Even as challenges continue to confront Connecticut”™s economy, several factors could be moving into place to help speed a recovery, says a national economist, and there are things the state could do to nudge them along.
Speaking via video to Gov. Malloy”™s recent Economic Summit, Moody”™s Analytic”™s director, Steve Cochrane, said he sees four positive factors supporting a Connecticut economic recovery:
Midsize and larger businesses are in good financial shape, after shedding debt and increasing cash liquidity. Consequently, many companies are in position to grow and expand their workforces.
Productivity growth is strong, with unit labor costs falling.
Households are deleveraging their debt.
The banking industry is well capitalized and its current lending portfolios in positive shape.
He also observed that many businesses have kept tight reins on spending and are now finding themselves in need of upgrades. That should lead to new spending on equipment, software and other aspects of their capital stock.
Cochrane also sees exports driving growth. Connecticut”™s export share jumped from 5 percent of GSP in 2005 to its current 7 percent.
One of the ways to expand exports is to widen the playing field for potential markets, said Cochrane. Connecticut is heavily concentrated in exports to Europe, but that”™s a little risky with the region”™s unstable financial condition.
Expanding the state”™s industrial base could also help in spurring the economy and jobs. While most states get job growth from 70 percent to 80 percent of their industries during expansions, said Cochrane, Connecticut generally sees growth from only about 50 percent to 60 percent of its industries. A wider range of industries would give the state a “more effective, more stable path of economic growth,” he added.
Another area for improvement is expanding the size and quality of the labor force. With the state”™s aging population and large numbers of baby boomers nearing retirement, Connecticut will be pressed to maintain a pipeline of skilled workers.
One way to do that, said Cochrane, is to focus on developing the community-college system as a feeder for the next generation of workers.
Most important, said the economist, if Connecticut is to make the improvements necessary and position the state for long-term economic and job growth, there has to be communication “across all sectors” ”“including government, academia and the business community.
David Conrad is a writer and editor with the Connecticut Business and Industry Association. Reach him at dave.conrad@cbia.com.
