reflecting a brief & shallow U.S. decline with a modest recovery in late 2008.
Gains of 0.9%, 1.4% and 4.3% are projected for 2010-2012.
Section 1 – Executive Summary of the NEEP
Forecast for Connecticut
Current Conditions in the Connecticut Economy as of February
2008
Benchmark Revisions – CT employment numbers
2007
In March of each year, the CT DOL rebenchmarks its monthly sample survey employment numbers using a broader data set based upon the number of workers covered by unemployment insurance. The revision showed that CT added 17,000 workers in 2007, with 1,706,500 in place as of December. These gains allowed the state to recover all of the -61,000 jobs lost from 2000-2003, and as of August to surpass the previous employment peak of 1,700,700 recorded in July 2000. Every employment super-sector, accept for manufacturing (-2.1k), recorded an advance. The largest gains were in Education and Health Services (8.1k), Government including casinos (3.1), and Leisure & Hospitality (3k). The Hartford LMA recorded the largest absolute gain (6.2k) followed by Bridgeport-Stamford (4.8k) and New Haven (1.3k). The CT manufacturing production index registered its largest gain (+11.4 pts) in over a decade, rising from 107,3 in 2006 to reach 118.7 in 2007. The gain underscores the growing productivity of a slightly smaller manufacturing workforce. Real personal income surged by $3.3 bil or 3.8%, while the value of CT exports grew by 12.3% to $13.7 bil after rising by 21.3% in 2006. Despite problems at the national level, 2007 was a decent economic year in CT.
Based upon the February 2008 employment report from the CT DOL, the state recorded its second month of job losses down -900 positions after dropping -2.5k jobs in January. Still the CT job total was 12.1k positions above the 2/07 figure. Year over job losses were recorded in Manufacturing (-2k), Financial Activities (-2.1k), Retail Trade (-1k), as well as Administrative and Support Services (-2.2k). Year over job gains were shown in Education and Health Services (7.6k), Government (4.7K), as well as Leisure and Hospitality (2.1k). Geographically, the largest job gains were in Hartford (7.3k), Bridgeport-Stamford (5.4k) and Norwich-New London (1k). Only New Haven (-.5k) registered a loss. For the one month job changes, Construction (-1.1k) and Trade (-1k) showed the largest losses, while Leisure and Hospitality (.9k), Information (.4k), and Government (.4k) showed the largest gains. With the national recession at hand, it may well be that CT is past its cyclical job peak of 1,706.5k reached in 12/07.
The CT unemployment rate for 3/08 was 5.3%, which was up from the state low of 4.4% registered for the six months from January through June 2007. Average weekly initial new claims for unemployment insurance were down by -362 from 2/08 and -135 from 3/07. Most of the year over rise in the unemployment rate was the result of an additional 18.6k person gain in the labor force vs. 3/07 rather than the layoff of existing workers. The number of unemployed persons rose by 6.6k from 2/08 to 3/08.
Table 1 summarizes the annual data for both the NEEP CT 5/08 and Moody’s Economy.com (ME.com) 3/08 forecasts, along with the NEEP 11/07 forecasts. This comparison of current, prior and baseline forecasts allows the reader to make two key assessments. First, it highlights the changes in the forecast data that have taken place over the six-month period. And second, it allows the reader to see if and how the model manager’s adjustments have altered the original base outlook.
Over the past six months, ME.Com has altered its forecast as the macroeconomic data have deteriorated. They have introduced a moderate and short lived recession scenario, covering 08Q1 and 08Q2, as part of their U.S. macro outlook. Given that the ME.Com macroeconomic forecast drives the NEEP CT baseline estimates, this change has materially altered the NEEP 5/08 CT forecast compared to its earlier 11/07 view. Major changes are visible in the lower annual estimates for non-ag employment, the labor force, real personal income, the number of housing permits, the number of sales of existing homes, and the median sale price of existing homes. Slower growth is consistent with a slightly higher CT unemployment rate which peaks in 2009 at 5.7% and falls thereafter to average 4.9% in 2012. Clearly the affects of the national recession will be felt in CT.
The data in Table 1 also contain some sharp as well as
subtle differences indicating the ways in which the NEEP 5/08 forecast has been
altered relative to the ME.Com 3/08
TABLE 1
CONNECTICUT
FORECAST SUMMARY
NEEP HISTORY
AND OUTLOOK 2007-2012
CT
Economic Indicator 2007 2008 2009 2010 2011 2012
=============================================================
Gross
State Domestic Product (Bil $ 2000)
NEEP 5/08 181.4 183.3 189.6 196.0 201.4 207.2
ME.Com 3/08 181.4 183.4 189.7 196.2 201.7 207.3
NEEP 11/07 178.3 181.7 187.4 192.9 197.9 203.2
Total
Nonagricultural Employment (000’s)
NEEP 5/08 1,698 1,690 1,692 1,710 1,722 1,728
ME.Com 3/08 1,698 1,691 1,695 1,714 1,727 1,731
NEEP 11/07 1,697 1,705 1,717 1,729 1,739 1,753
Total
Manufacturing Employment (000’s)
NEEP 5/08 191.3 188.5 187.6 188.3 187.8 185.7
ME.Com 3/08 191.3 187.7 186.4 187.1 186.9 185.2
NEEP 11/07 192.7 190.6 189.8 189.5 188.5 187.4
Labor
Force (000’s)
NEEP 5/08 1,866 1,884 1,895 1,909 1,917 1,917
ME.Com 3/08 1,866 1,884 1,895 1,910 1,918 1,917
NEEP 11/07 1,872 1,889 1,894 1,907 1,923 1,945
Unemployment
Rate (%)
NEEP 5/08 4.6 5.3 5.7 5.5 5.1 4.9
ME.Com 3/08 4.6 5.3 5.6 5.3 4.9 4.8
NEEP
11/07 4.4 4.5 4.3 4.2 4.2 4.2
Real
Personal Income (Bil $00)
NEEP 5/08 161.5 160.9 164.7 169.8 174.3 177.6
ME.Com 3/08 161.5 161.0 164.9 170.0 174.5 177.7
NEEP
11/07 159.3 163.6 168.4 173.0 177.2 180.7
Population
(mil)
NEEP 5/08 3,503 3,507 3,510 3,513 3,518 3,522
ME.Com 3/08 3,502 3,507 3,510 3,513 3,517 3,521
NEEP
11/07 3.506 3.511 3.514 3.517 3.520 3.525
Total
Housing Permits
NEEP 5/08 7,853 6,812 7,716 8,193 8,890 9,769
ME.Com 3/08 7,853 7,233 10,584 12,432 12,258 12,189
NEEP
11/07 7,992 8,428 10,200 10,989 10,958 11,505
Sales
of Existing Homes (000)
NEEP 5/08 45.6 38.9 43.0 46.2 47.3 48.9
ME.Com 3/08 45.6 40.1 49.0 51.2 50.3 49.9
NEEP
11/07 47.9 47.4 51.2 50.5 50.4 50.0
Median Home Price ($000)
NEEP 5/08 320.6 283.1 274.2 276.6 280.4 292.3
ME.Com 3/08 320.6 283.2 276.0 285.1 293.9 301.3
NEEP 11/07 309.5 289.0 296.7 302.9 309.8 317.5
baseline. First, non-ag employment is projected to be a bit lower in 2008 and a bit slower to gain traction as the expected national recovery takes hold in late 2008 and 2009. The past two macro downturns in 1991-93 and 2001-02 have been characterized by “jobless recoveries”, where employment growth lagged the general expansion in both the U.S. and CT. There is no reason to believe that this delayed job expansion will not be part of the 2008-09 recovery. Second, NEEP 5/08 has the CT manufacturing sector experiencing a lower level of job loss. The dollar is weak and NEEP anticipates it to remain depressed
well into the future. This weakness has to date and should continue to help bolster CT manufacturing exports and jobs. Third, the NEEP unemployment estimates are a bit higher than those of ME.Com as slower job growth and modest gains in the labor force leave a larger number of persons unemployed.
