August 9, 2007
By JESSICA MARSDEN, Courant Staff Writer
After finally achieving healthy gains, Connecticut's job growth will slow markedly in the next year and will flatten even further in 2009, a new report by the University of Connecticut predicts.
The reason: The overall slowdown in the national economy, especially the housing sector, according to the report released Wednesday by the Connecticut Center for Economic Analysis. Moreover, many of the recent gains came in financial services, especially in Fairfield County, and that industry - famously volatile - might cool down, the report said.
Over the next 2½ years, the state is likely to add between 10,000 and 20,000 jobs, according to the report. That contrasts with a gain of 20,000 jobs in the last year alone. If it happens, the slowdown would represent a return to the struggle that marked most of this decade.
In June, the state added about 4,000 jobs and hit 1.7 million for the first time since the summer of 2000, when job totals peaked in Connecticut before a national recession.
The state's crucial aerospace manufacturing sector is now at the peak of its cycle. Unemployment has hovered at a low level, just above 4 percent, and total income has also jumped, making the picture look strong for the state in 2007.
But looking ahead, the relatively small number of available workers in the state will hamper job growth, said Fred V. Carstensen, a UConn economist and executive director of the center. The potential for expansion is largely in financial services and biomedical development, but the pool of unemployed workers in the state is mostly unskilled.
At the same time, the state has had difficulty attracting workers with high skills, in part because of high costs and the lack of a major city.
"We've had this worldwide glut of easy credit, and it's encouraged lots of mergers and acquisitions," Carstensen said, "and we're very strong in financial services, so we had this growth. It's not going to last."
The center's report on job growth offers two separate outlooks through 2009. The optimistic forecast, which predicts 20,400 new jobs by the end of 2009, is based on this year's strong growth in household income. Total personal income in the state went up by $6.1 billion in the first three months of the year, more than 3 percent, bringing per capita income to $52,225 a year - by far the highest in the nation.
The more conservative forecast predicts that job growth will level off by mid-2009, for a total of just 10,000 new jobs.
Peter Gunther, a senior research fellow at the center and the author of the report, said he was afraid of putting too much weight on the more optimistic view - which still represents a decline from recent gains.
But Donald L. Klepper-Smith, an economist at DataCore Partners in New Haven, said he expects to see continued strong growth in health services and casino jobs. Fourteen thousand jobs have already been added from December to June, he said, so the state is on pace to exceed analysts' expectations of 10,000 to 15,000 new jobs in 2007. In the best case scenario, he expects this growth to continue through 2008, he said.
"On the job front, we're hitting on all cylinders at this point," Klepper-Smith said.
The center's projection for slowing jobs growth in Connecticut mirrors expectations for job growth nationwide, said Fairfield University Professor Edward Deak, who prepares a semiannual economic forecast for the New England Economic Partnership. Annual growth in the national job rate is likely to drop below 1 percent, he said.
The housing recession, declining automobile sales and rising energy costs are all contributing to the slowdown in the national economy, Deak said.
Connecticut is hit even harder because its population is not growing, Klepper-Smith said.
Reprinted with permission of the Hartford Courant.
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