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Five Years Later, It’s Still About Jobs

May 17, 2013

Many economists fear another weak growth year for Connecticut

By Pete Gioia
CBIA Vice President and Economist

What Connecticut needs most to achieve a real and sustained economic recovery is still, not surprisingly, more jobs. But we won’t get those jobs without both a housing recovery and a more confident business community. 

That’s what about a dozen area economists from public, private and academic sectors said at a recent meeting hosted by the Connecticut Department of Labor (DOL). They also agreed that Connecticut is likely to lag, by at least a year, in a U.S. recovery that should take hold by 2014.

Perhaps, but even the U.S. recovery has hit a speed bump. In March, the entire U.S. gained a paltry 88,000 net jobs — making Connecticut’s net gain of 2,600 new jobs in March a bit surprising.

Connecticut’s gain, however, is as much an anomaly in measurement as it is a true increase in jobs. Because revisions in monthly numbers from the U.S. DOL fluctuate wildly, Connecticut’s Labor Department added a three-month moving average to its report to provide a steadier picture.

Looking at that three-month picture, state DOL analysts see Connecticut on the path toward modest job growth throughout the first quarter of the year. We also see the state’s unemployment rate holding steady at 8%, but this too is misleading.

Most of the decline in Connecticut’s unemployment rate has been due to people exiting the labor force. While some of that is attributed to baby boomers retiring, most of it is traced to “discouraged” workers giving up looking for work.

Most economists think that if you add in the discouraged workers and those who are seriously underemployed or working multiple part time jobs, the state’s real unemployment rate would be a full 5 or 6 percentage points higher.

Our labor force decline really is a big deal. Connecticut has seen 33,000 workers exit the labor force year over year (March 2012 to March 2013) compared with net gain of only 1,000 jobs over the same time. This matches the trend seen throughout the U.S. (See chart.)

(Chart source: Federal Reserve Bank of St. Louis | research.stlouisfed.org)

Another factor to consider is that while a lot of boomers are getting ready to retire, the poor economy is leading many of them to hold onto their jobs making it harder for talented young people to get a foothold in the workforce.

(Chart source: Federal Reserve Bank of St. Louis | research.stlouisfed.org)

All of this employment data point to a historic period of subpar job activity. They also reveal long-term structural issues for the state’s economy:

  • How can we create an environment that will provide significant opportunities to recapture discouraged workers and provide jobs for our young people and immigrants?
  • How can we create and fill more jobs so that we see begin to see more household formations and achieve the robust housing market recovery that economists say is key?

We at CBIA believe that jobs are Job No. 1 for state policymakers.

It will take fostering an environment in which business people want to make job-creating investments here in Connecticut. It means policymakers need to convince decision-makers in the private sector that they are welcome here, that it’s safe to make investments (from a policy perspective, i.e., responsible tax policy, state spending), and they are supported by their state government.

Connecticut has a lot of work to do!

 

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