Finally, the largest projected discrepancies between NEEP 5/08 and ME.Com 3/08 are in the expected number of housing permits, sales of existing homes, and median home prices. While both have the CT permit and sale numbers declining until mid-2008, NEEP expects a much longer housing cycle with respectable but more modest recoveries in permits and sales through 2012. While prime mortgages have been available to well qualified CT buyers throughout the housing contraction, credit conditions have tightened because bank lenders are less able to securitize the mortgages transferring them off their books. Holding on to or ‘warehousing” the mortgages limits the bank’s access to securitized funds making more difficult to continue the lending cycle by acquiring funds to make new mortgage loans. Perhaps the current freeze up in securitization activity will thaw by the end of 2008 as expected by ME.Com. However, the exchange of mortgages, even prime mortgages, for investor cash is unlikely to reach anywhere near the levels that existed prior to 07Q3. Furthermore, the sub-prime mortgage market looks dead for at least the intermediate term, and the Alt-A loan market could be severely weakened in the near term. Both of these events should limit the issuance of new home permits and the sales of existing homes.
As the economic pain of the credit crunch spreads from Wall St (the financial sector) to Main St (the general economy), the list of CT groups being “crunched by the credit crunch” is expanding statewide and growing on almost a daily basis. From permits to sales to prices to foreclosures, the CT housing industry is declining in the wake of the bursting of the national housing bubble, the tightening of lending conditions, and the freezing up of the credit securitization process. Statewide, median sale prices for single family homes are down 6-7% vs. a year ago, sales of existing homes are down by 28-30%, new home permits are down by 15%, and foreclosure filings are up by 303% to 1 for every 188 households. The decline in home construction has reduced building supply spending leading to the closing of three major lumber yards with the loss of 400 jobs.
CT job numbers are declining with Financial Activity jobs off by -2,4k, including -1.6k in Finance and Insurance, and -.8k in Real Estate. Fewer jobs has meant less income and retail spending with the loss of -.9k jobs in that sector. Fewer jobs have led to less tax revenue being collected at both the state and local levels, turning what was projected to be a $260m state budget surplus into an estimated -$67m deficit. Major cities such as Bridgeport and New Haven have experienced revenue shortfalls from diminished state aid and declining real estate tax collections. In turn, they have announced budget cuts and current employee layoffs of around 100 workers each. These cuts run counter to the growing need for social service and welfare support at the local level. Other communities including Bristol, Farmington, Middletown, Bloomfield and Monroe have experienced multiple rounds of budget cuts. Local private charities and food banks are finding it more difficult to raise money and/or secure tangible support. And prospective college students are finding it harder to borrow tuition money from private lending sources. Even the state’s two Indian casinos are registering slot machine revenue declines, with Mohegan Sun reporting a -2.6% drop in net slot winnings and a -10.6% decline in overall operating profit for the first quarter of 2008 vs. 2007. The list and burdens of the “crunchies” are large and expected to grow into 2009.
The NEEP Connecticut baseline forecast, shown in Table 1, is drawn from and dependent upon the U.S. macroeconomic cyclical projection developed in March 2008 by Dr. Mark Zandi and his research team at Moody’s Economy.com (ME.com). Key portions of this macro simulation are displayed in Table 2 below. These projections help to determine the initial path for the Connecticut forecast.
The introduction of a macroeconomic recession scenario for the first half of 2008, alters several of the ME.Com 3/08 forecast numbers relative to 11/07. Percent changes in real GDP, total employment, real disposable income, housing starts, net exports, interest rates, and the S&P stock prices are all driven lower, some by significant amounts. Conversely, changes in the CPI inflation rate, the unemployment rate, and oil prices are noticeably higher. In particular, the Fed Funds rate is some 281 bp lower as the Federal Reserve has struggled aggressively to get ahead of and reverse the tide of economic decline.
Looking at 2009, not only are there still some sharp cyclical differences in the 3/08 forecast relative to 9/07, but ME.Com anticipates a fairly strong cyclical upsurge in economic activity that continues into 2010. The gain in RGDP is 200 bp above the 2008 level in both 2009 and 2010. In addition, it is fully 50 bp above the earlier projections. Employment growth rises in 2009 but still remains below the 9/07 estimate. However, it jumps sharply in 2010 and exceeds the gains anticipated in 9/07. Real disposable income, the number of housing starts and the fed funds rate all demonstrate a similar pattern.
Key Indicators
Moody’s Economy.com U.S. Macro Forecasts
March 2008 vs. September
2007
YearU.S. Macro Indicator |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
Gross Domestic Product %D 3/08
|
2.2 |
1.5 |
3.5 |
3.5 |
2.8 |
2.7 |
9/07
|
2.0 |
2.9 |
3.0 |
3.0 |
2.9 |
n.a. |
Consumer Price Index %D 3/08
|
2.9 |
3.0 |
2.0 |
1.8 |
1.9 |
2.2 |
|
9/07 |
2.9 |
2.2 |
2.1 |
2.2 |
2.3 |
n.a. |
|
Total Employment %D 3/08 |
1.1 |
0.3 |
0.9 |
1.7 |
1.4 |
0.8 |
|
9/07 |
1.3 |
0.8 |
1.1 |
1.2 |
1.3 |
n.a. |
|
Unemployment Rate % 3/08 |
4.6 |
5.4 |
5.8 |
5.4 |
4.9 |
4.8 |
|
9/07 |
4.6 |
4.8 |
4.7 |
4.6 |
4.5 |
n.a. |
|
Real Disposable Income %D 3/08 |
3.0 |
2.6 |
2.8 |
4.0 |
3.7 |
2.9 |
|
9/07 |
3.0 |
3.5 |
3.7 |
3.3 |
3.2 |
n.a. |
|
Housing Starts (mil) 3/08 |
1.34 |
0.93 |
1.35 |
1.73 |
1.69 |
1.71 |
|
9/07 |
1.42 |
1.39 |
1.67 |
1.67 |
1.68 |
n.a. |
|
Net Exports ($Bil) 3/08 |
-556.5 |
-484.7 |
-483.1 |
-475.9 |
-470.9 |
-476.8 |
|
9/07 |
-582.9 |
-558.8 |
-538.2 |
-524.7 |
-528.3 |
n.a. |
|
Federal Funds Rate % 3/08 |
5.02 |
2.41 |
4.27 |
4.88 |
4.51 |
4.51 |
|
9/07 |
5.25 |
5.22 |
4.97 |
4.73 |
4.48 |
n.a. |
|
Treas-Bond Rate 10-yr % 3/08 |
4.6 |
4.18 |
5.4 |
5.66 |
5.48 |
5.51 |
|
9/07 |
4.86 |
5.32 |
5.54 |
5.62 |
5.45 |
n.a. |
|
S&P 500 Stock Average 3/08 |
1,477 |
1,447 |
1,597 |
1,672 |
1,762 |
1,869 |
|
9/07 |
1,473 |
1,520 |
1,607 |
1,701 |
1,799 |
n.a. |
|
Oil West Texas ($/Bbl) 3/08 |
73.3 |
85.4 |
60.5 |
51.9 |
51.8 |
51.8 |
|
9/07 |
65.4 |
52.9 |
46.5 |
44.7 |
44.2 |
n.a. |
The S&P stock average is projected to fall in 2008 with respectable gains in 2009 through 2012. However, the annual value does remain below the previous estimates reflecting a modest lasting impact from the recession caused by the bursting of the housing bubble. Crude oil prices are also expected to behave badly in 2008, rising to average $85.40 per barrel. However, ME.Com anticipates a sharp drop in crude oil prices in 2009 and 2010 as more supplies reach the global market and higher prices restrain worldwide consumption. However, the 3/08 price estimate for each year exceeds the earlier annual projection by anywhere from $7-$33 per barrel.
Lastly, the housing market is expected to reach bottom with starts at their low in 08Q2, existing home sales hitting bottom in 08Q1, and median sale prices for existing homes continuing to fall through the first half of 2009. Starts and sales rebound smartly in 2009 and continue a gradual gain through 2010 when they encounter another mild decline in 2011.
Table 3 contains some key business cycle data from the peak of the last boom in mid-2000 to the subsequent low points in 2003, with current data through February 2008. The cyclical peak in CT non-farm employment was reached in July of 2000 with 1,700,700 jobs being counted. Subsequent months saw a low point for the unemployment rate at
|
CT Econ Indicator (Seasonally
Adj) |
Cyclical Best (sa) |
Subsequent Worst
(sa) |
Diff |
March 2008 |
Nonag Employment |
July 2000 1,700,700 Dec 2007 1,706,500 |
July 2003 1,640,400 |
-60,300 -3.55% |
1,699,3 00 |
|
Unemployment
Rate |
10/00-11/00 2.1% 1/07-6/07 4.4% |
3/03-4/03 5.7% |
+360 bp |
5.3% |
|
Number
Unemployed |
Nov 2000 35,700 Nov 2006 78,500 |
April 2003 102,700 |
+67,000 +187.7% |
100,500 |
|
Ave Initial
Wkly New Claims
Unemploy Insurance |
Sept 2000 3,204 Jan 2006 3,702 |
May 2002 6,400 |
+3,196 +100% |
4,135 |
Sources:
http://www.bos.frb.org/economic/neei/neeidata/empstn.csv, and
www.ctdol.state.ct.us/lmi/laborsit.pdf.
