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Potential for Good Things on Connecticut’s Horizon

January 27, 2014

Pete Gioia
CBIA Vice President and Economist

When an economist sees positive signs in the economy, he gets encouraged—a feeling, especially for this Connecticut economist, that’s been a long time in coming.

As the new Year begins, I am optimistic because there are several encouraging factors in the U.S. economy. In 2013 there was more progress on energy independence, a reawakening of business confidence and job creation, and a very strong year on Wall Street.

Right now, there’s no reason to believe those trends can’t continue. And with that kind of traction, 2014 could be a stronger one for the U.S. economy—barring, as always, any profound shocks to the system.

But what about Connecticut’s economy? The key for us is that the nascent national momentum should pull us out of our doldrums eventually—not right away, but soon.

Our recoveries have typically lagged other states’ and the nation’s overall, and that’s certainly the situation again. So patience is still in order.

As is vigilance: A significant x-factor for Connecticut’s economy is the General Assembly and what lawmakers do in the short session that begins in February and runs until the beginning of May. Will they help make Connecticut more competitive? 

We all need to work together to prepare the state to take full advantage of the economic recovery, and make Connecticut a top state for opportunity and good jobs.

National Economic Highlights

Here’s what we’re seeing in the U.S. economy:

  • Third-quarter 2013 U.S. GDP growth was a healthy 4.1%, fueled by a combination of consumer spending and business investment
  • The stock markets have surged and many see another good year in 2014
  • American manufacturing is growing, adding jobs and improving its global competitiveness
  • Job growth overall is steadier and could settle in at a level of about 200,000 jobs added per month
  • The nation is on the road to achieving energy independence, with plentiful new sources and new technologies expanding access to less expensive energy, and to alternative renewable sources  
  • Residential home construction and sales of existing homes are increasing
  • Gasoline prices have moderated and likely will continue to moderate

Slow Growth

Last year, Connecticut businesses were exiting a recovery so slow that it felt like a recession.  

Yet, while we’re one of the slowest-growing states in the nation, I believe the 4,000 jobs gained in November were not an anomaly but probably an indicator of better things to come.

We also just passed the halfway mark on jobs recovered since the Great Recession hit, with a net gain of 16,500 jobs from November (2012) to November (2013), fueled particularly by private-sector growth.

Job growth remains slow here because business costs remain high—including a new spike in energy costs as our infrastructure strains to catch up—and other factors, such as the largely unknown impact of the Affordable Care Act.

Increased Demand

But few things are a better tonic for business than the phone ringing, and the good news is that the U.S. economy’s resurgence will get those phones ringing in many Connecticut businesses with demands for their products and services.

And as the increased demand hits, Connecticut businesses should be looking to increase their workforces, expand product lines and explore new marketing avenues.  

For the immediate time, however, there will be a lag this year as that demand builds, even as our state economy improves. 

Our unemployment rate is likely to stay high in 2014 as more workers re-enter the job market, and as businesses use low interest rates for capital to increase their use of technology and automation.

But push will come to shove, in a nice way of course, and hopefully by the end of the year we will begin to see improvement in our state economy.

No Secret

It’s no secret that Connecticut is perceived as a difficult place in which to do business. Too often we are on the lower end of national business-friendliness rankings. 

So what tempers my optimism for 2014 is the question of whether state policymakers will commit to improving Connecticut's competitiveness.

Only a concerted effort will attract the private-sector investments and business activities that will unlock job creation and build a healthier economy.

If we do that, we’ll make annual progress in those rankings. But most importantly, we will have the good jobs, opportunity and quality of life that our people and communities need.

 

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