The report from the U.S. Bureau of Labor Statistics last week showing that the Connecticut unemployment rate spiked to 9 percent in August, with a net loss of 6,800 jobs, shows the state economy moving in the wrong direction and suggests the Malloy administration's job-growth policies are so far ineffective.
In 36 years of such data keeping there had never been a month-to-month unemployment increase as big as the 8.5 percent to 9 percent jump from July to August. The spike in the jobless rate caught state economists by surprise.
Gov. Dannel P. Malloy wasn't buying it, saying he had serious doubts about the accuracy of the number. While the governor could be accused of denying an unpleasant reality, the unemployment rate does appear inconsistent with other economic indicators, including reductions in unemployment filings, increased tax withholdings and positive reports from job placement agencies.
But even if the unemployment number is later recalculated lower, the trends are definitely going in the wrong direction. Don Klepper-Smith, chief economist and director of research for DataCore Partners in New Haven, saw enough to announce that he will soon lower his previous predictions of 11,000 job gains this year, and 8,000 next year, tepid job growth numbers to begin with.
The $2.6 billion in tax increases over the past two years to help close a $3.4 billion deficit, combined with the recent jump in gas prices and stagnant wages, has reduced disposable income. And indeed the leisure and hospitality sector was hard hit, with a decline of 3,100 jobs in August, while retail trade was down 1,900 jobs.
Yet deeper government spending cuts in lieu of tax increases would have aggravated job losses in the public sector. Government jobs have been a loss leader, with 3,600 jobs lost in June, a number that slowed to 500 in August.
It will take time to evaluate whether many of the measures initiated by the legislature at the administration's urging, including direct investment in small businesses and grant and loan programs aimed at keeping and adding large corporations in the state, will prove successful.
In the meantime the governor will have to do more than try to recalculate the unemployment number, he will have to recalculate his economic policies.