Section 1 – Executive Summary of the NEEP
Forecast for Connecticut
Current Conditions in the Connecticut Economy as of September
2008
CT registered a decrease of -2.3k jobs from 8/08-9/08, despite having recorded year-over job gains from Jan-Sept 2008. State employment is down by -4.1k from its job peak of 1.7065m in 12/07, and the unemployment rate at 6.1% is well above the 4.4% low recorded in the first six months of 2007. Still CT is relatively better off (so far) than the -760k jobs that have been lost in the U.S. since the start of 2008. CT has been late to feel the broader job loss because of its failure to be an aggressive participant in the housing boom-bust cycle that is at the heart of the early phase of the recession. However, the state is expected to be relatively harder hit by the second phase as the financial crisis leads to substantial reductions in the high income jobs that have been a major pillar of the CT expansion. Average weekly initial claims for unemployment insurance reached 6,209 exactly 2.2k above the average for 9/07. The total number of unemployed persons amounted to 116,400, up by 29,600 or 34% from 9/07.
All nine Labor Market Areas recorded a higher unemployment rate (nsa) in 9/08 compared to 9/07, led by Waterbury (7.1%), Willimantic-Danielson (7.1%), and New Haven (6.2%). Seven of ten employment super-sectors recorded year-over employment declines led by manufacturing (-2.8k), Trade (-1.6k), Finance (-1.4k) and Construction (-1.1k). Education and Health (+5.7k), Government (including casinos +2.6k) and Leisure/Hospitality (+1k) were the employment gainers.
The CT housing market is in sharp decline, with permits (reported for 128 of 169 towns) down by -28% for the first nine months of 2008 relative to 2007, and -50% relative to the cyclical peak in 2004. Year over, monthly permit numbers were down by -17% in September after declining by -42% for July and 53% in August. Perhaps the shallower September numbers are signaling the approach of a potential bottom in the residential construction industry. Nevertheless, fewer permits mean less inventory on the market to further depress home prices.
Table 1 summarizes the annual data for the NEEP CT 11/08 and Moody’s Economy.com (ME.com) 10/08 baseline forecasts, the ME.Com worst case S3 10/08 forecast along with the NEEP 5/08 forecast. The NEEP 11/08 forecast was developed off of the baseline estimates. This comparison of current, prior, baseline, and worst case forecasts allows the reader to make three key assessments. First, it highlights the changes in the forecast data that have taken place over the six-month period from 5/08 to 11/08. Second, it shows how the model manager’s adjustments have altered the ME.com 10/08 baseline outlook. And third, it allows the reader to determine how closely the NEEP 11/08 forecast tracks the ME.Com worst case forecast. The worst case assessment includes a stronger collapse in the housing market combined with a medium-level national recession. ME.Com assigned a 15% likelihood of occurrence to the worst case forecast, while the baseline data received a 60% probability.
Over the past six months, ME.Com has altered its baseline forecast as the macroeconomic data have deteriorated. They have introduced a moderate and short lived recession scenario, covering 08:Q3 through 09:Q1, 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 11/08 CT forecast compared to its earlier 5/08 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. The projected recession is consistent with the higher CT unemployment rate which is expected to peak in 09:Q4 at 7.74%, and fall slowly thereafter to average 6.1% in 2012. Clearly the affects of the national recession will be felt in CT.
