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State's Unemployment Rate Climbs, But Economists See Hopeful Signs

By MARA LEE

March 26, 2010

Unemployment reached 9.1 percent in February, the highest rate yet in this recession, and the number of jobs in the state slipped. Nonetheless, experts agree that there are subtle signs of improvement in the Connecticut economy.

The state's economy shed 1,100 jobs last month, according to a state Department of Labor report released Thursday. That number is far smaller than the typical declines of 2009, and February also showed hiring in sectors that had been shrinking — professional and business services (including temp agencies), and manufacturing, which added 700 positions.

"A couple of nice bright spots in there," said Nick Perna, a Yale University economics lecturer and Webster Bank financial adviser. "These numbers are a bit encouraging."

It certainly is encouraging to John "Drew" Bodmer, 53, who landed a machinist job in February at Bloomfield's R&D Dynamics. The Stafford resident had been laid off from 3M in January 2009, and he was beginning to wonder if he'd ever find another machinist job.

Tom Shivers, 54, of the Rockville section of Vernon, joined R&D in November. He was laid off twice during the recession, first in November 2008 from a job that he'd had for nine years, and then again in July 2009.

"I was never laid off for so long. First it was OK, then it got really hard," he said. He started to think he might have to go to school for some medical specialty, like thousands of others are trying to do.

What was it like to return to work as a toolmaker — at the same salary as his last position? Shivers let out a sigh of relief as he searched for words to express how good it felt.

"It was a real treat to get back to work. It changed my whole attitude," he said. And he's pleased to be at a company that's growing strongly. He interviewed for other jobs, and even at those factories, the atmosphere wasn't as optimistic. "The future looks brighter."

He's not the only one thinking that the future will be brighter. Economist Don Klepper-Smith is wondering if his outlook should be slightly more optimistic.

"I expected the job losses to be closer to 2,300 to 2,500," he said. "In that respect, it was a relatively good month."

Klepper-Smith, who writes economic forecasts for Farmington Bank, said that downsizing in financial services in Fairfield County was not as deep as he had projected. Overall, he had expected state unemployment to be at 9.3 percent or 9.4 percent by now.

The state's jobless rate, which shows about 174,000 people out of work and looking actively, remains below the national rate of 9.7 percent, but while Connecticut's rate is rising, the U.S. rate has been falling in 2010. The loss of 1,100 jobs follows a gain of 3,200 jobs in January, a figure that was revised upward in Thursday's report.

Thursday's report came on the same day as a national report showing that the number of first-time unemployment claims was lower than expected. The four-week average of first-time claims is lower than it has been since September 2008, the U.S. Department of Labor said.

That was the same month that manufacturing employment started a dramatic fall that lasted more than a year. Over the past few months, factory jobs have stabilized in Connecticut.

The first sign of improvement was the end of reduced-hour schedules. Where sales climbed high enough, hiring started.

But that's not the story at R&D Dynamics, a small manufacturer founded by former United Technologies Corp. engineer Giri Agrawal. It has been on a growth spurt for years, including a 20 percent gain in revenue from 2008 to 2009.

R&D, which designs and builds turbo-machinery for aerospace, fuel cells and desalination plants, is among the small, private manufacturers that many hope will lead the way toward recovery. The firm hired 11 engineers and production workers in the past 15 months, and now employs 55 people.

R&D's success has also touched construction workers, who were even more severely hurt in the recession than factory workers. The company built a $6.5 million, 75,000-square-foot building and is in the middle of moving its staff and machinery there.

Agrawal received $2 million in state loans for the new building, $3 million in private lending and sunk $1.5 million of his own money into the project.

"I don't think I'm ever going to retire. I've got this passion for this technology," said Agrawal, 72.

Agrawal, who immigrated to the United States from India 48 years ago to study engineering, spent 11 years at Hamilton Sundstrand [then Hamilton Standard] before leaving to start his company in 1990.

At Hamilton — and before that, at Honeywell — Agrawal worked on refining air circulation systems for commercial airplanes. R&D does not sell those systems, although its largest revenue stream is selling spare parts for them. Rather, the firm tries to apply the same ideas to new applications, like air-conditioner compressors, fuel-cell blowers and water purification.

Some ideas don't translate into sales. The Department of Energy, Connecticut Light and Power and the state of Connecticut contributed funding for a prototype for a high-efficiency, air-conditioner compressor. But even though utility bills would be lower if it were used, the $8,000 premium for the component was too pricey for air-conditioner manufacturers to bite.

"Until we get the volume up, it's hard for us to get the costs the customers are looking for," said Dennis Burr, manager of business development.

But companywide, revenue grew from $6 million in 1998 to $7.2 million last year. About 30 percent of sales are exports. Only 15 percent are defense contracts.

Agrawal says his target is to grow 30 percent this year. And as sales grow, so will hiring.

"The reason we are profitable here, we don't take too much money home. We don't have to pay investors," said Agrawal. "I don't have this motivation of making more money. I cannot take money with me. It's our responsibility to make the life of the next generation better than what we found it. I want to leave this earth better than I found it."