Following the Connecticut Department of Labor”™s drastically lowered revision of job gains throughout the state last year, some heads of leading business organizations are calling for increased caution as the state pushes forward in dealing with its current and impending budget deficits totaling more than $200 million this fiscal year and more than $900 million in the next.
In March, the Labor Department released its annual benchmark revision of job growth estimates and reported what the director of the Office of Research Andrew Condon called a “severe” revision of the numbers for 2015 with original estimates of 22,600 jobs gained in 2015 revised by nearly half to 11,600 jobs gained.
“Are we surprised by it? Somewhat,” said Paul Timpanelli, president and CEO of the Bridgeport Regional Business Council, Fairfield County”™s largest business association.
“You can see the writing on the wall when you look at the degree to which the state needs to come to grips with how it spends money and what it does to invest in its economy,” he said.
Peter Gioia, an economist with the state”™s largest business organization, the Connecticut Business and Industry Association, said in 26 years of tracking job growth in the state this is the largest revisions he has seen. But more concerning than the implications for the economy is the cause behind the revision, he said.
Gioia said he believes the relatively poor resurgence of high-paying, long-lasting jobs such as in finance and manufacturing throughout the post-recession period has been coupled with gains in low-wage, high-turnover jobs.
“Leisure, hospitality, health care and education have more than exceeded the number we had prior to the recession,” he said. “Some of those low-wage jobs have turnover rates that exceed 100 percent a year.”
He said it may be possible that the employer surveys, on which preliminary job growth numbers are based, may be reporting these individuals as new hires, but are discovered during the benchmark revision process to be people shifting from one job to another.
“What has traditionally happened in recoveries is when the revision comes up the numbers go up, not a lot, maybe 1,000 or 2,000 over the course of a year, not 10,000,” he said.
Condon disagreed, saying turnover is not to blame for the revision.
“What employers are asked is to report the number of payroll jobs they have on the 12th of the month of each month,” he said. “There is no particular reason, high turnover or not, they would report a number that”™s different than that.”
Instead he blames the large revision on a rare statistical error.
According to Condon, the annual benchmark revision takes place to adjust the monthly sample-based estimates of payroll employment in the state by using quarterly census numbers of employment and wages, which come from unemployment insurance tax data ”” an actual count of employees in employment in the state. However, this data is delayed by approximately six months compared with the monthly estimates.
“When we saw the first-quarter data, which was in June, we saw that job estimates appeared to be overestimating, it wasn”™t significant then, but it was noticeable,” he said. “By the time we saw the end of the year data, the amount of overestimation had significantly increased. It is possible through the error of no one, just probability, that the sample you draw might not be representative. I have seen it happen in other states once or twice over the last 10 years or so. It is literally that rare, but it does happen.”
Condon said beginning in May or shortly thereafter, the Labor Department will begin publishing quarterly benchmark revisions to “ensure that if something like this begins to happen again we know it quicker.”
The revision of job growth numbers in 2015 has given Gioia cause for caution. He said the monthly numbers may have to be looked at with a more “jaded” perspective.
The revised 2015 numbers preceded job growth numbers for February 2016, in which the Labor Department estimated the state gained 4,200 jobs ”” significantly outpacing job growth for the same period last year.
According to the department, the estimated year-to-date pace of job growth for the first two months of 2016 was 5,400 jobs compared with 1,200 jobs for January and February 2015.
The state”™s unemployment rate remains unchanged from January at 5.5 percent, but down five-tenths of a percentage point from the February 2015 unemployment rate of 6.0 percent.
While indicating the economy is making some gradual progress, both reports only increase the need for fiscal diligence, Gioia said.
“When the governor says we have a new economic reality he is absolutely right,” he said. “This is something we are really going to have to pay attention to and it shows Connecticut is not there yet, we are still in the process of recovery whereas the U.S. and many neighboring states have recovered.”
He cited the state”™s unemployment rate of 5.5 percent, the highest in New England and nearly a full percentage point above the regional average of 4.6 percent.
The U.S. average unemployment rate for February was 4.9 percent.
And while the state has now recovered 77 percent of jobs lost during the recession and the private sector has regained 91 percent, the economy still faces challenges, said Gioia, noting 2015 was the second-slowest year for job growth since the recession ended in 2010.
Timpanelli said until the state starts to promote an environment for job creation, lukewarm growth and job losses will likely remain. But how the state government and its residents will manage the task remains to be seen.
He cited Gov. Dannel P. Malloy”™s 30-year, $100 billion proposal to revitalize the state”™s ailing transportation infrastructure, which already is getting pushback from legislators and residents.
“We are seeing a lot of opposition because people don”™t want to see any more means of taxing them to pay for public infrastructure,” he said. “It”™s the same old story, people want their cake, but they don”™t want to pay to eat that cake.”