2.1%, with only 35,700 persons being listed as unemployed. From that date onward, labor market conditions deteriorated in CT. Average weekly new claims for unemployment insurance nearly doubled from 3,204 in September 2000 to a peak of 6,400 in May of 2002, for a gain of 96%. The unemployment rate reached a peak of 5.7 % in both March and April of 2003, while the peak number of persons counted as unemployed reached 102,700 state residents in April 2003. The CT employment low of 1,640,400 was reached in July of 2003, one month before the 8/03 national low. One of the key factors causing both the number of unemployed persons and the unemployment rate to rise was the gain in the size of the CT labor force. CT added 72,300 potential workers from November 2000 (1,733,700) to April 2003 (1,806,000). From 4/03 through 8/07, the state added another 65.3k potential workers, while at the same time seeing a fall in the unemployment rate to 4.6.
If the U.S. entered into a recession in 08Q1, and if that recession has spread to CT, then it is likely that the state reached its latest cyclical employment peak in December 2007, with 1,706,500 persons employed in non-agricultural jobs. Through March 2008, the job total had declined by -6,800 and is potentially headed lower through at least the middle of the year. New claims for unemployment insurance at 4,135 are up from their lows of January 2006, and the unemployment rate has climbed to 5.3% from its low of 4.4% recorded in each of the first six months of 2007.
From August 2000 through September 2003, CT lost a total of –60,300 non-farm positions for a decline of –3.5%. On the national level, total employment fell from a peak of 132.530 million jobs in February 2001 to a low of 129.839 million as of June 2003 (Source: http://data.bls.gov/cgi-bin/surveymost). This was a loss of –2.691 million jobs, or –2% of the original total. These numbers strongly support the observation that the most recent business cycle pattern from job peak to trough to current recovery has had a more severe impact on CT than for the U.S. as a whole.
1. On a relative basis, the percentage decline
in jobs within CT (-3.5%) exceeded that for the U.S. (-2.0%). In addition, the decline lasted longer in CT
(37 months = 7/00-9/03) than in the U.S. (27 months = 3/01-6/03)
.
2. Moreover, the job recovery has been weaker
through 12/07 in CT, at +66,000 jobs or 102% of the non-ag jobs lost, than in
the U.S. at +8.239 million jobs, or 306% of the -2.691m jobs lost.
The data in Table 4 is drawn from the NEEP history banks and indicates the level of employment by key NAICS super-sectors for the cyclical quarterly peaks of 1:89, 3:00, and potentially 4:07. Also shown are the quarterly cyclical lows achieved in 4:92 and 3:03. The comparison of peaks, lows and subsequent recovery shows exactly where CT jobs have been lost and gained over the past 18 years.
|
|
|
|
Table 4 |
|
|
|
|
|
|
|
|
|
|
CT
Cyclical Employment History |
|
|
|
|
|
|||
|
|
|
|
Quarterly
Data 1989-2007 (sa) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89-92 |
|
92-00 |
|
00-03 |
|
03-07 |
|
|
Job
Sector (000’s) |
89:Q1 |
92:Q4 |
% Chg |
00:Q3 |
% Chg |
03:Q3 |
% Chg |
07:Q4 |
% Chg |
|
|
Total
Nonfarm |
1,676.70 |
1,519.50 |
-9.4 |
1,698.30 |
11.8 |
1,639.30 |
-3.5 |
1,704.2 |
4.0 |
|
|
Manufacturing |
321.1 |
267.7 |
-16.6 |
236.6 |
-11.6 |
198.4 |
-16.1 |
190.8 |
-3.8 |
|
|
Construction |
78 |
48 |
-38.5 |
64.6 |
34.6 |
62.3 |
-3.6 |
68.9 |
10.6 |
|
|
Information Serv |
43.4 |
39.6 |
-8.8 |
46.9 |
18.4 |
39.3 |
-16.2 |
39.0 |
-0.8 |
|
|
Other Serv |
65.5 |
53.9 |
-17.7 |
61.4 |
13.9 |
62.2 |
1.3 |
64.6 |
3.9 |
|
|
Trade, Tran, Util |
334.8 |
287.9 |
-14.0 |
317.7 |
10.4 |
304.9 |
-4.0 |
312.5 |
2.5 |
|
|
Financial |
153.5 |
141.8 |
-7.6 |
143.7 |
1.3 |
142.5 |
0.8 |
143.3 |
0.6 |
|
|
Prof + Bus Serv |
172.5 |
163.1 |
-5.4 |
217.1 |
33.1 |
195.4 |
-10.0 |
206.0 |
5.4 |
|
|
Educ + Health |
186.6 |
209.9 |
12.5 |
246.2 |
17.3 |
265.9 |
8.0 |
289.7 |
5.2 |
|
|
Gov: Federal |
24.5 |
25.1 |
2.4 |
23.0 |
-8.4 |
20.7 |
-10.0 |
19.6 |
-5.3 |
|
|
Gov: Local |
118 |
117.8 |
-0.3 |
150.1 |
27.5 |
158.8 |
5.7 |
161.8 |
1.9 |
|
|
Gov: State |
65.6 |
63.8 |
-2.7 |
69.1 |
8.3 |
65.8 |
-4.8 |
69.6 |
5.8 |
|
|
Leis + Hospitality |
112 |
100.2 |
-10.5 |
121.3 |
21.1 |
125.9 |
3.8 |
137.7 |
9.4 |
|
On the plus side the data indicate a positive long term trend, where total employment at the most recent peaks in 00:Q3 and 07:Q4 exceeded the total for the earliest peak in 89:Q1. Reinforcing the long-term growth trend is the fact that the most recent cyclical low in 03:Q3 was higher than the previous cyclical low. Therefore, the structural trend of CT employment would appear to be rising over the 18-year time span, albeit at a rather slow pace. In addition, as might be expected, employment levels in Construction, Professional and Business Services, Trade + Transportation + Utilities, Information Services, and even State Government demonstrate a cyclical pattern. Also as expected, jobs in Education and Health show a persistent growth trend apart from the business cycle, with the increase being driven primarily by the rise in health employment as the overall state population ages and income grows.
The largest absolute job growth from 89:1 through 07:4 was recorded in the employment super-sectors of Education and Health (+103.1k), Leisure and Hospitality (+25.7k) along with Professional and Business Services (+33.5k). The L&H increase raises questions about the pay and quality of the jobs being added, given that many openings are in lower paying positions with minimal opportunities for advancement. Likewise, the Professional and Business Services sector contains jobs at temporary help agencies that may not yield the benefits or type of longer term employment stability that most workers seek. On the negative side, the U.S. as a whole has been experiencing a steady and sharp decline in the number of workers employed in manufacturing. That trend is also in evidence in CT where employment in manufacturing firms fell by -130.3k positions from 89:1 through 07:4 or -40.6%. This decline has appeared despite the cyclical recovery from 1992-2000, and the modest gain in merchandize exports from 2003-2007 that has been driven by the falling trade value of the U.S. dollar. Lastly, employment in Financial Activities fell by -10.2k or -6.6% from 89:1 through 07:4. Even with major high-paying job gains in the CT private investment industry, the substantial upheavals in the structure of the state’s insurance and banking sectors has pulled the job totals in the CT Financial Activities super-sector into a mild long-term decline.
Creating more of an apparent puzzle is the sharp growth in Local Government employment. The total is up by almost 43,800 from 89:1 to 07:4, and it has resisted the downward pressures brought about by the recession from 2000-2003. For sure, some 23,000 of those gains are related to the two casinos as part of Tribal Government employment. The Foxwoods Casino opened in 92:Q1, while the Mohegan Sun Casino opened in 96:Q3. But it should be of some concern that the strongest source of consistent, non-cyclical employment growth is in local governmental employment. This trend has implications for the level of local taxes as well as the ability of CT to sustain future job gains as the recession puts pressures on local budget revenues.
