This year will end noticeably better than last but 2015 may be better yet.
The Connecticut Business & Industry Association’s recent surveys show more firms expanding than contracting at a rate of 3 to 1; experiencing sales growth; and planning to add jobs over the next six months.
All of this will help sustain moderate growth.
Right now, it’s mainly U.S. growth pulling Connecticut out of the economic doldrums and hopefully into a state ripe for growth.
National conditions are good with job growth of 200,000 plus per month; banks that can lend and do so cheaply; and consumers who have deleveraged their personal finances and are ready to buy.
U.S. housing is getting back on track with sales and construction. The stock market is strong and is expected to see gains in 2015.
Good news continues since U.S. trade is now strong enough to weather some bumps, and we’re experiencing a revitalization of U.S. manufacturing. The best news? We have over a million people who were unemployed in January 2014 that now have jobs.
Here in Connecticut, it’s likely that we will end this year by doubling our gain of 14,000 jobs in 2013, and we are set to exceed that in 2015 due to aerospace growth, stronger consumer spending, and a steadier return of housing sales and construction.
Wages will begin a comeback as more people get hired due to growth and retirements, and the unemployment rate eventually nears 5 percent.
However, this can’t be accomplished without a serious effort to make Connecticut more economically competitive. We are challenged by national studies that rank Connecticut as a poor state in which to do business. Lawmakers must address the factors that contribute to these low rankings such as the state’s budget deficit and unfunded long-term liabilities.
If they do, Connecticut can fully take advantage of the economic growth being seen on the national level. Three big changes may accelerate this growth and create a base for some better long-term economic conditions.
1. Inflation is benign
Slower growth in Europe and East Asia may somewhat dampen exports in 2015, but right now it’s having a dramatic impact. This gives the Federal Reserve time before it raises the federal funds rate, which will lead to higher borrowing costs. The Consumer Price Index is experiencing a 1.7 percent annual rate of growth and should stay in that range. That leads to low inflation in 2015 and we may not see the Fed raise rates (slightly, slowly) until late 2015.
2. Aerospace is back in action
Commercial aerospace, especially regional jets with fuel efficient engines, is and will continue to be in high demand. That’s good news for the hundreds of Connecticut manufacturers who make parts and engines. Expect capital and industrial property investments and hiring in 2015 and beyond.
3. Oil is lower
Oil started this year priced at $114 per barrel and has plunged below $80 per barrel as of mid-November. This is due to slack global demand, strong U.S. production, and political strife keeping the Saudi output high despite weak prices. The gas “sale” will boost consumer spending well into 2015.
In longer terms, the prospect of an energy independent America has huge implications for trade balance, prices, defense, and geopolitics.
All of this is very positive but there will be some bumps. The state faces an anticipated budget deficit, and has yet to sufficiently address unfunded liabilities.
As previously stated, in order to take advantage of the positive trends on the national level, Connecticut must improve its economic competitiveness.
That’s why we support the efforts and goals of CT20x17.
CT20x17 is a statewide, bipartisan campaign that aims to make Connecticut a top 20 state for business by 2017. CBIA along with dozens of other business, professional, and community groups are working together to develop policy recommendations for the upcoming legislative session.
A top 20 state for business means supporting public policy decisions that spur private investment, accelerate economic growth, and create good, well-paying jobs.
If lawmakers come together, in a bipartisan manner to develop solutions for these issues, Connecticut can and will become a better place to do business — and that means a better future for everyone.
Peter Gioia is an economist and vice president at the Connecticut Business & Industry Association.
