Positivity was the keyword at the CBIA”™s “Connecticut Economic Update” event this morning, though a Federal Reserve executive warned, “We still have a long way to go.”
CBIA President and CEO Chris DiPentima opened the proceedings with, “There is no doubt that this is a really exciting time.
To bolster his statement, he noted that about 2/3 of adults have received at least one dose of a Covid vaccine ”“ about 50% have been fully vaccinated; roughly 60% of the jobs lost during the pandemic have been recovered; a 7% GDP growth in the state during the fourth quarter of 2020, which he said was the fourth-highest growth in the country during that period; and an influx of some 17,000 people and creation of over 40,000 jobs over the past year.
Also of note are the over $3 billion Rainy Day Fund and the projected $800 million surplus by the end of this year, he said. And with the scheduled lifting of all Covid-related restrictions (except for indoor mask-wearing) on May 19, “We”™ll be the first state in the Northeast to fully reopen,” DiPentima said. “How great is that?”
The CBIA chief further noted that the state will likely make a nine-figure payment on its pension liabilities for the second consecutive year, and that its workforce development initiatives and reformation of its unemployment compensation system all prove that “Momentum is clearly on our side.”
“What is the biggest threat to our recovery? Ourselves,” he continued. Imperatives include continuing vaccinations, safety measures, and wise spending of the billions of dollars of federal aid that is coming to the state.
DiPentima also reiterated opposition to the “package of costly new workforce mandates being pushed by the Labor Committee” ”“ a reference to a package of bills under consideration that was the subject of a letter sent to the General Assembly earlier this month by the CBIA and 43 other employer organizations.
Andrew Haughwout, senior vice president & policy leader at the Federal Reserve Bank of New York ”“ whose second district includes New York state, Fairfield County, northern New Jersey and Puerto Rico ”“ repeatedly expressed pleasant surprise at how well the region and the country as a whole have rebounded from the economic slump caused by the pandemic.
He warned, however, that there are still plenty of potential pitfalls remaining ”“ including the specter of what could happen should there be a widespread end to the loan, rent and other forbearances that have been put in place to help during the Covid era.
Nevertheless, he presented plenty of reasons for cheer. U.S. GDP, which plunged by almost 10% during the second quarter of 2020, grew at an annualized rate of 6.4% in the first three months of the year, according to data released yesterday by the Commerce Department. Most economists had predicted growth of 4.3%.
Further, Haughwout noted that Real GDP stood at $19.1 trillion in the first quarter, close to the $19.3 trillion reported during the pre-Covid fourth quarter of 2019.
He also noted that the Fed is now predicting Real GDP for 2021 to grow by 6.5%, up from the 4.2% it forecast in December.
Haughwout said good news is also being seen in unemployment. The national unemployment rate, which skyrocketed to 14.8% in April of last year, now stands at about 6%. He noted that while it took eight years for the country to recover jobs lost during the Great Recession, it has taken only 18 to 24 months to do the same post-Covid. The Fed is expecting a 4.5% unemployment rate by the end of this year.
Real disposable income and real personal consumption spiked in nearly perfect opposition to each other during the worst of the pandemic, he said, as “People actually had money but they couldn”™t spend it” due to store closures and other Covid concerns ”“ a highly unusual development during such a severe economic downturn.
Haughwout also noted that government spending, which was about 21% of the nation”™s GDP before the pandemic, now stands at over 33%, largely thanks to the multiple trillion-dollar-plus relief bills being passed by Congress and signed into law. Earlier this month it was reported that that country”™s budget deficit grew to a record $1.7 trillion in the first half of this fiscal year.
On a year-over-year basis, as of March private sector jobs have increased only in Idaho and Utah; Connecticut and New York have, like many other states, are still down 5% to 10%.
The Nutmeg State”™s state and local government employment, which was down by 8% before the pandemic, has continued to swoon; it currently is down by 15% from December 2007.
As for the residents moving into Connecticut, and a slow uptick in house prices ”“ still below both New York and the U.S. as a whole ”“ Haughwout said that they could represent “some silver linings” for Connecticut, but added that questions remain over whether those residents have moved here permanently.