For the period of the current CT recovery from 03:3 to 07:4, the largest absolute super-sector job gain was in Education and Health Services (+23.8k), followed Business and Professional Services (10.6k), and Leisure and Hospitality (+11.8k). Again, the quality of the jobs being added is called into question by the identity of the advancing sectors. Employment in the Construction sector advanced at 6.6k positions, yielding the largest percentage gain at 10.1%. This rise was undoubtedly related to the strength of the housing industry. However, if private commercial and public construction remains strong, then construction employment is projected to resist major cuts through the end of 2008. Despite the relatively strong national expansion, and the recent full recovery of previous CT job losses, three super-sectors in the state’s economy showed job declines from 03:3 to 07:4 including manufacturing (-3.8%), Information Services (-0.8%), and Federal Government (-5.3%).
TABLE 5 contains a list of publicly announced labor force reductions recorded from
September 2007 through April 2008. The CT Department of Labor has been tracking announcements on a monthly basis with the information being located at the Web site as listed below. In addition, the federal Worker Adjustment and Retraining Act requires that all firms planning to layoff 100 or more employees must file a notice to dismiss no less than 60 days before the time of the action. A Warn Report containing each of these filings is published monthly by the CT DOL at the Website listed below. These two CT DOL sources have been supplemented for the NEEP report with additional information obtained from local media reports. These employment losses, along with the numbers and lists in the November 2006, May 2006, November 2005, and May 2005 NEEP forecasts, help to explain why the CT economy has lagged in its job recovery numbers relative to the U.S. The 4/08 record lists 21 different announcements with total job cuts projected at 1,498 positions. The job loss numbers are down by -9% from those contained in the 11/07 NEEP forecast, which listed 37 firms with 1,600 job cuts. Seven of the current announcements involve cuts of more than 100 jobs compared to five in 11/07, with the largest numbers being the projected cut of 225 at LifeTouch studios.
Connecticut Labor
Force Reductions
|
Employer |
Industry |
No. Jobs |
Reason |
As of Q/Yr |
Location |
|
Watson Pharma |
Pharmaceuticals |
60 |
Closing |
2010 |
Danbury |
|
Gibbs School |
Education |
35 |
Closing |
2:09 |
Norwalk |
|
Ross & Roberts |
Rub + Plastics |
60 |
Closing |
3:08 |
Stratford |
|
Hartford Courant |
Newspaper |
45 |
Cost Cut |
2:08 |
Hartford |
|
Neurogen |
Bio-tech |
70 |
Reorg |
2:08 |
Branford |
|
Merriam Motors |
Retail |
15 |
Close |
1:08 |
Wallingford |
|
Goodrich Corp |
Aerospace |
45 |
Cost Cut |
1:08 |
Danbury |
|
Nerac |
Internet search |
34 |
Reorg |
1:08 |
Tolland |
|
Nationwide Insur |
Insurance |
100 |
Close |
3:08 |
Rocky Hill |
|
St. Mary’s School |
Education |
14 |
Close |
2:08 |
Griswold |
|
Lifetouch |
Photography |
225 |
Close |
2:08 |
Derby |
|
AT&T |
Communication |
127 |
Reloc |
2:08 |
Meriden |
|
Webester Financial |
Fin Services |
165 |
Close |
1:08 |
Cheshire |
|
Norden Systems |
Defense Elec |
48 |
Close |
1:08 |
Norwalk |
|
Home Fabrics |
Retail |
13 |
Close |
2:08 |
Cheshire |
|
Bear Naked |
Food specialty |
100 |
Merger |
1:08 |
Stamford |
|
Cuno |
Filters |
63 |
Reloc |
1:08 |
Meriden |
|
Showcase Cinema |
Entertainment |
37 |
Close |
1:08 |
Orange |
|
Belden Mfg |
Cable |
132 |
Close |
3:08 |
Manchester |
|
Zoots |
Cleaning Serv |
80 |
Close |
1:08 |
Wallingford |
|
People’s United |
Finance |
170 |
Cost Cut |
2:08 |
Statewide |
|
Stevenson Lumber |
Build supply |
300 |
Close |
2:08 |
Monroe |
|
Suffield Lumber |
Build supply |
100 |
Close |
1:08 |
Suffield |
|
Seymour Lumber |
Build supply |
12 |
Close |
2:08 |
Seymour |
|
|
|
|
|
|
|
|
PREVIOUSLY
TABULATED |
TO BE FELT DURING THE
FORECAST |
|
|
|
|
|
General Electric |
Electrical sys |
57 |
Close |
3:08 |
Plainville |
|
Clairol |
Chemicals |
235 |
Close |
1:10 |
Stamford |
|
Fed Res Bank |
Fin Services |
146 |
Reloc |
1:09 |
Windsor Lcks |
|
|
|
|
|
|
|
|
NEEP Forecast |
# Firms |
Jobs |
|
|
|
|
|
|
|
|
|
|
|
5/08 Totals: |
23 firms |
1,728 |
|
|
|
|
|
|
|
|
|
|
|
11/07 Totals: |
17 firms |
1,670 |
|
|
|
|
3/07 Totals: |
37 Firms |
4,298 |
|
|
|
|
10/06 Totals |
32 Firms |
3,844 |
|
|
|
|
4/06 Totals: |
31 Firms |
6,131 |
|
|
|
|
9/05 Totals: |
20 Firms |
2,164 |
|
|
|
|
5/05 Totals: |
16 Firms |
1,941 |
|
|
|
|
11/04 Totals: |
33 Firms |
3,442 |
|
|
|
|
5/04 Totals: |
54 Firms |
5,789 |
|
|
|
|
|
|
|
|
|
|
Sources: CT newspapers, http://www.ctdol.state.ct.us/lmi/pubs/bechanges.pdf.,
and http://www.ctdol.state.ct.us/progsupt/bussrvce/warnreports/2006%20Warn%20Reports/warnreports2006.htm.
In addition, there are just three cuts listed that were counted in previous projected CT job loss totals that will be carried out during the current forecast period. They are repeated here to keep the events and consequences in mind.
This job cut information has been incorporated into the 5/08 NEEP report when it has been judged to be a unique and substantial external shock, not captured within the ME.com baseline. As such, the data serves as part of the basis for the add-factoring that causes the NEEP forecast to differ from the ME.com baseline.
TABLE 6 contains data for the labor force additions publicly announced from September 2007 through April 2008. Most of the announcements have been compiled by the CT DOL, and are published monthly at the Website noted below. There were announcements by 27 firms with potential job gains totaling 4,301 positions. The firm figure for 5/08 is three less than the number for 11/07, but the job total is larger by 2,226 or 107%.
