General Electric Co. announced it will take a charge against earnings of at least $1 billion in the fourth quarter, with much of the restructuring slated for its GE Capital subsidiary that employs more than 3,000 people in Fairfield County.
In a conference call with analysts, GE”™s chief financial officer Keith Sherin indicated job cuts and facility consolidations are under way at GE Capital and to a lesser degree at GE Industrial, without immediately providing target levels or offices that will be affected.
Fairfield-based GE plans to restructure or “run off” its businesses in equipment financial services, consumer mortgages and a dozen other unspecified financial business lines through 2011.
The company hopes the restructuring will accelerate the company”™s path through the recession. Connecticut has had a slower descent into recession than many other states nationally, according to Edward Deak, head of Gov. M. Jodi Rell”™s council of economic advisers, who addressed a November gathering of the New England Economic Partnership in Boston. Whereas the U.S. economy entered a state of recession last year ”“ defined as two straight quarters of economic contraction ”“ Deak believes Connecticut dipped into a recessionary state in the current quarter.
“Connecticut has been late to feel the broader job loss because of its failure to be an aggressive participant in the housing boom-bust cycle that is at the heart of the early phase of the recession,” Deak said, in prepared comments. “However, the state is expected to be relatively harder hit by the second phase as the financial crisis leads to substantial reductions in the high-income jobs that have been a major pillar of the Connecticut expansion.”
Deak theorizes that Connecticut benefited from a hefty influx of 2007 compensation in early 2008 ”“ the effect of Wall Street companies tallying bonuses after computing yearend profits.
The state”™s manufacturing sector benefited from both the weak dollar for much of the year and ongoing defense spending. And with new construction trailing much of the rest of the country during the expansion, Connecticut builders are not suffering as badly in the recession. While new home permits are down more than a quarter this year, Deak sees permits jumping more than 25 percent 2010 and more than 40 percent in 2011.
Deak sees evidence, however, that Connecticut will exit the recession later than the rest of the nation. Whereas he and other economists predict the U.S. economy will resume growth by the third quarter next year, Connecticut may not due so until the second quarter of 2010, when the full impact of Wall Street”™s restructuring and hedge funds”™ retrenchment clears through the system.
Over 10 fiscal quarters between 2007 and 2010, Deak predicted Connecticut could shed 62,000 jobs. By comparison, the state lost 58,000 jobs over 12 quarters in the high-tech recession at the start of the decade; and more than 150,000 jobs over 14 quarters between 1989 and 1993.
Still, if Connecticut reaches the 8.5 percent unemployment rate predicted by Deak in 2010, that would be a full percentage point higher than the peak rate in 1992.
At the NEEP conference, University of New Hampshire economist Ross Gittell predicted New England as a whole will experience a more severe recession than the United States as a whole, with stiffer job cuts despite better output through the third quarter next year. NEEP economists say Rhode Island will suffer the deepest decline, while New Hampshire will have the shallowest.