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 11/08 181.8 181.8 183.9 191.0 199.2 204.0
ME.Com baseline 10 /08 181.8 182.2 184.6 191.6 198.7 204.2
Moderate Decline 11/08 181.8 181.8 183.5 190.1 197.0 202.4
NEEP 5/08 181.4 183.3 189.6 196.0 201.4 207.2
Total
Nonagricultural Employment (000’s)
NEEP 11/08 1,698 1,698 1,659 1,644 1,660 1,695
ME.Com baseline 10/08 1,698 1,699 1.677 1,693 1,725 1,743
Moderate Decline 11/08 1,698 1,693 1,653 1,661 1,687 1,703
NEEP 5/08 1,698 1,690 1,692 1,710 1,722 1,728
Total
Manufacturing Employment (000’s)
NEEP 11/08 191.3 188.9 183.1 178.6 178.3 182.0
ME.Com baseline 10/08 191.3 189.0 185.1 185.0 186.7 186.6
Moderate Decline 11/08 191.3 189.0 185.1 185.0 186.7 186.6
NEEP 5/08 191.3 188.5 187.6 188.3 187.8 185.7
Labor
Force (000’s)
NEEP 11/08 1,866 1,886 1,895 1,910 1,919 1,915
ME.Com baseline 10/08 1,866 1,886 1,895 1,910 1,918 1,917
Moderate Decline 11/08 1,866 1,886 1,896 1,908 1,916 1,915
NEEP 5/08 1,866 1,884 1,895 1,909 1,917 1,917
Unemployment
Rate (%)
NEEP 11/08 4.55 5.80 7.41 8.38 7.67 6.35
ME.Com baseline 10/08 4.55 5.78 6.80 6.59 5.59 5.04
Moderate Decline 11/08 4.55 5.94 7.66 7.77 7.00 6.55
NEEP 5/08 4.6 5.3 5.7 5.5 5.1 4.9
Real
Personal Income (Bil $00)
NEEP 11/08 163.7 162.1 160.9 163.5 167.2 171.2
ME.Com baseline 10/08 163.7 162.1 162.1 166.9 172.6 176.8
Moderate Decline 11/08 163.7 161.9 161.2 165.7 171.2 175.3
NEEP 5/08 161.5 160.9 164.7 169.8 174.3 177.6
Population
(mil)
NEEP 11/08 3.503 3.507 3.510 3.514 3.518 3.521
ME.Com baseline 10/08 3.503 3.507 3.510 3.514 3.518 3.522
Moderate Decline 11/08 3.503 3.507 3.510 3.512 3.514 3.516
NEEP 5/08 3.503 3.507 3.510 3.513 3.518 3.522
Total
Housing Permits
NEEP 11/08 7,746 5,609 4,632 5,904 8,401 8,960
ME.Com baseline 10/08 7,746 5,634 5,680 7,286 9,273 9,113
Moderate Decline 11/08 7,746 5,510 5,015 6,663 8,052 8,562
NEEP
5/08 7,853 6,812 7,716 8,193 8,890 9,769
Sales
of Existing Homes (000)
NEEP 11/08 45.4 36.3 41.8 44.3 43.8 43.8
ME.Com baseline 10/08 45.4 38.5 45.6 50.0 49.2 48.0
Moderate Decline 11/08 45.4 35.5 40.6 45.0 46.1 44.9
NEEP 5/08 45.6 38.9 43.0 46.2 47.3 48.9
Median Home Price ($000)
NEEP 11/08 321.4 288.8 246.7 233.0 240.8 253.2
ME.Com baseline 10/08 321.4 288.8 265.0 269.3 282.1 294.6
Moderate Decline 11/08 321.4 288.8 263.0 257.5 262.4 270.2
NEEP 5/08 320.6 283.1 274.2 276.6 280.4 292.3
The data in Table 1 also contain some sharp as well as
subtle differences indicating the ways in which the NEEP 11/08 forecast has
been altered relative to the ME.Com 10/08
baseline. The NEEP-CT decline is significantly sharper, lasts longer, and has a shallower recovery trajectory than the ME.Com CT baseline forecast. First, non-ag employment is projected to be 18k jobs lower in 2009 with a recovery that is 48k jobs lower in 2012. 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 2010-12 recovery. This should be especially true for CT given that the Financial Services sector will be very hard hit by job losses and will experience an as yet unclear structural reformation. Second, NEEP 11/08 has the CT manufacturing sector experiencing the same level of job loss as the baseline. The dollar is weak and NEEP anticipates it to strengthen a bit but to remain relatively depressed for the next 12-18 months. This weakness has been a major support for CT manufacturing exports and jobs. However, the national election results may lead to a slowing of defense spending that could hurt CT manufacturing employment 3+ years out. Third, the NEEP unemployment estimates are significantly higher (8.38% vs. 6.80%) than those of ME.Com at both the peak in 2010 and the end of the forecast in 2012 6.35% vs. 5.04%). Slower job growth combined with gains in the labor force should leave a larger number of persons unemployed.