Publicly Announced
Job Additions
Announced Between September 2007 and April
2008
|
Employer |
Industry |
# Jobs |
Date Q/Yr |
Location |
|
Har-Conn |
Metal fininsh |
60 |
To 2011 |
West Hartford |
|
Fender Musical Instru |
Guitars |
70 |
2008 |
New Hartford |
|
Home Depot |
Retail |
150 |
2:08 |
East Haven |
|
Monster Mini Golf |
Entertainment |
10 |
1:08 |
Windsor Locks |
|
Big Y |
Food Retail |
200 |
1:08 |
Branford |
|
Big Y |
Food Retail |
200 |
1:08 |
Stratford |
|
FuelCell Energy |
Alt energy |
100 |
To 2010 |
Torrington |
|
Steadfast Holdings |
Chemicals |
12 |
2008 |
Meriden |
|
Molly Maid |
Cleaning Serv |
300 |
2008 |
Statewide |
|
NBC Universal |
Filmmaking |
75 |
2008 |
Stamford |
|
Fld County Bank |
Financial Serv |
12 |
3:08 |
Stamford |
|
U.S. Army |
Military |
100 |
2009 |
Middletown |
|
Keisense |
Info Tech |
25-35 |
2009 |
Hartford |
|
Lowe’s |
Retail |
120 |
3:08 |
Derby |
|
Am Precision Mfg |
Aerospace |
20 |
2008 |
Ansonia |
|
AMP Media Partners |
Entertainment |
14 |
2008 |
Rocky Hill |
|
Europa Sports Products |
Whsle Dist |
25 |
4:07 |
Windsor |
|
Target |
Retail |
60 |
4:07 |
Waterbury |
|
O’Shaughnessy Mgt |
Financial Serv |
23 |
4:07 |
Stamford |
|
Ikonisys |
Testing Equip |
30 |
2008 |
New Haven |
|
Keystone Aviation Serv |
Airport mgt |
400 |
2008 |
Oxford |
|
CT Biodiesel |
Alt Fuels |
25-30 |
2009 |
Suffield |
|
Burris Logistics |
Food Dist |
200 |
2008 |
Rocky Hill |
|
Gilbert & Bennett Mill |
Retail |
1500 |
2010 |
Georgetown |
|
Shick Mfg |
Metal blades |
100 |
4:08 |
Milford |
|
Blue Sky |
Entertainment |
300 |
4:08 |
Greenwich |
|
Hawley Lane Mall |
Retail |
200 |
2:08 |
Stratford |
|
|
|
|
|
|
|
|
|
|
|
|
|
PREVIOUSLY COUNTED |
IN EFFECT DURING FORECAST |
|
|
|
|
Hartford Financial |
Financial Serv |
300 |
2009 |
Windsor |
|
MannKind Corp |
Pharmaceuticals |
400 |
2009 |
Danbury |
|
CT Biodiesel |
Renew Fuel |
30* |
2009 |
Suffield |
|
Hilton |
Hospitality |
200 |
2009 |
Norwich |
|
Aero Gear Inc |
Transportation |
48 |
2007-08 |
Windsor |
|
Mohegan Sun |
Casino |
2,000 |
2010 |
Uncasville |
|
City of New Haven |
Local Gov |
85 |
1:08 |
New Haven |
|
Target |
Retail |
450 |
2:08 |
Lisbon |
|
Pilgrim Furniture |
Retail |
50 |
1:08 |
Milford |
|
Premier eSecurity |
Bus Serv |
20 |
2007-08 |
Milford |
|
Swiss Army Brands |
Knives |
25 |
2009 |
Monroe |
|
Capitol Theater |
Entertainment |
80 |
3:08 |
New London |
|
Walgreens |
Retail |
35 |
2008 |
Stamford |
|
Foxwood’s |
Casino |
2,300 |
3:08 |
Ledyard |
|
Yale-New Haven Hosp |
Health care |
400 |
3:08 |
New Haven |
|
Royal Bank of Scotland |
Fin Services |
8-1100 |
3:08 |
Stamford |
|
Nufern Inc. |
Optical Fibers |
180 |
2009 |
E. Granby |
|
TnT Expense Mgt |
Bus. Services |
60 |
2008 |
Newtown |
|
Griffin Hospital |
Health Serv |
60 |
10/08 |
Wallingford |
|
Carvel Corp |
Food Process |
225 |
3/08 |
New Britain |
|
Lowe’s |
Retail |
175 |
3:08 |
Cromwell |
|
NuPower |
Elec Utility |
275 |
3:08 |
Plainfield |
|
|
|
|
|
|
|
NEEP FORECAST |
# FIRMS |
JOBS |
|
|
|
|
|
|
|
|
|
5/08 |
27 |
4,301 |
|
|
|
|
|
|
|
|
|
11/07 Totals |
30 Notices |
2,075 |
|
|
|
5/07 Totals: |
25 Notices |
4,658 |
|
|
|
10/06 Totals: |
29 Notices |
4,035 |
|
|
|
4/06 Totals: |
27 Notices |
5,049 |
|
|
|
9/05 Totals: |
17 Notices |
3,505 |
|
|
|
5/05 Totals: |
27 Notices |
6,710 |
|
|
|
|
|
|
|
|
Sources: CT media and http://www.ctdol.state.ct.us/lmi/pubs/bechanges.pdf
Subtracting the number of announced job cuts from the number of new additions leaves a total of +2,973 publicly announced net new potential positions to be created in the CT economy. There were 12 announcements of job gains in excess of 100 positions, led by the potential for 1,500 new jobs at Gilbert and Bennett retail development in Georgetown, and 400 at Keystone Aviation in Oxford.
The job numbers for 5/08 would be considerably larger if the major Stamford development effort dubbed
the Antares Project was included. It
will involve a $2.5 billion mixed use development on some 83 acres just south
of the train station and stretching to the harbor area in Stamford. The project has received local and state
approval and is slated to be phased in over an 8-10 year period. It will provide up to 4,000 residential
units along with commercial and office facilities. Construction will incorporate a modern urban design to
accommodate local employees of UBS-Warburg and the Royal Bank of Scotland,
among others, as well as rail commuters eastward and westward into
Manhattan. The project will employ an
as yet undetermined number of construction workers and eventually provide jobs
for hundreds of commercial and office employees. This NEEP forecast has not included the project in its current
projection, but will do so in the future as plans evolve over the next few
forecasts.
Several previously
announced and NEEP tabulated job gains are still to be felt during this
forecast period and have been add-factored into the NEEP 5/08 forecast. The largest increase will involve some 2,300
new positions from the $700 million expansion, currently under construction, at
the Foxwoods Casino in Ledyard. These
new jobs would be added to the approximately 12,500 positions already at the
site. The addition is being developed
in partnership with MGM Grande Casinos and is scheduled to open in May 2008.
It will include an 825-room hotel, a 5,000 seat concert theater, a
21,000 sq ft luxury spa, and a new casino.
Not to be outdone, the Mohegan Sun Casino is making its own $740 million
addition in conjunction with the House of Blues. It will include a 1,000 room hotel tower, a 1,500 seat music
hall, 115,000 sq ft of retail and restaurant space and a new 64,000 sq ft
casino. The expansion is expected to
open in 2010 and add some 2,000 more employees to the 11,000 person current
workforce.
A third addition of between
8-1,100 positions will be added to the Stamford Labor Market resulting from the
relocation of the North American Headquarters for the Royal Bank of Scotland by
mid-2008. The firm is constructing a
new facility near the train station and directly across from the global
currency trading center for UBS Warburg.
These two facilities will help to make lower Fairfield County a major
global currency and banking center. The
two casino expansions, along with the Royal Bank facility, have been explicitly
add-factored into the NEEP 5/08 forecast.
Another, large
increase will include 400 new positions to be added by the Yale-New Haven
Hospital cancer treatment and research center to be completed in mid-2008. This cancer center is expected to be a
world-class facility rivaling Sloan-Kettering in New York and Dana-Farber in
Boston. Pfizer Pharmaceuticals has
already built and staffed a major research facility near Yale-New Haven
Hospital to take advantage of the new cancer center and the world-class
graduate Life Sciences program at Yale University. The cancer facility should yield important job and income spin-offs
once it comes on line.
Some of the positions
listed in Table 6 are lesser paying distribution, hospitality, or retail
jobs. These positions along with the
heavily tip based positions found at the state’s two casinos and the growth in
positions in Leisure and Hospitality firms raise concerns about the quality of
the jobs being created in CT. Running
contrary to this observation are the quality and pay of jobs to be created at
the Yale cancer facility, the Royal Bank of Scotland, and MannKind Corp among
others.
Anticipated Sequential Forecast Adjustments
The data in Tables 5 and 6 have been incorporated into the NEEP forecast. They serve as a primary source for some of the employment deviation of the NEEP forecast from the Economy.com baseline. The interactive nature of the model accounts for a significant portion of the remaining changes in employment, income and real state GSP. However, the reader is cautioned that the data represent only the best available estimates for the anticipated job changes. If actual events deviate from the assumed path, this could have a material impact on part or the entire NEEP Connecticut forecast.
The
Connecticut Forecast - Employment
Table 7 contains the projected NAICS employment data organized according to the format published monthly by the Connecticut Department of Labor.[2] The annual non-ag employment number grew by 17,100 in 2007, after advancing by 18,600 in 2006. Through March 2008, the CT job total stood at 9,400 positions above the March 2007 total. As of 3/08, the CT job total had retreated by some -7,200 below the cyclical peak of 1,706,500 recorded in 12/07. In the near term 2008-09, the NEEP forecast looks for the national recession to cut -7,700 positions off of the 2007 total, with a modest increase of 2.1k jobs in 2009 if the U.S. recovery gains traction in CT.
