New data show that Connecticut has a deeper economic hole to dig out of than analysts imagined a few months ago.
The federal data, analyzed in the latest edition of the quarterly publication The Connecticut Economic Outlook released today, indicate that residents are still feeling the effects of the Great Recession and that the state, which has gone a generation without job creation, will be lucky to produce another 10,000 positions over the next two years.
"Connecticut was still contracting when the rest of the nation was beginning to recover," the report by University of Connecticut researchers stated. "The contraction was worse than previously understood."
The realization about how deep the state's economy sank during the recession came as the U.S. Bureau of Labor Statistics released new data on Connecticut's economic output, showing sharply lower numbers than previously had been projected. The numbers resulted in a chart of Connecticut's gross domestic product showing a much deeper economic trench in 2009 than had previously been known and a less robust recovery as well.
"It was a bit of a shock," said Fred Carstensen, director of the Connecticut Center of Economic Analysis at UConn and a co-author of the report, in a telephone interview. "This explains why the unemployment numbers have been telling us a much more pessimistic picture than what the output numbers were telling us - because the output numbers were wrong."
The new data caused UConn economists to refigure previous employment projections that now appeared to be overly optimistic. This resulted in job-number projections over the next two years that look relatively flat if done with conventional methodology, while showing a slight incline using more optimistic assumptions that anticipate continued low federal borrowing rates and economic boosts from the build-out of the Jackson Laboratories-UConn Health Center bioscience hub.
Even the more optimistic measure leads to projected job increases of only 10,000 in the next two years - "insufficient to return total employment to anything approaching the level of 2008," according to the report.
Through the end of last year, the state's economy had generated only a third of the job growth required to compensate for the 120,000 Connecticut jobs lost since the last employment peak in 2008, the report noted. The state still boasts job numbers below the level seen in 1988, more than a generation ago.
Carstensen added that employment problems seem to have hit southeastern Connecticut particularly hard, thanks largely to the financial struggles of the region's two casinos and to layoffs at Pfizer Inc.
"The one big challenge is we have to figure out how to help southeastern Connecticut," he said.
Carstensen suggested one way to generate economic growth locally and throughout the state would be to implement a proposal UConn economists put on the table two years ago to release nearly $2.5 billion in so-called "stranded tax credits" to fund major capital projects in key industries such as pharmaceuticals. The idea, which has not earned much traction in the Malloy administration because of its impact on state revenues, would allow companies such as United Technologies Corp. that are unable to use all of their tax credits to sell these write-offs to other corporations looking to make major investments in the state.
Carstensen said changing the tax-credit system could help Pfizer in the marketing of more than 750,000 square feet of research laboratory space it has listed for sale or lease at its campus off Eastern Point Road in Groton. Pfizer has announced that it plans to demolish the largest of these facilities, the company's original R&D headquarters known as Building 118, if it doesn't find a buyer by the end of the year.
"We need a very aggressive response," Carstensen said.