Finally, the largest projected discrepancies between NEEP 11/08 and ME.Com 10/08 are in the expected number of housing permits, sales of existing homes, and median home prices. While both have the CT existing sale numbers declining until mid-2009, NEEP expects a much longer and steeper housing permit 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, thereby 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 07:Q3. 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. Additional foreclosures will combine with job losses and tighter credit conditions to depress housing prices until 10:Q2
A slightly more moderate CT outlook is possible if the federal government is able to find ways to support the national housing market. It is apparent that financial and economic stability on Wall St and Main St can not occur until stability in the housing market is established. At this date, the Bush administration and President-elect Obama have stated their intention of providing housing market support. Neither the shape nor the extent of this potential support program are visible as yet. However, if it helps to limit foreclosures in early 2009, then the more drastic housing slump of 2010 may be avoided. In that case, the more moderate forecast looks for higher existing sales, permits and home prices in 2010. Moreover, there would be corresponding positive influences on personal income, the number of jobs and the unemployment rate through 2012.
In general, NEEP-CT offers an outlook that
is more pessimistic than the ME.Com baseline, including a more prolonged
housing decline, with a weaker 2010, and a shallower recovery in 2011-12. A slightly more positive outlook is possible
in 2010-12 if the housing market stabilizes earlier.
TABLE 1A
|
|
CT Business/Housing/Credit Cycles:
Forecast Comparisons |
|
|
|||||||
|
|
ME.com Baseline vs. NEEP
Outlook: Quarterly Data (saa) |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic |
|
Cyclical |
|
Cyclical Worst |
Worst |
NEEP Diff |
|
ME.com |
|
NEEP |
|
Indicator |
|
Best |
|
ME.com |
NEEP |
Best-Worst |
|
12:Q4 |
|
12:Q4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BUSINESS
CYCLE - HISTORY/FORECAST |
|
|
|
|
||||
|
Employment
mil |
|
1.704 |
|
1.674 |
1.642 |
-62,000 |
|
1.743 |
|
1.712 |
|
|
|
07:Q4 |
|
09:Q3 |
10:Q2 |
-3.64% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unemploy
Rt % |
|
4.2 |
|
6.89 |
8.49 |
429 bp |
|
5.04 |
|
5.92 |
|
|
|
06:Q2 |
|
09:Q4 |
10:Q2 |
102% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
GSP $Bil |
|
182.9 |
|
180.4 |
180.4 |
-2.5 |
|
204.2 |
|
205.5 |
|
|
|
07:Q1 |
|
07:Q4 |
07:Q4 |
-1.40% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Per Inc $Bil |
|
163.94 |
|
160.43 |
160.2 |
-3.92 |
|
176.8 |
|
173.1 |
|
|
|
07:Q4 |
|
08:Q4 |
08:Q4 |
2.39% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real
Per Inc Per |
|
46.953 |
|
45.727 |
45.662 |
1.291 |
|
50.194 |
|
49.139 |
|
Capita ($000) |
|
07:Q3 |
|
08:Q4 |
08:Q4 |
2.75% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HOUSING
CYCLE - HISTORY/FORECAST |
|
|
|
|
||||
|
Permits |
|
12,155 |
|
4,684 |
4,365 |
-7,790 |
|
9,113 |
|
8,964 |
|
|
|
05:Q4 |
|
08:Q3 |
09:Q4 |
-64.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Exist (000) |
|
61.3 |
|
35.8 |
35.1 |
-26.2 |
|
48 |
|
44 |
|
|
|
05:Q1 |
|
08:Q2 |
08:Q4 |
-42.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
Price |
|
326.8 |
|
263.2 |
232.2 |
-94.6 |
|
294.6 |
|
