Connecticut’s Economy Shows Improvement, Although Caution Signs Ahead
By Peter Gioia
Vice President and Economist,
Connecticut Business & Industry Association
Connecticut’s economy showed steady signs of improvement in the last quarter, but there is still reason to be cautious.
“There are definitive signs that Connecticut’s economy is starting to improve,” says CBIA economist, Peter Gioia. “Unemployment numbers are declining and companies are starting to show more confidence about doing business in the state.”
Also promising are the numbers that came out of CBIA’s Fourth Quarter 2011 Economic Survey, which found that businesses were more optimistic in the fourth quarter than they were in the third quarter of last year.
The survey, mailed to 1,950 Connecticut businesses in January 2012, shows that 46% of respondents see their own business improving over the next three months, with only 14% expecting a worsening. In the third quarter survey, only 29% of respondents saw the potential for improvement, and 28% saw the potential for their business to worsen.
The survey also saw executives expecting more growth, first nationally, then locally. Thirty-seven percent of respondents expect the U.S. economy to improve, while 19% expect further decline. Although still better than last quarter, expectations at the state level are weaker. Twenty-three percent of respondents see the state economy improving while 34% expect continued deterioration.
“While this survey shows that business leaders are beginning to gain confidence, there are challenges to be met going forward,” says Gioia. “That’s why it’s important for our policymakers to continue to reduce the cost of state government, reform public education, address barriers to economic growth and modernize state infrastructure.”
Improving Job Numbers
Connecticut has been adding jobs, but at a slow pace. According to the Connecticut Department of Labor, the job market continued on a path of modest recovery in December, adding 600 jobs for the month and causing the state’s unemployment rate to fall to 8.2%.
CBIA’s 4Q2011 survey found that 23% of respondents expect to add workers in the following quarter while 13% expect to decrease their workforce. While those are low numbers, only 16% of respondents to the CBIA 3Q2011 survey expected to add workers and 22% expected to cut jobs.
“This is overall a positive trend,” says Gioia. “It shows that business leaders are beginning to see the recession turning around and are planning for the future.”
“That being said, Connecticut policymakers have to continue making policy decisions that boost business confidence so that companies will begin investing and growing once again.”
Potential Hurdles to Clear
While Connecticut’s economy is showing signs of improvement, there are issues that could slow down that improvement. Housing sales in the state fell to their lowest level in a generation. Iran poses an ongoing problem, which leaves the economy in a constant state of wait-and-see. The European economic crises will continue to cause concern, given that they creates uncertainty on Wall Street and that Connecticut exporters rely so heavily on European markets
Connecticut is showing distinct signs of an economic turnaround. This is a good thing, but it is not yet time to celebrate. Although the economy is improving, we still see some businesss struggling, and few are confident enough to add significant numbers of jobs.
Policymakers need to work together to further Connecticut’s economic recovery. Now is the time to be prudent when it comes to state spending and to seek out and seize opportunities for cost savings, and make careful and calculated investments that enhance recovery.