Connecticut’s economic decline during the recession and immediately after was due to steep losses in the key industries of manufacturing and financial activities, the state Department of Labor reported Thursday.
“Connecticut is the only state to continue losing economic activity even since the end of the recession,” Manisha Srivastava, an economist at the state Office of Policy and Management, wrote in the latest issue of the Connecticut Economic Digest. “This lackluster economic growth has resulted in anemic revenue growth in the state, leading to years of budgetary constraints.”
Adjusted for inflation, the state’s economy is the same size as in 2004, leading to slow revenue growth and frequent state budget crises.
“What is ailing Connecticut’s economy?” Srivastava asked. “One thought is Connecticut has a city problem — or specifically, lack of a major city,” she wrote.
The loss of manufacturing is the “largest cause” of the decline in economic activity, Srivastava said. In the decade before the recession, which began in 2007, manufacturing contributed $16.2 billion of the state’s nearly $64 billion economic expansion.
It has since subtracted $18.6 billion, driven by losses in chemical manufacturing as companies such as Pfizer Inc., Bayer and Bristol Myers Squibb Co. reduced its presence or left the state, she said.
The declline in financial activities — which include finance, insurance and real estate — has removed $8.3 billion from the economy after contributing $22.6 billion in the decade before the recession, Srivastava said.
Of that industry, the largest declining subsectors were insurance and securities and financial investments.
The state’s still struggling economy, despite some promising developments in aerospace and defense jobs, is one of the primary issues in the campaign for governor. Five Republicans and two Democrats will face off in primaries next month as candidates compete to demonstrate they are the best to lead Connecticut out of the economic stagnation under outgoing Gov. Dannel P. Malloy.
All sectors in Connecticut showed slower real growth, or a decline in the decade after the recession, compared to the years before the downturn, Srivastava said.
July 2018 Connecticut Economic Digest featuring the articles
"2017 Housing Market in Review" and "What is Ailing Connecticut's Economy? Is it a City Problem? Is it a Sector Problem?" https://t.co/bmtc9z8hYP #LMI #cteconomy #housing pic.twitter.com/04NpmSSTz9
— Connecticut LMI (@DOL_Research) July 5, 2018
The state reported in January that the number of manufacturing jobs in Connecticut increased in 2017 for the first time in seven years, providing a much-needed bright spot to the state’s jobs picture. The industry’s 2017 gains, up 4,100, or 2.5 percent, were a first for Connecticut since 2010.
The state is now benefiting from a boom in aerospace and defense manufacturing. United Technologies Corp. has a backlog of orders for its next-generation jet engine, Sikorsky is committed to building the military’s new heavy lift helicopter and a shift in military strategy that relies more on submarines and surface ships is a boon for Electric Boat.
But employment gains have been stronger outside Connecticut, which is struggling to fill thousands of manufacturing jobs. The U.S. recovered jobs lost in the recession by May 2014 and jobs have since grown 12.5 percent, Srivastava said.
Connecticut’s job growth since the recession is 4.6 percent and is one of the few states yet to recover all jobs lost during the recession, Srivastava said.
The state lagged in job growth compared with western Massachusetts and upstate New York, Srivastava said as she tried to determine the role of cities in the loss of jobs.
“Many of the issues that affect Connecticut also affect upstate New York, including slow population growth, decadeslong loss of manufacturing jobs and the exit of larger employers,” she said.
Srivastava said Connecticut’s job growth after the recession is similar to what occurred in upstate New York despite tax increases in Connecticut in 2009, 2011 and 2015.
The analysis of Connecticut’s economy by industry “shows that if a few sectors had performed differently after the last recession, Connecticut could have turned declines into real (economic) growth,” she said.