What are the prospects for economic recovery in Connecticut?
According to Susan Coleman, professor of finance at the University of Hartford”™s Barney School of Business, there is good news and “not-so-good news.”
Speaking before more than 200 business leaders recently at CBIA”™s The Connecticut Economy conference in Rocky Hill, Coleman said the state is making progress toward recovery, but that it”™s a “somewhat shaky recovery.”
“There are mixed signals about the recovery of the economy at both the state and national levels,” said Coleman, citing uncertainty over the European debt crisis and problems addressing our own national debt.
Those two issues have “muddied the waters as we come out of this severe recession,” she said.
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A qualified upside
“There is a lot of good news,” said Coleman. “First of all, we are no longer in a recession. Both gross state product (GSP) and national GDP growth rates turned positive in 2010.”
In 2010, Connecticut GSP grew by 3.1 percent and U.S. GDP by 2.6 percent. Although encouraging, those numbers suggest a recovery considerably weaker than optimal.
“At the national level, generally we”™d like to see growth rates coming out of a recession of at least 3 percent to 4 percent to have a nice, healthy recovery. ”¦ So it”™s a weak recovery at best.”
Coleman identified Connecticut”™s strong durable goods manufacturing sector, positive export numbers and the rebound of the state”™s finance and insurance industries as other positives, as well as the fact that the state has added jobs.
“From July 2010 through July 2011, we added 8,700 jobs in Connecticut,” she said, citing manufacturing, professional and business services, and health services as sectors that have seen job growth. “The bad news, of course, is that we”™d like to see ”¦ more jobs.”
Another positive sign, said Coleman, is that Connecticut companies have used the time since the recession ended to pay down debt, resulting in stronger earnings and balance sheets.
She noted that households have also made progress in paying down debt, remarking that “sanity has taken over.”
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The downside: slow growth into 2012
Coleman identified several factors hindering a more robust recovery in Connecticut:
- Demographically, Connecticut is an old state: the median age is 40 (compared to 37.2 nationally) and the population of key working-age adults (18-44) is shrinking.
- Connecticut is not seen as an attractive state for young people to live and work.
- The state”™s unemployment rate remains high at 9.1 percent, the second highest in New England.
- The gap between rich and poor is growing.
- Connecticut”™s housing market remains weak.
- High levels of state and municipal debt, including massive unfunded liabilities for state employee pension and post-retirement health care benefits, will slow down our economic recovery.
- Connecticut continues to be seen as unfriendly to business.
“Connecticut has many strengths,” said Coleman, “but continued weakness in the housing and local markets serve as a drag on the economy.
“Consumer and business confidence are deteriorating, and these factors, combined with global and national economic issues, point the way to slower growth for the balance of 2011 and into 2012.”
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A recipe for success
Can Connecticut overcome its barriers to economic recovery? Coleman believes the state has the fundamental ingredients for economic, business and entrepreneurial success.
“There are really three ingredients you need for success: human capital (an educated, experienced workforce), social capital (a rich network for gaining access to resources and information) and financial capital,” said Coleman.
“And the good news for Connecticut is that we have very high levels of all three.”
Add several policy initiatives to those basic ingredients and Connecticut could be well on its way to economic recovery. Coleman recommends the state do the following:
- Create an economic development strategy that includes a role for new, small and midsize firms.
- Align tax, regulatory and spending policies with economic development needs and objectives.
- Tie workforce development initiatives to needed skill areas in advanced manufacturing and other industries.
- Target key industries with growth potential and provide incentives for entrepreneurship.
Finally, Coleman suggests the state undergo an attitude adjustment.
“We”™ve got to (move) away from ”˜business is the problem”™ and ”˜no you can”™t”™ to ”˜business is a key element of the solution”™ and ”˜yes you can”™ and ”˜let me help you,”™” she said.
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Bill DeRosa is editor of CBIA News. Reach him at bill.derosa@cbia.com.
