You’re speaking to the Human Resources Association of Central Connecticut on Jan. 20 about business issues affecting Connecticut. You will be discussing whether Connecticut is in a “jobless recovery”? What does that mean and does the state face that prospect?
A jobless recovery would be one where jobs do not come back after losses or do so extremely slowly. That will not be the case for Connecticut, though recovery will be slow to moderate and not rapid. We will likely see job losses until mid-2010 (although at a much slower rate) and then see a turnaround. New England Economic Project forecasts we’ll recover 80,000 jobs by end of 2013.
What is the current state of Connecticut’s economy? Where will it be at the end of 2010?
We are technically out of recession and recovering at a moderate pace. But we took such a severe downturn in the fourth quarter of 2008 and first quarter of 2009 that most people do not “feel” we are in recovery. By end of 2010 recovery is expected to be strong and long enough to be noticeable.
How much is our recovery affected by the current state business taxes? What recommendations does CBIA have for business taxes in the upcoming session?
Tax increases, such as the billion dollars of tax increases in the state budget recently passed in September are negative for both recovery and investment. Some of these are set to sunset in 2012. They’ll make recovery weaker for the state by lessening investment and spending power. Principally, we are concerned that in fixing budget gaps present now and predicted for the future, it be done without new tax increases. In addition, it is important that tax increases set to sunset do so on or ahead of schedule.
How much does our dysfunctional state budget affect the Connecticut business climate? After all, it seems as if the budget has yet to be finalized six months after it was supposed to be.
The lack of a state budget that recognizes the lowered capacity of taxpayers to afford current levels of state spending shakes investor confidence in the state and has a dampening effect on consumer spending. People are concerned that major tax increases may result from failure to adopt a fiscal policy that is sound.
End of the year figures seem to indicate increased consumer confidence. Will that trend continue throughout 2010?
Consumer confidence is modestly recovering, but like the whole economy it took a major nosedive in late 2008 and early 2009. Its recovery is still below mid-2008 levels.
What threats are on the horizon for the national, regional and state economies that are being overlooked?
Economic risks are still on the downside as recovery is fragile. We have geopolitical risks from unstable areas of the world like Venezuela and much of the Middle East. The war on terror remains real as we see from the Detroit airplane incident. Oil prices can be affected by these as can confidence in markets. All of these bear watching.