The State Has Built Up Its Immunity Against National Economic Downturns
By ERIC GERSHON, Courant Staff Writer
February 23, 2008
In case you've forgotten how ugly recessions can get, consider the number 159,000: That's how many jobs Connecticut lost between 1989 and 1993, the era of the last major national recession.
Those lost jobs represent more people than the current population of any Connecticut city, six times the in-state workforce of United Technologies Corp., the state's biggest private employer, and more than 1.5 times the state's net population growth since mid-2000.
"We really got hammered in the early '90s," said University of Connecticut economist Fred Carstensen. "We were old-line manufacturing, old-line financial services and old-line defense, and all three of them went south at the same time."
It's unclear whether the national economy is in recession, but food and energy prices are rising while wage gains and overall commerce are slowing, leading to a generally grim view of the year ahead, for nation and state alike.
Yet circumstances in Connecticut may not be as bleak as elsewhere, analysts say — and certainly not as bleak as in the Connecticut of the early 2000s and early 1990s.
"This is the flip opposite of 1989," said Don Klepper-Smith of DataCore Partners, a New Haven economics consulting firm.
This time around, the state's major industries are healthy, there are new and growing industries such as gambling, and the housing market can only cause so much damage because it wasn't overheated. As a result, Connecticut's economy appears better positioned to endure the slings and arrows of economic misfortune.
In the late 1980s, Connecticut — like California, Florida, Arizona and Nevada now — had an extreme oversupply of housing due to speculative construction, as well as excess commercial space. This contributed to the collapse of the state's banking industry. But moderate housing construction in recent years means that the market has less ground to make up when the economy improves.
Major industries in the state, including aerospace and defense manufacturing and insurance, are now either busy or stable, whereas both were shaky in the early 1990s and lost thousands of jobs. Manufacturing in general, which is still important to the Connecticut economy despite years of job losses, is benefiting from the weak dollar, which stimulates exports.
One United Technologies division, Sikorsky Aircraft in Stratford, hired more than 860 new salaried and hourly employees in Connecticut in the past 12 months and expects all of them to be busy in 2008, a spokesman said.
Bob Poudrier runs the Hartford office of Illinois-based insurance broker Arthur J. Gallagher Risk Management Services, which sells property-casualty insurance to construction firms. He said the local office has leased additional space for its growing workforce, which is up by six in the past year to 17. And there's work for more.
"If I found three or four people that were qualified, I'd hire them right away," he said. "I've got recruiters that are looking for me. We're very bullish on Connecticut. If you hire three or four producers, then you have the support staff that goes with it. That three or four people can become six or seven people."
Still Tough Times
The growth or expansion of new industries in Connecticut in the last 15 years, including gambling, financial services and, to a lesser extent, the biosciences, has also diversified the state's job base, observers say.
Despite likely job losses for the nation this year, economists generally anticipate flat employment for the state. Some anticipate job growth.
"There's very little to say that Connecticut is being sharply affected by what's going on nationally," said Ed Deak, a Fairfield University economist. "That's not to say our turn isn't to come. But most people, myself included, think Connecticut will weather this better than at the national level."
Despite inherent strengths, the economy here is weakening, which will make life more difficult for many people. Foreclosures are rising, if not as fast as elsewhere, and some companies, including The Courant, are eliminating employees. Inflation is growing faster than wages, an especially painful circumstance in the suburban Northeast, where energy costs are high.
"Between gasoline, home heating oil and electricity, you can see that, from an energy perspective, many households are spending more than $1,000 a month," said Klepper-Smith. "What that means is discretionary income is hard to come by."
The state added about 16,600 jobs last year, or 1 percent, nearly all of it in the first three quarters, according to preliminary data from the state Department of Labor. The job count was flat in the last three months of the year and fell in December as the gravity of the national economic picture became more clear.
Economists at UConn's Connecticut Center for Economic Analysis recently forecast flat employment through 2008 and job losses of about 7,000 in 2009. They foresee most of the job losses in manufacturing, construction and municipal government.
Chips, Drugs And Money
Optimists are counting on several large companies to follow through on previously announced hiring plans, offsetting job losses and possibly expanding the job base. Royal Bank of Scotland, Pfizer Inc., and the state's two casinos all have said they would add jobs over the next two years.
Foxwoods Resort Casino in southeastern Connecticut is on schedule to finish construction of a $700 million expansion by May 17 and is now interviewing candidates for 2,000 positions as card dealers, housekeepers, security guards and others. The casino intends to fill them all, spokesman Saverio Mancini said.
In August, Foxwoods rival Mohegan Sun plans to open its own expansion, with 800 new employees.
"I dare say, you go to Southern California or south Florida, I don't think you're going to find any help-wanted signs down there," said Peter M. Gioia, vice president at the Connecticut Business and Industry Association.
Last year, Pfizer transferred 700 to 800 employees to Connecticut from other states, spokeswoman Liz Power said. This represents most of the drug maker's planned employment growth in the state through 2009, she said. The company may add another 200 to 300 people.
A spokesman for Royal Bank of Scotland said 1,850 people will initially work at its new Stamford headquarters, scheduled to open next year, about 1,150 of them in positions new to Connecticut. The new building will have room for 3,000 workers.
The expansion of the financial services industry in Fairfield County in the last five years has spurred both job growth and construction, as well as poured money into the state treasury. But economists warn that the sector is among the state's more vulnerable, given Wall Street's role in the mortgage crisis.
"Our economy is substantially affected by what happens in New York," said Nick Perna, a consultant to Webster Bank and a member of Gov. M. Jodi Rell's council of economic advisers. "To me, that's where I see the downside."
Reprinted with permission of the Hartford Courant.
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