🔒CT economy’s fast start overshadowed by budget woes

As we reach the midway point in 2015, it's a good time to reflect on the good, bad and uncertainty impacting Connecticut's business community and economy.

It's been a wild ride so far this year, with promising jobs numbers getting overshadowed by a nasty budget fight that has led to a new wave of tax increases. A merger-and-acquisition wave sweeping through the healthcare industry has also created a lot of uncertainty over the future employment ranks of several large Connecticut companies.

The Good

Connecticut's jobless rate fell to 6 percent at the end of May and the labor force grew to an all-time high of 1.92 million, signs that the state's economy continues to improve. The state added 6,400 jobs in May alone, and 13,700 jobs since January, despite a tough winter that weighed down economic growth in much of the Northeast.

The state Department of Labor characterized the state's 2015 job growth as the strongest since 2010. No doubt, Connecticut has made progress this year digging itself out of the deep pit left by the Great Recession. The state has now recovered 97,800, or 82.2 percent, of the jobs lost between Mach 2008 and February 2010.

The Bad

While the first half of this year saw solid job growth, the second half has storm clouds hovering over it. The state legislature's initial decision to increase taxes by $2 billion has done harm to Connecticut's economy. Although Gov. Dannel P. Malloy and legislative leaders rolled back $178 million in tax hikes last week during a special session, the damage to the state's business climate can't be undone.

Once again Connecticut made national headlines for all the wrong reasons, as some of our blue-chip corporate residents shouted loudly that they weren't only opposed to tax increases but threatened to flee the state if they were enacted.

We can't say for sure what, if any, impact the tax hikes will have on the economy this year, but Malloy and the legislature are playing a dangerous game of chicken with businesses. Some lawmakers have accused General Electric, Aetna and other employers of voicing empty rhetoric: threatening to move without any intentions of actually following through.

That conclusion, however, just reinforces the obtuse thinking of many of our legislative leaders. We believe Connecticut has finally reached a tipping point, where the unfriendly business climate will significantly hamper private sector investment in the state. As a result, we expect job growth to stall during the second half of this year.

Reinforcing that negative thinking is a recent report by the Connecticut Center for Economic Analysis, which revised its bullish economic outlook for the state down to a paltry 0.6 percent growth.

The Uncertain

Mergers and acquisitions typically lead to job losses as conjoined companies scale up and eliminate duplicative positions and departments. Bank mergers in the 1990s, for example, cost Connecticut hundreds of jobs.

Now the worry is a similar consolidation wave, this time in the healthcare sector, will lead to more pink slips. The damage, however, could be worse as hospitals and insurers represent two of the state's largest employment sectors.

We've seen already massive consolidation in the healthcare industry in recent years with countless hospitals and physician practices joining forces. Now health insurers are joining the fray with Aetna working on its purchase of Kentucky-based Humana, and Indianapolis' Anthem and Bloomfield-based Cigna negotiating a possible deal.

Combine that with tax increases and other major Connecticut employers' threats to move elsewhere, and the amount of uncertainty hanging over the state becomes troubling at best.n

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