The Chamber of Commerce of Eastern Connecticut got a strong dose of bad economic news this morning, February 6, 2009 at the annual economic outlook breakfast. The New London DAY, http://www.theday.com/re.aspx?re=ae69f46e-2e07-4f01-9397-921e18eee161, and the Norwich Bulletin, http://www.norwichbulletin.com/breaking/x84117699/Economic-recovery-two-years-off-Rell-adviser-says, have posted their accounts which will appear in tomorrow’s print paper.
The first presenter, or the “Ghost of Christmas Past and Present” as coined by his fellow presenter, Jeffrey Blodgett, the Vice President of Research for the Connecticut Economic Resource Center (CERC), gave a short economic history of Connecticut with the emphasis on Southeastern Connecticut ending with the current economic climate.
According to Dr. Blodgett, the moving average for job growth in Connecticut is trending to zero and new business growth is flat. There are fewer businesses in Connecticut today than there were in 1989 Any job growth is primarily in the lower wage industries. The fifty richest zip codes in Connecticut have had their income double in the recent past (data is good to 2008) and the fifty poorest zip codes have lost ground.
To complicate the problem, the work force is aging, population growth is slow, people are leaving the cities, and young people are leaving the state. Cities are left with old buildings and people who cannot leave. Local zoning laws discriminate against young familys by not permitting affordable family housing. As a result, the twenty two year old growth is declining and the over 65 population is growing. Housing permits have shrunk to an all time low.
According to Blodgett, if the base line trends continue in 2020 the state 1) could see 150,000 baby boomers retiring; 2) college attainment drop from 34% to 31%; 3) No improvement of the K-12 education gap between the urban centers and the suburbs; 4) a large relative decline in younger workers; 5) Fifty percent of all jobs in low wage industries; 6) the loss of 100,000 manufacturing jobs; 7) inflation adjusted gross income down by four percent; 8) continued high levels of economic and racial disparity; 9) increasing reliance on the personal income tax to fund state and local government; 10) increasing inner city high school drop out rate; and 11) growing internet commerce eroding the sales tax base.
The fiscal implications of the above trends are ominous. As the economic opportunity decreases, more businesses and individual will migrate from Connecticut. Retired Senior to Younger Worker ratio will decrease to 3 to 1 making support of senior services and entitlement programs more difficult. The increasing number of high school dropouts will increase demand for police, social service, and correctional services. There will be less available income and sales tax revenue to support state and local government services. Declining home prices will put downward pressure on home values and grand lists. Negative business growth will also adversly impact local grand lists and state income tax revenues.
Blodgett concluded by noting that a crisis is a “terrible thing to waste” and that as citizens and as a state, we should make significent changes in public spending, reveneus, organization, and scale of public programs to build a more sustainable future.
The second speaker, who described himself as “the Ghost of Christmas Future (and the future is not very bright), was Stan McMillen, Managing Economist for the Connecticut Department of Economic and Community Development (DECD). Mr. McMillen is responsible for the development of a strategic plan of economic development for the State of Connecticut which is due, by State Statue, to be released by July 1, 2009.
After stating that he could not go into much detail on the plan since it had not yet been approved, Mr. McMillen explained that it was based on three “legs”. The first was Education. IN the long term, education needed to start at pre school ages to be successful. For the short term, there also needed to be partnerships between the public and the private sector to make sure that secondary and college education was providing the necessary workers at all levels. There needed to be programs to “transfer knowledge and technology” from the older retiring worker and the young entrapraneur. The second leg is Housing. There is insufficient young family affordable housing. The third leg is Transportation. The Transportation Strategy Board has a good plan, it just needs to be implemented by the State.
Mr. McMillen concluded by praising the Chamber’s “Buy Local” Campaign. Buying local keeps money recycling in the state.
During the question and answer period when asked how long the current downward trend would continue, Mr. McMillen stated that he believed that there were still two more years of decline before the economy would turn around. Jobs are the last thing to recover from a recession. It took until 1999 for the state to recover the jobs lost in the 1989 to 1992 recession. This recession will be deeper and the job recovery may be much longer.