253.2 |
|
1-Faimily ($000) |
|
07:Q4 |
|
09:Q3 |
10:Q2 |
-28.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OFHEO
Home |
|
478.3 |
|
434.4 |
346 |
-142.3 |
|
487 |
|
371.7 |
|
Purchase Index |
|
07:Q1 |
|
10:Q1 |
10:Q4 |
-29.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bankruptcy
(000) |
|
4.806 |
|
16.652 |
19.817 |
15.011 |
|
13.987 |
|
19.334 |
|
|
|
06:Q4 |
|
11:Q2 |
12:Q2 |
412% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mgt
Orig Pur $B |
|
23.172 |
|
11.804 |
11.504 |
-11.668 |
|
16.543 |
|
15.09 |
|
|
|
05:Q4 |
|
09:Q2 |
09:Q2 |
-50.35% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mgt
Orig Refi $B |
|
27.8 |
|
13.89 |
13.9 |
-13.9 |
|
13.785 |
|
13.418 |
|
|
|
04:Q2 |
|
09:Q2 |
09:Q2 |
-50.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mgt
Delinq Rt % |
|
3.07 |
|
5.52 |
5.54 |
2.47 bp |
|
3.96 |
|
4.14 |
|
|
|
05:Q3 |
|
09:Q1 |
09:Q1 |
80.5% |
|
|
|
|
Table 1A contains data comparing the business and housing cycles for NEEP vs. ME.com baseline. A similar chart is available in the body of this report comparing NEEP with the more moderate outlook. Table 1A shows that the business, housing and credit declines will be steeper, will last longer, and demonstrate a slower recovery for NEEP-CT than for ME.com. For the NEEP-CT business cycle, the timing of the lows appears later near mid-2010. In addition, the NEEP projections are below those for ME.com while the unemployment rate is higher. By the end of the forecast in 12:Q4 the ME.com estimates are well above NEEP except for the unemployment rate where NEEP is 88bp higher. For the housing cycle, the NEEP lows for permits, sales, and home prices are below those for ME.com and generally occur at a later date. By the end of the forecast in 12:Q4, the ME.com forecast shows a decidedly weaker recovery in all three housing indicators. On a positive note, the NEEP-CT OFHEO home price index shows CT housing to be more affordable. For the CT credit cycle, the weaker CT economy leads to more bankruptcies at the low and a larger amount in 12:Q4 as well. The mortgage delinquency rate is approximately the same at the low, but marginally higher in 12:Q4. Lastly, the banking industry suffers a sharper decline as the lows in the dollar values for mortgage purchases and refinances are more severe for NEEP with a weaker recovery by 12:Q4.
The NEEP Connecticut baseline forecast, shown in Table 1, is driven by the U.S. macroeconomic cyclical projection developed in October 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 second half of 2008 and early 2009, alters several of the ME.Com 10/08 forecast numbers relative to 3/08. 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 in the years 2008-2010. Conversely, changes in the CPI inflation rate, the unemployment rate, and oil prices are noticeably higher in 2008-2010. In particular, the Fed Funds rate is some 250 bp lower by 2009 as the Federal Reserve has struggled aggressively to get ahead of and reverse the tide of economic decline.
Looking at 2010, not only are there still some sharp cyclical differences in the 10/08 forecast relative to 3/08, but ME.Com anticipates a fairly strong cyclical upsurge in economic activity that continues into 2012. The gain in RGDP for 2010 is 3½ times the gain for 2009. Real disposable income, the number of housing starts and the fed funds rate all demonstrate a similar pattern of sharp increases starting in 2010.
