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Report Sees Lag In Jobs Recovery Forecast Predicts More Losses, No Growth Before 2011

ERIC GERSHON

August 19, 2009

Even as the national economy shows signs of improvement, economists with the University of Connecticut expect tens of thousands more job losses in the state and no job growth before 2011.

In its latest quarterly report, scheduled for release today, the Connecticut Center for Economic Analysis says Connecticut could lose an additional 35,000 jobs over the next year, leaving it with 1.62 million — fewer than in 1990.

"The assumption of a strong national recovery fails by itself to begin the process of job creation in Connecticut," according to the report, titled "No Jobs Recovery?"

The report assumes national gross domestic product will grow steadily through mid-2011, reaching an annual growth rate of 3.5 percent by the middle of 2010. In contrast, UConn economics Professor Fred Carstensen, the center's director and an author of the report, anticipates state output to grow at a rate of 1.5 percent to 2 percent by the middle of next year.

The report cites weak housing construction and state budget cuts as reasons for its job forecast, which some other economists in the state called "pessimistic" but "plausible."

In an interview Tuesday, Carstensen said new hiring generally lags growth in output, and that Connecticut tends to recover from recession slower than the rest of the nation, major factors in the report's conclusion.

"We have a long pattern of weak response coming out of recession," he said, responses that "have been getting weaker over time."

His co-author, Peter E. Gunther, a senior research fellow at the UConn center, noted that many local companies have not merely laid off workers, but also reduced the hours of those that remain.

"There's room to soak up extra time by the people who are already employed," he said.

Massive monthly job losses during the winter have eased this summer — for the nation and for Connecticut — a sign some believe means the worst is over.

In June, the latest month for which state data are available, Connecticut lost 4,800 jobs, a major improvement from the 14,000 lost in February. Since the state's employment peaked in March 2008, 70,200 jobs have been lost here, leaving a total of 1.64 million at the end of June, the UConn report said.

The state unemployment rate is 8 percent. Nationally, it is 9.4 percent.

Nick Perna, an economic adviser to Webster Bank who also advises Gov. M. Jodi Rell, allows for job growth sooner than the UConn report, perhaps by the middle of next year, a view shared by Peter Gioia, who tracks the economy for the Connecticut Business and Industry Association.

Perna agreed with Carstensen that Connecticut's economy has in the past taken longer to recover than the nation's, as in the early 1990s. But he sees no reason why that should be the case this time. Connecticut has not suffered as much as other states from the mortgage crisis that was a major cause of the recession, for example, he said.

Gioia thinks companies have cut more jobs during the recession than necessary, and that they'll need to add some of them back as demand builds. He said federal economic stimulus programs, such as the "Cash for Clunkers" automobile program, also should help.

Still, Perna and Gioia acknowledged that there's no sign that companies are poised to add workers, and Gioia said there will be "rough sledding well into the middle of next year."

Meanwhile, companies continue to shed workers in Connecticut, and some potentially large layoffs loom.

In September Smurfit-Stone Container Corp. plans to close a Portland cardboard box manufacturing plant that employs nearly 100, for example, and Danaher Corp. has told the state that it will start laying off 58 workers at a subsidiary in Terryville.

United Technologies Corp., the state's largest private employer, is in the middle of a massive global restructuring plan that will eliminate 11,600 jobs worldwide this year, including at least 1,500 in Connecticut. The company's Pratt & Whitney unit has threatened to close its Cheshire plant by early 2011, a move that could cost 1,000 more jobs, including cuts at Pratt's East Hartford headquarters.

Companies large and small are proceeding cautiously.

"As far as our sales go, the last quarter, things seemed to stabilize," said Alan Levesque, a vice president at Nufern, an East Granby laser maker. "They weren't going down anymore, which is great."

At this point, though, hiring would be "a little premature," he said, noting that the company cut its workforce by 25 percent in January, to 60. "Our attitude is we're going to see how the next two or three months go. If sales continue to go up, we may be in a position to modestly add to our employment level."

Mark T. Malkowski, president of Stag Arms, a New Britain gun manufacturer thatspecializes in arms for left-handed shooters, doubled employment from 10 to 20 late last year, in the thick of the recession, to meet a surge in demand. But he's not hiring now, as the spike in orders has leveled off, and he said he has the sense his fellow small-business owners are being cautious.

"Just because the sun comes out after a long storm doesn't mean you want to be the first one out there, over-extending yourself," he said.