It’s Still Jobs, Jobs, Jobs! But most economists raise chances of a double dip.September 13, 2011
By Pete Gioia
CBIA Vice President and Economist
The most critical factor determining Connecticut's prospects for real and sustained economic recovery is, simply, jobs! More jobs will cure many of our state's ills, from tepid consumer spending to a stalled housing market and the state's long-term fiscal health.
That's why we are encouraged that Governor Malloy is pushing his "First Five" jobs plan and why we hope this fall's legislative special session on jobs will take specific actions to encourage employers to invest in the state. Certainly, help is needed.
Many economists have increased the odds of a double-dip recession, and actual job creation is painfully weak. Numerous prognosticators have upped "double-dip" forecasts from 1 in 5 (or less) just last January to 1 in 3, or 1 in 2 now. Global factors -- such as a slowdown in Chinese growth and myriad challenges in Europe -- are threatening Connecticut exports, our strongest economic card in this subpar recovery.
While the state's economy continues to expand since June 2009, the "official" end of the most recent recession, job growth has been excruciatingly slow. Connecticut has added a paltry net 8,700 jobs in 2011 year-to-date, and July's labor report disappointed with a net loss of 300 jobs. The U.S. job-growth total of 154,000 private sector jobs in July was less than half of what is needed to propel real solid recovery.
We need jobs not only to (obviously) put people back to work and reduce the state's high unemployment rate of 9.1%, but also to unlock other much-needed economic activity.
For example, despite 50-year lows in mortgage rates and up to 50% declines in median home values, housing is at historic lows for new home sales and flat for sales of existing units. People need to feel more confident in Connecticut's economy and job market to justify making such a significant purchase.
A healthy job market will help generate the tax revenue needed to ease the state's fiscal challenges. It will also create new waves of taxpayers who will fuel economic activity, build confidence and add to the state's revenue stream. More jobs also, eventually, will relieve Connecticut employers of the extreme burden they are shouldering in sustaining the state's overwhelmed unemployment compensation system.
There are some encouraging signs amid the disappointing news. Results of the CBIA/BlumShapiro 2011 Survey of Connecticut Businesses show that most (56%) businesses in the state expect to be profitable this year and fewer businesses (17%) expect a net loss.
It also appears a mini-refinancing boom is underway as many homeowners who have equity are accessing extraordinarily low interest rates to lock in 15-year mortgages with lower payments. This might explain July's improved U.S. consumer spending numbers -- good news, because consumers account for 70% of economic activity. As we now approach the colder months, we are also seeing lower fossil-fuel prices in this Northeast region that uses so much home heating oil. And lower gasoline prices at the pumps should boost confidence too.
But the bulk of the news is of great concern and the rest of the year is unlikely to produce significantly better results. CBIA's most recent quarterly economic survey showed hiring, production and sales and productivity figures that were all off compared with late 2010 and early 2011. Also in the survey, business expectations regarding the future performance of the U.S. and Connecticut economies were weak. And business leaders' expectations for their own companies' performance slipped a bit.
In addition, our surveys continue to reflect the concerns of businesses that the state is not moving quickly enough to help unlock private-sector investment.
What will state lawmakers do this fall in their special session on jobs to reverse this course?