Key Indicators
Moody’s Economy.com U.S. Macro Forecasts
October 2008 vs. March
2008
YearU.S. Macro Indicator |
2007 |
2008 |
2009 |
2010 |
2011 |
2012 |
Gross Domestic Product %D 10/08
|
2.0 |
1.6 |
1.0 |
3.7 |
4.0 |
2.7 |
3/08
|
2.2 |
1.5 |
3.5 |
3.5 |
2.8 |
2.7 |
Consumer Price Index %D 10/08
|
2.9 |
4.4 |
2.4 |
1.4 |
1.4 |
1.8 |
|
3/08 |
2.9 |
3.0 |
2.0 |
1.8 |
1.9 |
2.2 |
|
Total Employment %D 10/08 |
1.1 |
-0.0 |
-0.7 |
1.3 |
2.3 |
1.5 |
|
3/08 |
1.1 |
0.3 |
0.9 |
1.7 |
1.4 |
0.8 |
|
Unemployment Rate % 10/08 |
4.6 |
5.6 |
7.1 |
6.9 |
5.7 |
5.1 |
|
3/08 |
4.6 |
5.4 |
5.8 |
5.4 |
4.9 |
4.8 |
|
Real Disposable Income %D 10/08 |
3.4 |
0.4 |
0.8 |
3.3 |
3.8 |
3.1 |
|
3/08 |
3.0 |
2.6 |
2.8 |
4.0 |
3.7 |
2.9 |
|
Housing Starts (mil) 10/08 |
1.34 |
0.96 |
0.90 |
1.24 |
1.71 |
1.75 |
|
3/08 |
1.34 |
0.93 |
1.35 |
1.73 |
1.69 |
1.71 |
|
Net Exports ($Bil) 10/08 |
-546.5 |
-403.6 |
-363.4 |
-347.2 |
-343.7 |
-361.9 |
|
3/08 |
-556.5 |
-484.7 |
-483.1 |
-475.9 |
-470.9 |
-476.8 |
|
Federal Funds Rate % 10/08 |
5.02 |
2.24 |
1.76 |
3.30 |
4.80 |
4.59 |
|
3/08 |
5.02 |
2.41 |
4.27 |
4.88 |
4.51 |
4.51 |
|
Treas-Bond Rate 10-yr % 10/08 |
4.6 |
3.85 |
4.81 |
5.89 |
5.36 |
5.06 |
|
3/08 |
4.6 |
4.18 |
5.4 |
5.66 |
5.48 |
5.51 |
|
S&P 500 Stock Average 10/08 |
1,477 |
1,295 |
1,386 |
1,608 |
1,698 |
1,804 |
|
3/08 |
1,477 |
1,447 |
1,597 |
1,672 |
1,762 |
1,869 |
|
Oil West Texas ($/Bbl) 10/08 |
72.4 |
113.7 |
97.3 |
83.8 |
75.9 |
67.9 |
|
3/08 |
73.3 |
85.4 |
60.5 |
51.9 |
51.8 |
51.8 |
The S&P stock average is projected to fall dramatically in 2008 with respectable gains in 2009 through 2012. However, the annual value remains below the 2007 high reflecting a rather long-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 $113.70 per barrel. However, ME.Com anticipates a sharp drop in crude oil prices from 2009 through 2012 as more supplies reach the global market, there is modest worldwide recovery from the global recession and higher prices restrain consumer spending. However, the 10/08 price estimate for each year exceeds the earlier annual projection by anywhere from $18-$37 per barrel.
Lastly, the housing market is expected to reach bottom with starts at their low in 08Q2, existing home sales hitting bottom in 09:Q1, and median sale prices for existing homes continuing to fall through 09:Q4. Starts and sales rebound smartly in 2010 and continue a gradual gain through 2011, when they encounter another mild decline in 2012.