Two cautionary observations are in order here. First, the job numbers in the years 2008-09 are expected to be consistent with a shallow and moderate recession. This is to be followed by a reasonably good recovery starting in the second half of 2008 and continuing on through 2009. However, the bottom of the housing contraction and the depths of the credit crunch have not been reached as of 5/08. Additional money center banking losses have been reported. To date, the economic contraction has spread from Wall St to Main St, with both current and future job cuts in retail, construction, financial services, municipal government, and business support services. Leisure and Hospitality employment may also contract in the face of higher energy and food prices, especially if the national recession lasts into the fall. Under these conditions, it may be difficult to halt the job loss trend in CT by the end of 08Q3 as forecast by NEEP. Furthermore, the state had trouble generating job creating traction as it emerged from the last two downturns in 1989-93 and 2000-2003. Steeper and more prolonged CT job losses would be likely and a lower trajectory for any job recovery are quite possible if the housing decline and credit crunch persist into 2009, and/or the fiscal stimulus and interest rate actions fail to turn the national economy around.
Second, as of March 2008, CT employment accounted for 1.23% of total U.S. jobs. This was down from 1.26% as recently as 2001. Therefore, it is apparent that CT, has not been sharing proportionately in the U.S. job expansion. Even with a late 2008 rebound in the U.S. economy, employment changes in 2008-09 may leave CT further behind in relative job growth. Contrary to this cautionary note is the observation that an important part of CT job growth in 2003-07 took take place in Financial Services, Business and Professional Services and Education and Health. Many of these positions were good paying and environmentally friendly, boosting both state incomes and related jobs, as well as enhancing the attractiveness of CT as a place to live and work. However, the Financial Activities and Business Services sectors are being squeezed in CT and the quality of near term job growth again becomes an important issue.
CT Employment by
NAICS Super-sectors:
History/Forecast 2007-2012
(000’s)
|
Job Super-sectors |
|
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
|
Total Nonag Empl |
|
1,697.7 |
1,690. |
1,692.1 |
1,709.5 |
1,722.0 |
1,728.3 |
|
Manufacturing |
|
191.3 |
188.3 |
187.6 |
188.3 |
187.7 |
185.7 |
|
Construction |
|
68.5 |
65.7 |
61.4 |
56.4 |
54.0 |
54.9 |
|
Priv Service Empl |
|
1,188.2 |
1,183.7 |
1,187.8 |
1,207.9 |
1,223.3 |
1,230.0 |
|
Trade, Trans,
Util |
|
311.6 |
310.5 |
308.7 |
310.0 |
311.0 |
310.0 |
|
Information |
|
38.5 |
38.3 |
39.2 |
40.5 |
41.5 |
41.9 |
|
Financial
Services |
|
144.5 |
137.2 |
134.7 |
136.3 |
137.6 |
138.2 |
|
Professional
Serv |
|
205.9 |
202.6 |
202.0 |
204.8 |
205.7 |
205.3 |
|
Educ + Health |
|
287.6 |
292.9 |
298.9 |
307.5 |
315.2 |
320.7 |
|
Leisure+Hosp |
|
135.7 |
137.7 |
140.3 |
144.6 |
148.2 |
149.8 |
|
Other Services |
|
64.3 |
64.6 |
64.1 |
64.2 |
64.3 |
64.1 |
|
Govt: Fed, S+L |
|
249.0 |
251.3. |
254.6 |
256.4 |
256.4 |
257.1 |
Manufacturing employment is currently showing some strength in CT as a result of two forces. First, there has been a rise in for CT exports and import competing products triggered by the falling trade value of the dollar. ME.com expects the dollar to fall further relative to the euro and yen leading to an improvement in the U.S. trade deficit of nearly +$100 billion by 2012. Greater foreign demand for CT built products should help to trim the rate of decline in the decades old loss of state manufacturing jobs. The second factor bolstering CT manufacturing employment is the rise in military related production resulting from the wars in Iraq and Afghanistan. CT prime contractors and component sub-contractors still play a major role in providing defense equipment. However, these expenditures and jobs are vulnerable to any changes in the political climate that may result from the presidential elections in November 2008. Despite these two buoyant forces, manufacturing employment is expected to decline by -5.6k or -2.9% from 2007 to 2012. Major contributors to the job fall-off will be the state’s relatively high manufacturing costs along with a shortage of skilled workers to fill existing job openings.
Two additional pieces of information may reinforce the projections of continued manufacturing jobs losses. First, the Pratt and Whitney division of United Technologies (UTC) was paired with Boeing in its bid to win the US DOD contract for the next generation of Air Force tanker planes. This multi-year, $40 billion dollar tanker contract has been initially awarded to Northrop-Airbus rather than Boeing. Therefore the jobs will not be coming to P&W in CT. While the award process is under review, it does not appear at this point that the contract decision is likely to be overturned. Second, Sikorsky Aircraft was the prime candidate to secure a $15 billion dollar contract from the Air Force to provide combat search and rescue aircraft to replace the aging fleet of Sikorsky PaveHawk helicopters. The contract was initially awarded to Boeing in Nov 2006 but the bidding process has been reopened with a final decision scheduled to be announced in late 2008. Sikorsky has a strong war related order book at this time. However, if war plans change then the combat search and rescue contract would serve as a strong force for employment support at the Stratford firm.
New home permits for 2007 were down by -1,490 units or -16.1%, and 2006 permits were off by -2,649 units or -22.3% from their peak of 11,885 units in 2005. Despite these declines, CT construction employment continued to rise, going from an average of 66k in 2005 to 68.5k in 2007. This situation is expected to be reversed in 2008 with an average of only 65.7k jobs and further declines are anticipate through 2012. The earlier up-tick in major commercial and public works construction projects have provided employment opportunities to offset the jobs lost in the residential building trades. Public projects including school construction along with private commercial building efforts are underway in Hartford, New Haven and Bridgeport. Casino expansion is planned or was in progress at both Foxwoods and Mohegan Sun, while Yale University has important expansions or retrofitting plans for both Yale-New Haven Hospital and the newly acquired Bayer Pharmaceutical property. The $2.5 billion Antares mixed use residential-commercial project is taking shape in Stamford, while the construction of the North American headquarters building for the Royal Bank of Scotland is scheduled for completion late in 2008 or early 2009. From 2009-12 the total is projected to decline by 6.5k jobs in the absence of additional commercial building or a strong revival is residential activity. The course of national interest rates combined with the loosening of mortgage lending criteria, and a revival of some degree of securitization will have a considerable say in how jobs in the building trades will fluctuate in the longer term.
Given the above trends in goods production, all of the projected net job gains of 38.3k from 2008 to 2012 will be in Private Service Providing sectors. The largest absolute advance of 28.8k positions is projected for the Education/Health sector. As the median age of the CT population rises (39.3 years in 2005, 7th oldest, vs. 36.4 years U.S.), more healthcare workers will be needed to care for sick and elderly residents. Employment in the Governmental sector is expected to rise by 8.1k from 2007-2012 with approximately 5k of those gains appearing at the local level. Approximately one-half of the local gain can be attributed to the rise in the employment numbers for the state’s two Indian Casinos as new construction projects come on line in 2008 and 2010. The Foxwoods Casino will open its new $700 million MGM Grand facility expansion in late May 2008. It will add some 1,000 net new positions to the casino’s existing staff of 11,400, with another 1,100 jobs being added by the concession holders. The Mohegan Sun Casino is starting a $740 million expansion project that is scheduled for completion in 2010. It is estimated to add another 2,000 jobs to their existing 10,000 employee base. Together, the Foxwoods and Mohegan Sun casinos currently employ approximately 21,500 workers in southeastern CT, and earn net between $2.3-2.5 billion annually before expenses, from gaming as well as related resort operations. Their additional workers will be counted as part of the State & Local Government category helping to offset the expected declines in municipal employment. In fiscal 2007, they turned over $440 million (Foxwoods $201.380 mil and Mohegan Sun $229.095 mil) to the CT state treasury, amounting to one-quarter of their net slot machine winnings.[3] Slot net state payments were up by $3 mil for fiscal 2007, with Foxwoods down by -$3mil and Mohegan Sun up by +$6mil. State slot revenue payments were down for the first nine months of 2007/2008.
