While the state’s unemployment rate dropped from 5.3 percent in March to 4.7 percent in April, University of Connecticut economists believe that statistic masks broader negative trends for job creation and the state’s gross domestic product.
The economists from the university’s Connecticut Center of Economic Analysis believe the current housing crisis will stunt growth until at least 2009.
“The main driver in the slowdown is residential construction,” said Peter Gunther, senior research fellow at CCEA. “Permits have flattened out, but they’re still well below what we would normally expect.”
State GDP May Fall
CCEA has projected that the state’s GDP will actually decelerate this year and will only increase slightly in 2009. They estimate the 2009 GDP will be limited to 0.2 percent growth because of weak construction activity and turmoil in financial markets.
Also contributing to the slowing GDP are local governments and businesses trying to combat rising energy prices while attempting to maintain balanced budgets.
The encouraging report on the dip in the unemployment rate from 5.3 percent in March to 4.7 percent in April, which was based on a survey of households, may be misleading. The rate had jumped from 5.0 percent in February.
The longer view of jobs in Connecticut isn’t so encouraging. CCEA projects that Connecticut will lose 24,000 jobs by the first quarter of 2010. Only three months earlier, it had estimated job losses at 9,000 during that period.
Gunther said almost half of those job losses will come in the construction sector.
Manufacturing Comeback?
While the overall economic outlook for the state is bleak, there are a few positive factors to consider, Gunther said. Specifically, durable manufacturing in Connecticut has flattened out and shows signs of making a comeback.
“It’s relatively good news because there are going to be increases in employment and output,” Gunther said, adding that nearly 6,000 jobs could be created in the manufacturing sector by the end of 2009. “We’ve seen a significant benefit from the lower exchange rate, and durable manufacturing had been declining for the past three or four years.”