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 September 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 |
September 2008 |
Nonag Employment |
July 2000 1,700,700 Dec 2007 1,706,500 |
July 2003 1,640,400 |
-60,300 -3.55% |
1,702,4 00 |
|
Unemployment
Rate |
10/00-11/00 2.1% 1/07-6/07 4.4% |
3/03-4/03 5.7% |
+360 bp |
6.1% |
|
Number
Unemployed |
Nov 2000 35,700 Nov 2006 78,500 |
April 2003 102,700 |
+67,000 +187.7% |
116,400 |
|
Ave Initial
Wkly New Claims
Unemploy Insurance |
Sept 2000 3,204 Jan 2006 3,702 |
May 2002 6,400 |
+3,196 +100% |
6,209 |
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.
Subsequent to the cyclical lows of 2003, CT reached its latest cyclical employment peak in December 2007, with 1,706,500 persons employed in non-agricultural jobs. Through September 2008, the job total had declined by -4,100 and is potentially headed lower through at least the second half of 2009.
In this latest cyclical turn, the CT unemployment rate which reached 6.1% in September (down from 6.5% in August 2008), has surpassed the previous peak of 5.7% recorded in early 2003. And NEEP projects the impending new cyclical high of 7.74% to arrive in 09:Q4. Average initial weekly new claims for unemployment insurance hit 6,209 in September, just 400 claims shy of its cyclical peak in May 2002. The September number is half again as large as their most recent low of 3,980 recorded in August 2007. With new claims on the rise, it is not surprising to see that the total number of unemployed persons has reached 116,400. What is shocking is that this is 13,700 persons above the previous cyclical peak of 102,700 recorded in April 2003. As the unemployment rate rises, more persons will be drawn into the labor force seeking any type of work to supplement a dwindling amount of family income. Therefore, it would not be surprising to see the number of unemployed persons in CT rising to the total of 147,200 as projected in 09:Q4.
Given
the CT history of being late into and late out of the two most recent national
recessions, there are real concerns as to the identity, origins and strength of
the forces that will pull the state out of this recession. This concern over recovery traction
is particularly acute given the impending restructuring of the U.S. financial
services industry, and the aging of the CT workforce.
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 89:Q1, 00:Q3, and potentially 07:Q4. 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 |
68.5 |
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 |
19.4 |
-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
April 2008 through September 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 May 2005 through May 2008 NEEP forecasts, help to explain why the CT economy has lagged in its job recovery numbers relative to the U.S.
Connecticut Labor
Force Reductions
|
Employer |
Industry |
No. Jobs |
Reason |
As of Q/Yr |
Location |
|
City of Bridgeport |
Gov Local |
31 |
Budget |
08:Q3 |
Bridgeport |
|
Ponderosa Stkhouse |
Leisure-Hosp |
40 |
Closed |
08:3 |
Southington |
|
City of New Haven |
Gov Local |
35 |
Budget |
08:Q3 |
New Haven |
|
Cartus |
Bus Services |
50 |
Slow bus |
08:Q3 |
Danbury |
|
Syntex Rubber |
Manufacturing |
35 |
Reloc |
09:Q2 |
Bridgeport |
|
Scholastic Inc. |
Publishing |
96 |
Close div |
09:Q1 |
Danbury |
|
Atlantic Wire |
Manufacturing |