The NEEP forecast anticipates a loss of 7.3k positions in the financial services sector in 2008 and 2.5k in 2009. Layoffs on Wall St., the commercial banking sector, and at local private equity and hedge fund firms will combine with declines in the real estate sector to account for the losses. From a low of 134.7k in 2009, NEEP anticipates a gradual revival to 138.2k jobs in 2012. Offsetting these expected declines is the fact that The Royal Bank of Scotland has agreed to relocate its North American headquarters to Stamford. The relocation is expected to create between 800-1,150 new RBS jobs within three years of the move. In addition, there will be several thousand temporary construction and permanent support positions, as part of the building of a $400 million new 500,000 sq. ft office complex including a trading floor. This job gain has been obtained in exchange for $100 million in state development grants and tax credits. Despite their recent securities losses and the need to raise additional capital, Royal Bank has stated that they do not plan to either delay or suspend their move to Stamford.
The addition of Royal Bank employees holds substantial implications for enhancing the housing, retail and service sectors within lower Fairfield County. In addition, the move in combination with the 4,100 jobs already located at UBS Warburg reinforces the competitive advantage of the Greater Stamford region as a global financial headquarters. The immediate construction jobs have been counted in this NEEP forecast, as well as the RBS employment numbers to be experiences in the 2008-2009 time span. Please note that UBS has also suffered billions of dollars in securities losses. The firm has stated that it will be cutting some 5.5k employees or 7% of its worldwide workforce by mid-2009. There is no information to date as to if or how many of those cuts will be at the Stamford headquarters.
For 2008, job gains are expected in Leisure and Hospitality (+2k), and Education and Health Services (5.3k). From 2008-12, Professional and Business Services should add 2.7k positions, while Leisure and Hospitality employment is expected to rise by 12.1k openings, Government 2.3k workers, and Education and Health employment is projected to grow by 27.8k positions. Job losses for 2008 are expected for Trade (-1.1k), Financial Services (-7.3k), Business and Professional Services (-3.3k).
In 2009 and beyond, the NEEP outlook relies upon the Moody’s Economy.com forecast of a rebound in national growth, and the absent of either external shocks or major domestic macroeconomic problems. Therefore, the modest CT job recovery from late 2008 should continue, generating overall employment gains of 2.1k positions in 2009 and 17.4k net new jobs in 2010. These projected job gains assume a sufficient expansion in the labor force with the appropriate skills to accommodate the job openings. This labor force growth was not forthcoming during the last expansion in the late 1990’s and it helped to drive the unemployment rate down to an expansion constraining 2.1% at its lowest point. The labor force numbers fell by -3.3k in 2004 but rebounded by 19k in 2005 and 21k in 2006. A CT labor force gain of 8.3k is projected for 2008 with another 11.6k expected to be added in 2009. However, as the forecast enters 2011 and 2012 the labor force is expected to decline by nearly 1k as boomers begin to exit the job market in increasingly larger numbers. These early year gains in labor supply along with the declines in jobs and the rate of job creation should drive the unemployment rate up to 5.7% in 2009. Thereafter it should fall towards 5% as job creation improves and labor forces gains begin to level off.
The information in Table 8 compares the strength of the state’s housing industry with the current and expected growth in CT incomes and population. Using U.S Census data released by the CT DECD in May 2008[1], CT housing permit numbers were down by -1,490 units or -16.1% in 2007 to a total of 7,746. Only Fairfield County, with the state’s largest share of permits at 29.6%, bucked the negative trend by registering a permit gain of 351 up by 18.1%. Hartford County had he largest absolute decline of -594 units or -25.8%, while Windham County experienced the largest percentage decline at -33.8% with a drop of -155 permits. This was the second year of state decline with 2006 being down by -22.6% from the peak of 11,933 permits recorded in 2005. Based upon DECD data from 128 CT towns, this downward trend in permits appeared to be continuing into the first quarter of 2008, with permits down another -15% relative to the first quarter of 2007. CT permits have decline in eight of the nine quarters since 05Q4.
NEEP anticipates that the number of new home permits will be down by -13.3% for 2008 totaling 6,812 units. The permit number should reach its lowest point in 08Q3 with a small rise in 08Q4. However, housing downturns are difficult to escape especially with tighter credit standards and the near elimination of the sub-prime lending market. Therefore, NEEP sees steady but minimal permit gains of 7,716 units in 2009 and 8,183 in 2010. Thereafter, the annual permit number may rise towards the 10,000 level by 2012. Tighter zoning requirements, diminished and expensive land pools, along with higher construction costs make it unlikely that new home permits will exceed the previous 2005 peak by the end of the forecast.
Annual CT Housing,
Population, and Income
History and Forecast
2007 - 2012
|
Indicator |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
|
New Home Pmts |
7,853 |
6,812 |
7,716 |
8,193 |
8,890 |
9,769 |
|
Sales Existing Homes |
45,600 |
38,900 |
43,000 |
46,200 |
47,300 |
48,900 |
|
Existing Homes Med sale price ($k) |
320.6 |
283.1 |
274.2 |
276.6 |
280.4 |
292.3 |
|
Mgt Orig %D |
10.0 |
-22.8 |
5.7 |
0.5 |
-2.2 |
2.6 |
|
Mgt Del Rate %D |
20.7 |
4.7 |
-4.3 |
-17.4 |
-11.6 |
2.7 |
|
Real Personal Income ($00bil.) |
161,505 |
160,952 |
164,747 |
169,764 |
174,271 |
177,570 |
|
Real Per Capita Income ($00) |
46,104 |
45,893 |
46,993 |
48,319 |
49,544 |
50,415 |
|
Ave Household Income ($) |
131,832 |
144,391 |
149,528 |
155,547 |
161,281 |
166,282 |
|
Median Household Income ($) |
67,710 |
68,562 |
70,522 |
73,167 |
75,763 |
77,677 |
|
Pop (mil.) |
3.503 |
3.507 |
3.510 |
3.513 |
3.518 |
3.522 |
Sales of existing homes are also on a decline in CT as a result of the national housing recession that was brought on by the lending excesses and subsequent meltdown in the sub-prime lending market. Existing sales peaked in 2005 at 58,100 units, but fell by 6,300 units or -10.8% to 51,800 units in 2006. A further decline of -6,200 sales or -12% was recorded in 2007. By all accounts, the decline in existing home sale numbers has continued into 08Q1. Barry Rosa, of Prudential Connecticut Realty, uses MLS data to track CT single family and condo sales for the state, its eight counties and most of the individual 169 towns.[4] His report for 08Q1 vs. 07Q1 showed existing single family CT sales off by -30% from 6,190 units to 4,326 units with the average number of days on the market increasing by 6% to 139 days or more than four months. Fairfield County registered both the largest absolute and percentage declines going from 1,527 to 983 sales down by -36%. However, the remaining seven counties also showed existing sales declines ranging from -21% to -33%. For condos, the CT 08Q1 sales decline was -37% with a 14% gain in time on market to average 140 days.
The Commercial Record, published by the Warren Group is a second source of existing sales data based upon their survey of town hall transactions records. Their figures showed 08Q1 single family sales off by 27%, with March sales down 28% vs. March 2007. The firm also reported that 5,855 units were in the first stage of the foreclosure process up 55 % from 07Q1. Similar data published by RealtyTrac indicated that there were 7,632 CT foreclosure filings in 08Q1, up 303% from 07Q1 and one for every 188 households in the state. The U.S. numbers were at 649,917 up by 112% and one for every 194 households. For comparison, the respective numbers for Massachusetts were 16,366, 260% and one filing for every 166 households.
The NEEP outlook anticipates a further decline in sales of existing homes to 38,900 units in 2008 with a bump up to 43,000 units in 2009. The low point is projected to be in 08Q1 at an annualized rate of 35,500. However, year over declines are expected to continue through 08Q3 with a 13% rise in comparables in 08Q4. Subsequent annul gains should push the sale total to 48,900 in 2012.
CT data for 08Q1 showed falling median sale prices for existing single family homes and condos. The NEEP historical data showed existing home prices falling in six out of eight quarters in 2006-07. However, a strong price advances in 06Q3 in 07Q1 allowed the annual figures to show average annual gains in both 2006 and 2007 peaking at a median value of $320,600. Much of the gain in the median value in 07Q1 reflected the drop off in sales based upon sub-prime mortgages. As a result, the bottom portion of the market saw a sharp sales decline, thereby relocating the median price higher into the more expensive segments of statewide sales activity. The Rosa/Prudential data showed that 08Q1 median single family home sale prices were down by -6%, to a median of $279,000. Litchfield and Middlesex Counties showed price gains of 11% and 5% respectively, while Fairfield County recorded the largest decline of -10% to a median price of $480,000. For the Warren Group, median single family prices fell by -5.84% to $266,000. The March 2008 decline of -7% was the largest monthly drop since an -8% fall in March 1995. For condos, the Rosa/Prudential data showed a 08Q1 price decline of -1% to $188,000.
