“Why is Massachusetts doing so well and Connecticut doing so poorly?” asked John Traynor, executive vice president and chief investment officer at People’s United Bank, during a presentation at the Fairfield Chamber of Commerce’s 2020 Economic Outlook Breakfast. “Employment growth in Connecticut has still not gotten back to the prior peak in 2007. We are dead last among the states.”
Across the border, Traynor observed Connecticut’s problems are not being shared.
“Massachusetts is 352% ahead of where they were in 2007,” he said. “There’s something wrong here. They’re not fracking up in Massachusetts.”
The answer, according to Traynor, was Massachusetts’ ability to keep the creation of locally developed technologies, particularly those brought forth in the university laboratories in Cambridge, within the state’s manufacturing sector.
“If you’re a bright, young man or a bright, young woman and you have some ideas for a new medical device, what Massachusetts has figured out is you don’t go to Tennessee or Alabama or California, but go to Worcester or Springfield and produce that product in the state,” he said.
Traynor added that Worcester’s manufacturers located along the Route 9 corridor will acknowledge that they are not inventing these technologies, but they would instead claim how they “have people that got out of the technical schools that can run the advanced biotechnical equipment [and] take those ideas and make those ideas work.”
Traynor challenged the business professionals in the town of Fairfield to follow the example set in Cambridge, citing the presence of Fairfield University and Sacred Heart University as a tool to achieve that goal.
“How many towns have two major universities in the town?” he continued. “We’re importing smart kids from all over the place. They are here for four years and we do a great job educating them, but we need to hold on to them. Our town should be one of the engines of Fairfield County if we do it right. And if we do it right, we could be one of the engines of the state of Connecticut. The hard part is done. We’ve got the universities. We’ve got the smart people. Now we just need to leverage that.”
To grow the Connecticut economy, Traynor observed that “businesses of the future are built on brain power,” including professions that traditionally emphasized brawn.
“Even if you’re in manufacturing, 71% of the manufacturing business in Connecticut is advanced manufacturing,” he said, pointing out that manufacturing programs conducted at Bridgeport’s Housatonic Community College channeled students into careers where they earn $65,000 to $75,000 per year. “Connecticut is one of the leaders in high-tech, high-thinking, high-brainpower industries. And it’s not just biotech, but it’s manufacturing across the board.”
Traynor’s presentation also considered the wider economy. He predicted the 2020 economy will moderate, with a “fairly subdued” stock market that will probably not mirror the upward motion of 2019. Yet, he did not believe this would be problematic.
“A slower economy means the economy can continue growing for a longer time period,” Traynor explained. “If we were growing at 3% to 4%, the Fed would have both feet on the brakes and interest rates would be moving up more dramatically. By growing a little bit more slowly, this gives the Fed more time to say, ‘Let’s keep this party going.’ This is a very positive sign. Growing slowly at this point in the economy is very good.”
Traynor cautioned that any uptick in unemployment could be a harbinger of problems ahead.
“When unemployment goes down and then starts going up, you generally have a recession soon thereafter,” he warned. “So, we keep an eye on the unemployment rate. We’re not looking for an absolute number, but at a direction. If we get to 3.5% and we start to get to 3.6, 3.7 or 3.8, that gets us a little bit nervous as an indicator of what’s going forward.”
Traynor also said the 2020 election is making some business professionals nervous.
“I do know that if we see a change in Washington in the House, in the Senate and in the White House, we are going to see some changes in legislation,” he said. “What does this mean if I am a businessperson? I am going to sit on my hands because I have no idea what my tax rate is going to be and I have no idea what business depreciation is going to be.”
Traynor pointed to a trend that keeps incumbents in office, giving President Donald Trump another four-year term.
“If real wage growth is growing a little bit above 1.4%, the president gets re-elected,” he said. “The only two presidents who didn’t get re-elected — Jimmy Carter and George H.W. Bush — were below the line. Right now, it is at 2.46%. The message to President Trump is: if you want to get re-elected, keep this economy growing. Focus on lowering the concern about tariffs and trade and calm down a little bit on the tweets — but I don’t think we’ll ever get that to stop.”