Structural Problems Seen in the Connecticut Economy
/In an analysis highlighted by the Connecticut Institute for the 21st Century, well-known economist Don Klepper-Smith, in a newsletter to clients of economic forecasting consultancy DataCore Partners, is voicing concerns about Connecticut’s economic prospects, short and long-term. His views come as the legislature grapples with approximately a billion dollars in projected deficit, and the Institute is signaling a heightened profile in the state, with a new director visibly sharing the organization’s economic concerns.
Klepper-Smith’s latest findings, headlined “Troubling Trends,” are the result of comparisons between economic activity in different parts of Connecticut and Massachusetts conducted over the last several years, the Institute website reports. Although both states share many of the same characteristics, Klepper-Smith notes the Massachusetts labor market is notably healthier than the Connecticut market and that seems to be a key factor holding back the Connecticut economy.
The job recovery rate in Connecticut since 2006 is 76.6 percent, according to DataCore, compared with the Massachusetts job recovery rate of 240.3 percent. The significantly lagging job recovery rate in Connecticut has “led to negative impacts in other parts of the Connecticut economy.” Examples cited include that the median price for single family homes in Connecticut dropped 3 percent in 2015, while it went up by 3 percent in Massachusetts during the same period.
Similarly, over the last six months, Connecticut’s unemployment rate has edged upwards, while the Massachusetts rate has dropped slightly. Technically, according to DataCore, this is a sign of a growth recession in which the local economy is not strong enough to prevent a rise in the jobless rate, the Institute indicates.
The website goes on to state that “The DataCorp findings, when combined with other recently published reports, provides continuing evidence of a fundamental shift in the basic foundations of the Connecticut economy.”
Scott Bates, a Connecticut native, has recently been named as executive director of the Connecticut Institute for the 21st Century. He previously served in the administration of Virginia’s Governor, for the U.S. House Select Committee on Homeland Security, and as president of The Center for National Policy in Washington.
In an article appearing in this week’s Hartford Business Journal, Bates describes Connecticut’s fiscal dilemma as both a spending problem and revenue problem, indicating that “our state will only return to a sustainable fiscal model when incremental changes - taken together – substantially reduce the cost of government.”
Bates adds that “the tax problem is a major issue that may take years to sort out,” suggesting that available savings be pursued immediately. Among the suggestions, moving to embrace a policy of “aging in place,” a change in approach that could save more than $650 million over the next 20 years according to a recent report from the Institute and the Connecticut Economic Resource Center.
The Connecticut Institute for the 21st Century is a non-partisan non-profit organization of businesses and civic groups dedicated to identifying effective and efficient ways for state and local government to deliver services while reducing cost to the taxpayer and making Connecticut’s economy strong.
The organization researches best practices, publishes reports, and educates policymakers and the public on key spending and policy issues including transportation, public pensions, smart growth and social service spending.