A third piece of state single family home price information is provided by the S&P Case-Shiller Home Price Index. It tracks the sale price information on a constant quality home basis by tracking the current sale price on a specific home relative to the sale price at its last previous sale. This approach eliminates any price distortions caused by changes in the mix of home sales from one data period to the next. The Case-Shiller data showed the U.S. median price to be down for each quarter in 2007 by -1.75%, -3.36%, -4.58% and -8.9% respectively. In CT the declines were considerably less at -0.44%, -0.84%, -0.03% and -1.28% respectively. This CT data compares relatively well to the numbers for Massachusetts at -4.0%, -4.07%, -2.63% and -2.8%.
The NEEP outlook anticipates a further weakening in median sale prices with a decline through all four quarters to register $283,100 for 2008, down 11.3% from 2007. Price weakness is expected through the second quarter of 2009 where the median should touch bottom at $272,600. However, the modest gains for 09Q3 and 09Q4 should not keep the median for 2009 from registering a new cyclical low of $274,200 down -3.1% from 2008. Tighter lending conditions combined with a flood of distressed housing sales should help to explain this prolonged price weakness. Subsequent to 2009, home prices should rise modestly but steadily to reach $292,300 in 2012.
Additional information on the health of the CT housing market is available from the Equifx Credit Trends data supplied by ME.com. TABLE 8A shows Mortgage Delinquency rates by state as a percentage of the number of mortgages outstanding and the percentage growth in delinquencies from 05Q1 to 08Q1. While CT does demonstrate
TABLE 8A
Mortgage Delinquency Rates (% of number)
2005:Q1 to 2007:Q4
|
Entity |
2005:Q1 |
2008:Q1 |
% Change |
|
U.S average |
2.41 |
3.87 |
+61% |
|
|
|
|
|
|
CT |
1.78 |
3.0 |
+68.5% |
|
Massachusetts |
1.44 |
2.93 |
+103.3% |
|
New York |
2.04 |
3.08 |
+50.0% |
Rise in delinquencies that is greater than the national average (68.5% vs. 61%), its share of mortgages that are delinquent (3.0%) is well below the U.S. average (3.87%)
Table 8B has similar CT delinquency data for the total number of sub-prime mortgage loans. These were the riskiest loans advanced to borrowers with the lowest credit ratings. They were frequently adjustable rate mortgage (ARM) loans, with low initial or teaser interest rates. They were scheduled to reset anywhere from six months to three years into the future at much higher than prevailing market, interest rates. The borrowers accepted the arrangement with the expectation that rising home prices would allow them to refinance the loans with sufficient equity to transform the loan into a fixed rate, lower interest rate loan. The fall in housing prices has disrupted this plan. Many sub-prime borrowers are delinquent on the existing loans, while others may be unable to carry the burden of higher mortgage rates when the loans reset between now and the end of 2009.
TABLE 8B
Mortgage Delinquency Rates Sub-prime Loans
(% of number) 2008:Q1 vs. 2005:Q1
|
Entity |
2005:Q1 |
2008:Q1 |
% Change |
|
U.S. |
17.75 |
26.81 |
+51.0% |
|
|
|
|
|
|
CT |
18.38 |
27.11 |
+47.5% |
|
Massachusetts |
18.99 |
29.45 |
+55.08% |
|
New York |
18.85 |
26.01 |
+37.98% |
While the CT share of sub-prime loans appears to be a bit higher than the U.S. average, the percentage increase from 05Q1 to 08Q1 is a bit below the U.S. average and below that for the neighboring state of Massachusetts.
The personal and per capita income data shown in Table 8 are expressed in real dollars of 2000 purchasing power rather than nominal or current year values. The NEEP CT historical data shows that real total personal income grew by 4.6% in 2007, but is expected to decline by -0.3% in 2008. The strong growth in 2007 reflected the large volume of bonus income earned by workers in the financial services industry in 2006 and paid in January 2007. The strength of this irregular income stream is in doubt for 2008 given the mid-year losses faced by numerous commercial and investment banks, hedge funds and private equity firms. CT is home base for 12 of the 100 largest hedge funds in the U.S. These employees along with CT residents who work in the New York financial services industry may experienced as much as a 5-10% average drop in their January 2008 bonus fund payments. There could also be similar declines in their January 2009 payments if the housing related financial crunch lingers long into 2008. These declines could put a partial lid on high level of residential and discretionary spending in parts of Fairfield and Hartford Counties. In the intermediate term, real personal income growth is expected to average 3% in 2009 falling to 1.9% in 2012. However, nominal personal income is projected to grow at an average annual rate of 3.6% a year for the five years to 2012.
For more than three decades, CT has been a relatively slow growth state with respect to population gains. This trend held over the past two years in that population growth added 10k persons in 2006, and 6k persons in 2007. These numbers include figures covering births minus deaths, internal migration, and immigration from outside of the U.S. boarders. The slow growth pattern is expected to continue throughout the NEEP forecast period, with additions of just 5k expected in 2008 and averaging 4.5k persons annually from 2009-12. Slow population growth will work to restrain the overall demand for housing and household related items, as well as limit the potential growth in the labor supply. Labor supply conditions will tighten additionally as the “baby boomers” begin to reach full retirement age in 2012 and beyond.
Lastly, the CT household income numbers reinforce the strength of the state’s economy. However, the disparity in income among CT residents is evidenced by the gap between the nominal median and average household income numbers. In 2007, the average household income of $141,832 was 2.09 times the size of the median CT household income of $67,710. The average figure was skewed upward by the heavy concentration of income in the hands of a relatively few large income earners. Both of the nominal CT numbers are higher than comparable indicators at the national level. However, the higher cost of living in CT, especially for housing, transportation, energy, and taxes substantially reduces the implications of the CT advantage in terms of individual purchasing power.
Section 3 Conference Theme: Who in CT is
getting “crunched” by the “credit crunch”?
As the economic pain of the credit crunch spreads from Wall St (the financial sector) to Main St (the general economy), the list of CT groups being “crunched by the credit crunch” is expanding statewide and growing on almost a daily basis. From permits to home sales, from home prices to home foreclosures, the CT housing industry is declining in the wake of the bursting of the national housing bubble, the tightening of lending conditions, and the freezing up of the credit securitization process. As noted above, median sale prices for CT single family homes are down 6-7% vs. a year ago. Sales of existing homes are down by 28-30%, while new home permits are down by -15%, and foreclosure filings are up by 303% to 1 for every 188 households. The decline in home construction has reduced building supply spending leading to the closing of three major lumber yards with the loss of 400 jobs.
CT job numbers are declining with Financial Activity jobs off by -2,4k, including -1.6k in Finance and Insurance, and -.8k in Real Estate. Fewer jobs has meant less income and retail spending with the loss of -.9k jobs in that sector. Fewer jobs have led to less tax revenue being collected at both the state and local levels, turning what was projected to be a $260m state budget surplus into an estimated -$67m deficit. The state has a biennial budget system with the spending for fiscal 2008-09 having been set as part of last years budget. Legislative leaders and Governor Rell have agreed not to reopen the spending and tax projections thereby avoiding a potentially nasty political fight and allowing the existing budget to stand. However, whether or not actual spending totals and tax collections will be held at these numbers as the year progresses are as yet unanswered questions.
Major cities such as Bridgeport and New Haven have experienced revenue shortfalls from diminished state aid and declining real estate tax collections. In turn, they have announced budget cuts and current employee layoffs of around 100 workers each. These cuts run counter to the growing need for social service and welfare support at the local level. Other communities including Bristol, Farmington, Middletown, Bloomfield and Monroe have experienced multiple rounds of budget cuts. Local private charities and food banks are finding it more difficult to raise money and/or secure tangible support. And prospective college students are finding it harder to borrow tuition money from private lending sources. Even the state’s two Indian casinos are registering slot machine revenue declines, with Mohegan Sun reporting a -2.6% drop in net slot winnings and a -10.6% decline in overall operating profit for the first quarter of 2008 vs. 2007. The list and burdens of the “crunchies” are large and expected to grow on into 2009.
A number of concerns at both the national and international levels may come to temper what is otherwise a mildly positive ME.com U.S. outlook. First, the housing recession has had more wide reaching national and