The national debt ceiling debate. A stubbornly high unemployment rate. A stalled economy. Connecticut”™s business community remains hopeful of a near-term recovery, but concerns are growing.
CBIA just released the results of its 2011 second-quarter economic survey and events inside and outside the state”™s borders are giving businesses headaches.
Our state and the nation are facing a jobs crisis. In the last two months alone, Connecticut lost nearly 10,000 jobs, compared with a gain of 14,000 for the same period in 2010.
Production indicators have weakened. What”™s more, Connecticut employers are adjusting to new withholding requirements for personal income taxes and coping with additional assessments on unemployment taxes.
It”™s discouraging, as Connecticut”™s economy showed slow but modest growth coming out of the recession. The latest downturn largely is being driven by national factors that could be resolved in the short term, and we”™re hopeful our economy will bounce back and businesses will report improvements in the next quarter.
Nonetheless, some 74 percent of those business leaders who responded to our 2011 second-quarter economic survey expect the state”™s economy to worsen. That”™s up from 46 percent last quarter and the highest rating since fourth quarter 2008, the peak of the recession.
Only 6 percent of surveyed businesses expect the state”™s economy to improve, the lowest number since the 2008 fourth quarter.
The economy clearly is impacting Connecticut businesses and negatively affecting performance indicators, including production, sales, productivity and the size of a firm”™s workforce, which help predict company performance going forward. And, because businesses are unsure about the economy, many still are reluctant to take risks, invest in their companies and hire new employees.
Here”™s a breakdown of those key performance indicators:
Ӣ Nearly a quarter of respondents (22 percent) said sales and production decreased, up from 10 percent and 15 percent in the first-quarter 2011 and fourth-quarter 2010, respectively.
Ӣ More than a third (35 percent) reported increased sales and production, down from 49 percent last quarter.
Ӣ Thirty-six percent said productivity has increased, down from 45 percent last quarter.
Ӣ Twelve percent said productivity decreased, compared with a low of 8 percent in the fourth-quarter 2010.
Ӣ On the hiring front, 19 percent of business executives expect to increase their workforce in the next quarter, down from the past two quarters. Twenty percent expect to cut their workforce, the highest percentage in more than a year.
Ӣ Nearly half (48 percent) those surveyed expect the U.S. economy to worsen, up from 43 percent a year ago. Twelve percent expect improvements, down from a high of 45 percent in the fourth quarter 2010, but the lowest number since fourth-quarter 2008.
Ӣ The expectations of business leaders for their own firms remain muted, with 28 percent (down from 45 percent in the previous quarter) forecasting an improved outlook.
Ӣ Almost half expect conditions to remain stable within their own company, while 22 percent have a negative outlook.
Ӣ Only 19 percent expect conditions within their own industry sector to improve, the lowest number since the second quarter of 2009.
Ӣ Nearly a third (31 percent) expect industry conditions to worsen, the highest number since the 2010 third quarter.
Ӣ More than half of respondents (52 percent) expect conditions within their sector to remain stable. ThatӪs the highest number in more than three years.
We”™re not seeing the type of job growth we certainly hoped to see coming out of a recession. The recovery for jobs so far has been very anemic, and the state”™s latest employment report further highlights the importance of Gov. Dannel Malloy”™s proposed special fall legislative session focused on jobs.
The business community is hopeful that the legislature will respond to the jobs crisis and really be aggressive in putting a better business climate together in Connecticut that will encourage employers to invest here, to grow here, and ultimately create jobs here.
Peter Gioia is vice president and economist at the Connecticut Business and Industry Association in Hartford. Reach him at pete.gioia@cbia.com.