71 |
Closed |
08:Q3 |
Branford |
|
Sunrise Resorts |
Leisure-Hosp |
90 |
Closed |
08:Q3 |
Moodus |
|
Gerber Scientific |
Manufacturing |
59 |
Slow bus |
08:Q3 |
So Windsor |
|
City of New Britain |
Gov Local |
35 |
Budget |
08:Q3 |
New Britain |
|
New Coleman |
Nursing home |
134 |
Closed |
08:Q3 |
Bridgeport |
|
Whyco Finishing |
Manufacturing |
17 |
Reloc |
08:Q3 |
Thomaston |
|
Citigroup, Inc |
Fin Services |
146 |
Cost cut |
08:Q3 |
Stamford |
|
Starbucks |
Retail |
100 |
Closed |
08:Q3 |
Statewide |
|
Momentive Perform |
Chemicals |
28 |
Reloc |
08:Q3 |
Wilton |
|
Continental AFA |
Mold maker |
55 |
Closed |
08:Q3 |
Bridgeport |
|
Beit Bros |
Retail grocery |
40 |
Closed |
08:Q3 |
Dayville |
|
City of Hartford |
Gov Local |
85 |
Budget |
08:Q3 |
Hartford |
|
UBS AG |
Fin Services |
800 |
Cost cut |
08:Q3 |
Stamford |
|
Webster Bank |
Fin Services |
100 |
Cost cut |
08:Q3 |
Hartford |
|
City of Meriden |
Gov Local |
16 |
Budget |
08:Q3 |
Merident |
|
First Coast Service |
Health Services |
86 |
Cost cut |
08:Q3 |
Meriden |
|
Hartford Courant |
Newspaper |
60 |
Cost cut |
08:Q3 |
Hartford |
|
United Health Grp |
Insurance |
25 |
Cost cut |
08:Q2 |
Hartford |
|
The Day Publishing |
Newspaper |
38 |
Cost cut |
08:Q2 |
New London |
|
Foxwoods Casino |
Gov Local |
200 |
Slow bus |
08:Q2 |
Ledyard |
|
Foxwoods Casino |
Gov Local |
700 |
Slow bus |
08:Q4 |
Ledyard |
|
Johnson Health Nwk |
Hospital |
76 |
Cost cut |
08:Q2 |
Stafford Sprgs |
|
Ansonia Copper |
Manufacturing |
85 |
Slow bus |
08:Q3 |
Ansonia |
|
Virgin Atlantic |
Transportation |
51 |
Reloc |
08:Q3 |
Norwalk |
|
Quebecor World |
Printer |
350 |
Close |
08:Q2 |
No Haven |
|
Linens n Things |
Retail |
80 |
Close |
08:Q4 |
Statewide |
|
JWM Partners |
Hedge Fund |
15 |
Cost cut |
08:Q2 |
Greenwich |
|
Keeper Corp |
Transportation |
34 |
Reloc |
08:Q3 |
Windham |
|
People’s United |
Banking |
170 |
Cost cut |
08:Q3 |
Statewide |
|
Pitney Bowes |
Postage Meters |
49 |
Reloc |
08:Q2 |
Newtown |
|
City of Bridgeport |
Gov Local |
76 |
Budget |
08:Q2 |
Bridgeport |
|
Mohegan Sun Casno |
Construction |
300* |
Stop Cons |
08:Q4 |
Montville |
|
Greenwood Pub |
Printing |
150 |
Close |
08:Q4 |
Westport |
|
WFS-PTS |
Flight Services |
74 |
Close |
08:Q4 |
Windsor Lks |
|
General Electric |
Manufacturing |
53 |
Cost cut |
08:Q3 |
Plainville |
|
Frozen Specialties |
Food Service |
|
|
08:Q2 |
West Haven |
|
Xerox |
Info Services |
N.S. |
Cost cut |
09:Q1 |
Norwalk |
|
|
|
|
|
|
|
|
PREVIOUSLY
TABULATED |
TO BE FELT DURING THE
FORECAST |
|
|
|
|
|
General Electric |
Electrical sys |
57 |
Close |
3:08 |
Plainville |
|
Clairol |
Chemicals |
350 |
Close |
1:10 |
Stamford |
|
Fed Res Bank |
Fin Services |
146 |
Reloc |
1:09 |
Windsor Lcks |
|
Watson Pharma |
Pharmaceuticals |
60 |
Closing |
2010 |
Danbury |
|
Gibbs School |
Education |
35 |
Closing |
2:09 |
Norwalk |
|
Ross & Roberts |
Rub + Plastics |
60 |
Closing |
3:08 |
Stratford |
|
Nationwide Insur |
Insurance |
100 |
Close |
3:08 |
Rocky Hill |
|
Belden Mfg |
Cable |
132 |
Close |
3:08 |
Manchester |
|
Citygroup Inc |
Fin Services |
120 |
Close brch |
3:08 |
Statewide |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NEEP Forecast |
# Firms |
Jobs |
|
|
|
|
|
|
|
|
|
|
|
11/08 Totals: |
42 |
4,807 |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
5/06 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.
