🔒Bordonaro: CT’s economic ‘comeback’ still in early stages

As Connecticut’s slow economic recovery from the pandemic-induced recession continues, many people will be keeping a close eye on the September jobs numbers when they are published later this month by the state Department of Labor (DOL).

So far, Connecticut’s recovery has trailed the rest of the nation and both state and private sector officials have raised concerns about a labor shortage. Gov. Ned Lamont recently said there are 71,000 open positions in the state and over 90,000 residents sitting on the sidelines.

The causes of the labor shortage have been hotly debated but many people have said extended federal unemployment benefits and lack of child care during the pandemic have been contributors. I agree both have played a role in stalling our economic recovery but last month those extra unemployment benefits expired and most Connecticut children returned to the classroom, which should send more people back to the workforce.

That’s left some people to speculate Connecticut will see potential significant job growth in September; the numbers could be an important indicator of where the state’s economic recovery goes from here.

For a bit of perspective, in Sept. 2020 Connecticut gained a whopping 19,700 jobs as the state was still relatively fresh off that spring’s economic shutdown. That was the biggest jobs gain in September since the state added 20,000 jobs in Sept. 1983, according to DOL data.

If you look back at historical jobs numbers for September, there are no clear trend lines on where things may be headed. The state has experienced both big gains and losses during the month over the last four decades, depending on the business cycle. The average September jobs gain from 1982 to 2020 was 1,033, according to my analysis of DOL data.

Plus, this current business cycle is unlike any other, since the country hasn’t experienced a pandemic in a century’s time.

To try to get a better understanding of where the state’s economic recovery is, I recently talked with Don Klepper-Smith, one of the state’s best-known economists, who was a top economic advisor to former Gov. M. Jodi Rell. He’s also consulted for a few local Connecticut banks.

Klepper-Smith said there’s been a lot of spin when it comes to talking about the recovery.

First, let’s put into context the state’s overall performance since the pandemic reached our shores in full force in March 2020. Connecticut has now recovered 201,400, or 69%, of the 292,400 jobs it lost during the lockdowns of March and April 2020, according to labor officials.

Our unemployment rate stands at 7.2% vs. the national average of 5.2%. Connecticut is among just a handful of states, including California and New York, with jobless rates over 7%.

On the brighter side, Connecticut has added jobs for eight consecutive months, including the addition of 34,500 positions in all of 2021.

“There is a good-news, bad-news story here,” Klepper-Smith told me. “The good news is that we are off the lows. At one point we were down almost 300,000 jobs. But when you” take into account that Connecticut has still not fully recovered jobs lost during the Great Recession, the long-term economic trend lines are still cause for concern.

The reality is, Connecticut still has 115,000 fewer jobs today than it did in March 2008 — right before the Great Recession took hold in the state — and it could take another five to 10 years to recover all those jobs, Klepper-Smith said.

That means it may not be until 2030 when Connecticut has the same number of jobs it did back in early 2008. And the state won’t fully regain jobs lost during the pandemic until sometime next year, or even 2023, Klepper-Smith said.

“Over the last 10 years the U.S. economy has posted significant job gains and real GDP growth at the time when Connecticut has been down,” Klepper-Smith said. “So, for all intents and purposes the Connecticut economy has been moving sideways.”

Klepper-Smith said we also shouldn’t put too much stock in the September jobs numbers and it may be misguided to think that everyone is going to rush back to the labor market.

He said the labor shortage is real and there is intense competition for top talent. He also suspects that some of the open positions are just employers fishing for potential hires in the future. Companies during the pandemic have also ramped up investment in technology, which will have a long-term effect on the labor market.

He points to a PwC study, which said 30% of jobs in today’s economy are at potential risk of automation by the mid-2030s due to advances in artificial intelligence, robotics and other technological changes.

So what’s all this mean?

I do think we should pay attention to the jobs numbers over the next few months. At the very least, they may help us figure out if the extended unemployment benefits did keep a significant number of people out of the workforce.

If that’s not the case, and large numbers of jobs remain unfilled, then the private and public sectors will need to work harder to address the issue.

Meantime, Lamont has been touting the state’s recent job gains, even coining the phrase “Connecticut comeback.”

You can expect to hear more of that tagline in the months ahead, particularly as Lamont prepares for re-election in 2022. (He hasn’t formally declared he’s running again, but most observers say he will.)

I do think Connecticut has positive near-term growth potential, thanks to the state’s ability to get the pandemic under control and some in-migration, particularly of New Yorkers, during the pandemic. We need that to translate into more business development.

The best way to do that is to show investors and business decision makers that Connecticut is a financially stable and welcoming place to park capital. And slogans alone won’t make that happen. The state must press its advantages — highly-educated workforce, strong quality of life, etc. — over the next 12 months.

Lamont should declare that one of his top priorities during the 2022 legislative session will be to improve the business environment and lay out a five-year plan on changes he would make to tax, regulatory, spending and other policies to make Connecticut more competitive.

Everyone in this state, particularly the business community, would love to tout a Connecticut comeback. We aren’t there yet. There’s still plenty of work to be done.