lost 6,500 jobs. In addition, a key area savaged in the recession — construction —continued to lose jobs in April. Connecticut has only replaced 31,000 out of 119,000 lost jobs in the recession to date. Job creation can cure a lot of ills in consumer spending, housing and tax receipts over time, but downside risks remain numerous and could slow or choke off what growth we have.
While consumer spending is still slowly rising, consumer confidence has fallen in the past few months. High gasoline prices (which may have peaked) have rattled consumers and hit their pocketbooks hard. Housing continues to drag with extremely weak starts and continued foreclosure issues despite very low mortgage rates.
All of these issues are impacting Connecticut businesses, as the most recent CBIA economic survey released in mid-May shows. Business people across the state have mixed opinions about whether the state’s economy will improve or worsen, and they don’t expect the national economy to get better anytime soon. But the good news is that businesses expect improvements in their own firms, and performance indicators are up. Both of these are factors which could point to more hiring.
According to the survey, 37 percent of respondents said conditions will improve in their businesses, the highest number in a year. Only 17 percent expect conditions within their own firms will worsen, the lowest number in more than a year.
When it comes to the state’s economy, 21 percent expect improvements—the highest number in a year. But that must be tempered with the nearly half (46 percent) saying they expect the state’s economy to worsen. That’s up from 37 percent last quarter and 43 percent a year ago.
Thirty-seven percent of business respondents expect the national economy will improve, down from 45 percent last quarter and 42 percent a year ago.
But a handful said they will take the risks needed to grow their businesses. Fourteen percent of respondents plan to secure funding to expand in Connecticut by the end of the year. That number only rises to 18 percent by the end of 2012.
Other survey highlights:
Performance indicators are the highest numbers reported in a year, with increases in sales, production and productivity.
- Almost half (49 percent) report increased sales and production, the highest number in a year.
- Only 10 percent said sales and production decreased, the lowest number in more than a year.
- Forty-five percent said productivity has increased, the highest number in year.
- Only 9 percent said productivity decreased, down from a year high of 16 percent in the third quarter of 2010.
- On the hiring front, 26 percent of business executives expect to increase their workforce in the next quarter, up from 21 percent last quarter and 20 percent a year ago. Only 12 percent expect to cut their workforce, up from 11 percent last quarter by down from 16 percent a year ago.
What happens in the final weeks of Connecticut’s legislative session is clearly a wild card and could either help or further hurt our economic recovery.
Already struggling to survive the recession and hold onto as many jobs as possible, employers in Connecticut now face $70 million in higher unemployment compensation taxes, as well as the tax increases contained in the new state budget, which will hit small and family business owners the hardest.
It’s uncertain whether several anti-business bills will become law or not. If they do, it will send a chilling anti-business message to companies here and site-selectors nationwide, exactly the kind of message lawmakers should be taking great pains to avoid.
To follow economic changes facing Connecticut and the nation, visit http://www.cbia.com/.