BY HUGH BAILEY
Hearst Connecticut Media
Fairfield County’s heavy reliance on the financial services industry has been a boon for Connecticut during good economic times. But a lack of diversification has also meant recessions hit harder, new data shows.
According to figures from Fitch Ratings, the global provider of credit ratings and research, wage growth in Fairfield County has lagged national rates since the recession of 2008-09, and a decline in high-paying jobs in the financial services sector is a major reason.
“Fairfield County is relatively concentrated on the financial services sector, where the wages are highest. Since 2007, employment in that sector has declined,” while other, less lucrative sectors have gained, said Jamie Goh, a research analyst at Fitch.
Education, health services and the hospitality industry have seen employment increases, but comparative salaries are much lower, she said.
“The unemployment rate has gone down, but the pay is not as lucrative.”
Wage growth in Fairfield County was just 1.5 percent in 2013, compared with 2.8 percent nationally.
The depth of the recession has changed the dynamics of the recovery, analysts said. Because employment took such a big hit, workers have remained at a disadvantage even after years of economic recovery.
The statewide jobless rate is 6.4 percent, still far greater than the 5.8 percent unemployment rate in the U.S.
“Because of high unemployment rates, employers had control over the markets, and you didn’t see a return to the higher wages and salaries prior to the recession,” said Kevin Dolan, a director at Fitch Ratings.
“And that’s still the case. Employers are still driving the boat in terms of what they can pay, and hiring people for much less than they would have in the past. That’s keeping wages a little bit flat.”
Retail sales outpace salaries
Before the most recent recession, wage growth routinely outpaced increases in retail sales, nationally and in Fairfield County. Those figures have shifted in recent years, with local retail sales rising faster than wages.
The region’s slow wage growth is a big part of the reason, as well as the release of pent-up demand following the recession, Dolan said.
“People did stop spending. They weren’t sure where the money was going to come from,” he said.
Post-recession, federal stimulus spending helped get the economy moving, he said. “There was a big uptick in car sales. People had postponed that kind of large purchase.”
After declining 14 percent in 2009, retail sales in Fairfield County jumped 9 percent the following year. Both the decline and subsequent rise were more extreme than the nation as a whole.
Retail sales have continued to outpace wage growth in the years since, but the gap has narrowed to a point that the trend is not considered worrisome, Dolan said. In 2013, retail sales climbed 3.2 percent while wages increased only 1.5Â percent.
“I don’t think we’re spending beyond our means, because we’re seeing the gap beginning to narrow,” Dolan said. “It’s more a reaction to the tightening of belts during the recession. People were not spending, there was less borrowing, and that’s starting to turn around now.”
Shock control
Connecticut has started taking steps to insulate itself from the shocks that can accompany heavy reliance on the finance industry, Dolan said.
“I think we’re seeing a number of localities trying to attract different industries ”“ technology, health services; you’re seeing hospital expansions, trying to attract medical professionals as a way to offset the loss of financial services, so they’re not exposed to that as much,” he said.
Other places with a heavy reliance on the finance industry have successfully diversified, he said. “We’re seeing that in other states that have been resilient to the shock of the financial services downturn. In Massachusetts, in Cambridge, where they have a strong technology sector and biotech, they’ve fared better during this recovery,” he said.
Connecticut’s push to expand its own biotech industry, including the recent opening of The Jackson Laboratory for Genomic Medicine on the campus of the University of Connecticut Health Center, could be considered a step in that direction, he said.
Employers in control
While wages across the U.S. have been helped by a boom in natural resource extraction, Connecticut hasn’t been able to follow suit. The result has been a slow, prolonged recovery that leaves many workers feeling left behind.
“After the 2001 recession, the recovery was very short. This one has been much longer because the recession was very steep,” Goh said.
“The depth of recession had a significant impact on the financial services industry. Given how much they contribute to the output of the state, it’s not surprising it’s taken longer to recover.”
Even with unemployment figures today becoming more in line with pre-recession numbers, employers retain the advantage, Dolan said.
“It usually follows the rate of unemployment. It’s supply and demand,” he said. “The higher the unemployment rates, the more employers have an advantage.”
A major difference this time, he said, was the high number of people who needed to accept a job even if it didn’t match the salary of one the that had been lost. “You had more people trying to get hired just to get a salary,” he said.
With the economy stabilizing, more weight could shift to workers, helping to drive wages up at a faster pace.
“As the economy strengthens and productivity increases, companies will want to expand to compete,” Dolan said. “That competition for talented people may lead to higher pay.”
Hearst Connecticut Media includes four daily newspapers: Connecticut Post, Greenwich Time, The Advocate (Stamford) and The News Times (Danbury). See ctpost.com for more from this reporter.
