A Federal Reserve economist said the economy appears to be rounding a corner toward growth, but significant hurdles remain before robust growth will resume in Fairfield County and the tri-state region.
“Things are getting worse much more slowly,” said Rae Rosen, senior economist and assistant vice president for the Federal Reserve Bank of New York. “You have that rocky bottom before you turn ”¦ We have every reason to think that we will see growth this quarter and next quarter, although it won”™t be as robust as we would like it to be.”
Rosen spoke at a Jan. 13 conference in Stamford hosted by the Business Council of Fairfield County and sponsored by Deloitte Inc.
Helping to limit that growth is the continued lag in the employment markets. Rosen noted that the average duration of unemployment is currently at 30 weeks, about two months longer than the previous high that occurred as a result of the recession of 1982.
“Layoffs are beginning to subside, but we haven”™t picked up hiring yet,” Rosen said.
If there were two positives for Fairfield County on that front during the recession, they were that the county has had a lower unemployment rate than many other parts of the Northeast and nation; and that layoffs at financial companies here and in New York City were 30 percent lower than what Fed economists had feared.
“We have been surprised that the contraction in the financial sector has been as mild as it has been,” Rosen said.
Rosen said the near-term outlook depends in part on the return of smoothly functioning financial markets, with the longer term health of the area”™s economy in part a function of new regulations that could emerge impacting the financial industry.
In its January Beige Book assessment of the tri-state economy, the New York Fed said the local economy has shown further signs of improvement since early December, with indications of a modest pickup in the labor market as businesses reported some expansion. The Federal Reserve Bank of Boston issued a similar forecast for Connecticut and the rest of New England, while cautioning that robust growth was unlikely to occur this year.
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New York manufacturers told New York Fed economists that they are adding workers, and a January increase in the Fed”™s Empire State Manufacturing Survey marked the sixth consecutive month the index has moved upward.
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“Future indexes were highly optimistic; activity and employment were widely expected to improve over the next six months,” Fed researchers wrote in their assessment of manufacturing. “The most commonly cited factor behind increased investment was a need to replace information technology equipment, followed closely by a need to replace other capital goods.”
Earlier this month, the Connecticut Business & Industry Association released an agenda for Connecticut to begin to recover jobs it has lost in the recession, focusing on moves by state government rather than business owners themselves.
Hartford-based CBIA said the state should avoid tax increases and promote predictable and consistent tax policy, to encourage employers to create more jobs here. CBIA also beseeched policymakers to improve the private sector health insurance market through affordable reforms; adopt the state Dept. of Education”™s plan to reform high schools; invest transportation funding where it can best boost local municipal economies; and improve the state”™s energy infrastructure.
“We know that free enterprise has lifted this state out of tough times before, and it can do it again,” CBIA stated in its report. “A strong employer base will generate the tax revenue state government needs to deliver important public services and programs. Because jobs are critical to economic recovery, state lawmakers must do all they can to help employers succeed and grow here in Connecticut. Legislative proposals should be held up to the piercing light of whether they will help or hurt our economy. Proposals that can”™t stand up to that very basic scrutiny should be discarded.”
