A 1,900 reduction in the number of people employed in the Norwich-New London area contributed to a downbeat statewide employment report released Thursday indicating that Connecticut lost 6,800 jobs in August.
The report also noted an unprecedented five-tenths of a percent increase in the unemployment rate, which reached 9 percent. The state Department of Labor, which released the numbers, said August's jobless-rate increase from July's level of 8.5 percent was the largest percentage-point rise in unemployment since estimate methods for these figures were first introduced more than 35 years ago.
Job losses were particularly steep statewide in the leisure and hospitality sector, which saw a decline of 3,100 positions, as well as in retail trade, down 1,900; construction and mining, off 1,300; and durable-goods manufacturing, lower by 1,000. The local labor market lost an astounding 1.5 percent of its total workforce in a single month, according to the report.
"The numbers reported today can be characterized as being 'highly disappointing,' and raises concerns about a downturn," said Don Klepper-Smith, chief economist and director of research for DataCore Partners in New Haven, in an emailed analysis of the numbers. "The figures were much worse than I expected."
Klepper-Smith said he was scaling back previous predictions of 11,000 job gains statewide this year and 8,000 next year to reflect the latest employment figures. He said new projections will be released in the coming months.
"Structural changes and modest demand for labor keeps unemployment high for the foreseeable future," he said.
Peter Gioia, chief economist for the Connecticut Business & Industry Association, said he believes the numbers released Thursday are suspect and likely to be revised upward in the coming weeks. But he said he wasn't surprised that Connecticut's job numbers are down, given the current funk of the national and state economies.
"I think the report's a warning sign that efforts to add jobs need to be redoubled and to be priority No. 1," he said in a podcast released to the media.
Gov. Dannel P. Malloy said he was skeptical about the numbers because they didn't match other indicators, such as new filings for unemployment benefits, which were down slightly in August compared with July. They also didn't track with tax withholdings, which were up 3.6 percent after seasonal adjustments, he reported.
"Those two trends are the opposite of what you would expect to see if the state was losing jobs at the rate suggested in this report," Malloy said in a statement.
Andy Condon, director of the state Labor Department's office of research, acknowledged that layoff announcements and reports of business expansions and contractions also did not match the magnitude of August's reported job-loss numbers. He said his office was continuing to monitor the state's labor situation to investigate what may have led to the unusual spike in reported unemployment.
The first eight months of the year produced job growth of only 1,300 positions statewide, the Labor Department noted. This was significantly off the pace of 2011, when 8,000 jobs had been added through August.
Jobs projections released earlier this week by the University of Connecticut said "tepid growth" in jobs of about 8,000 statewide were expected over the next year and a half, with most of the increases coming in the latter part of 2013. Jobs were projected to continue a downward trend in the Norwich-New London area through the end of this month before rebounding slightly by the end of this year and gaining steam in the first half of 2013.
Klepper-Smith, who headed the Governor's Council of Economic Advisors under the previous Rell administration, said the latest statistics show the state has 171,000 unemployed people. Unemployment is now at the highest level statewide since April of last year, he added.
The national unemployment rate now sits at a significantly more optimistic 8.1 percent, largely because 368,000 people exited the labor force last month, Klepper-Smith said. The U.S. labor-force participation rate is now down to 63.5 percent, a level to which the country had not descended since September 1981, he added.
Klepper-Smith said he expects some positive effects from lower interest rates following the Federal Reserve's announced push to buy $40 billion of mortgage bonds over the next several months. But he said the Fed's move could provoke increases in oil prices related to a weaker dollar and might create more uncertainty for an already skittish banking industry.
"Interest rate cuts at their core basically address problems related to the business cycle," Klepper-Smith said. "Many of our economic problems are structural in nature and not connected to the business cycle."