The 11/08 NEEP job-cut list has 42 different announcements with total job cuts projected at 4,807 positions. This is 3,079 positions or +178% above the number reported in the May 2008 forecast. The job loss numbers are the largest in over two and one-half years since May 2006. Eleven of the current announcements involve cuts of more than 100 jobs compared to Seven in 5/08. The largest cuts are projected at UBS the giant financial services employer in Stamford and 1,200 being the combined total at the two casinos in Ledyard and Montville.
In addition, there are 10 firms with approximately 950 additional 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 underscore the severity of the potential job losses and to keep the events and consequences in mind. Lastly, there are reports that job losses in the financial services industry including, Wall St, the investment banks, commercial banks, hedge funds, and insurance firms may exceed more than 200,000 by year’s end and possibly top 250,000 by mid-2009. Some 110,000 have already been announced with the expectation that 35,000 of the 200,000 will be direct jobs on Wall St. Given the assumption that 10-15% of the NYC cuts involve CT residents, the job loss to the state could amount to 3,500-5,000 positions with multiplier effects totaling in excess of 10,000 in total. Three CT cities, including Darien and Westport, have been cited by several studies as potentially experiencing the greatest job and spending hits from the financial crisis
This job cut information has been incorporated into the 11/08 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 April 2008 through September 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 19 firms with potential job gains totaling 2,586 positions. The firm figure for 11/08 is eight less than the number for 5/08, and the job total is smaller by 1,715 or 40%.
Publicly Announced
Job Additions
Announced Between April 2008 and September
2008
|
Employer |
Industry |
# Jobs |
Date Q/Yr |
Location |
|
Accel Internat |
Wire |
41 |
2009 |
Meriden |
|
Electric Boat |
Transportation |
100 |
2009 |
Groton |
|
Kohl’s |
Retail |
150 |
08:Q4 |
Waterbury |
|
Target |
Retail |
500 |
08:Q4 |
Trumbull |
|
STR Holdings |
Solar Panels |
180 |
2009 |
Somers |
|
United Methodist Home |
Sr Housing |
300 |
2010 |
Derby |
|
Garrity Industries |
Flashlights |
22 |
09:Q2 |
Bethel |
|
Holiday Inn |
Hotel |
100 |
08:Q4 |
Waterbury |
|
Mohegan Sun |
Casino |
235 |
08:Q3 |
Montville |
|
LA Fitness |
Leisure/Hosp |
40 |
08:Q3 |
Norwalk |
|
Hampton Inn |
Hotel |
30 |
08:Q3 |
Mystic |
|
PriceRite |
Retail |
100 |
08:Q2 |
Elmwood |
|
HomeGoods |
Retail |
60 |
08:Q3 |
Westport |
|
Big Y |
Retail |
60 |
08:2 |
Torrington |
|
Fieldpoint Private Bank |
Fin Services |
32 |
08:2 |
Greenwich |
|
Home Depot |
Retail |
150 |
08:2 |
East Haven |
|
Prudential |
Insurance |
275 |
To 2011 |
Hartford |
|
American Energy |
Ethanol |
200 |
2009 |
New Milford |
|
Design2Launch |
Software |
30 |
2008 |
Stamford |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
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 |