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With casinos shuttered, unemployment in region soared in April

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Norwich Mayor Peter Nystrom was not surprised to learn Friday that his city had the highest unemployment rate in Connecticut last month.

With 3,429 members of the city’s labor force of 18,730 people out of work in April, the unemployment rate in the “Rose of New England” worked out to 18.3%. Neighboring municipalities were very much in the same boat, the reason the Norwich-New London-Westerly Labor Market Area had an unemployment rate of 13.7%. Factoring out the Rhode Island portion of the LMA — Westerly and Hopkinton, with their 22.2% unemployment — left 20 southeastern Connecticut towns with a combined unemployment rate of 12.6%.

Eleven of the 15 Connecticut municipalities with double-digit unemployment rates in April were in New London County. Trailing Norwich in the top five were New London, 15%; Montville, 14.6%; Griswold, 13.1%; and Preston, 12.7%. Ledyard, Sprague, Groton, Lisbon, Voluntown and Waterford followed.

“I am not surprised at the numbers,” Nystrom said. “What I am surprised at is the lack of concern from our governor. I don’t think he cares about anyone living in eastern Connecticut. He’s from Greenwich. He’s quite wealthy. Has he ever had to worry about making a payment?”

Nystrom said he was angered by Gov. Ned Lamont’s opposition to the Mashantucket Pequot and Mohegan tribes’ plans to reopen Foxwoods Resort Casino and Mohegan Sun on June 1, contending it’s not yet safe to do so amid the ongoing coronavirus pandemic. The casinos, among the biggest employers in the state with a combined workforce of more than 10,000 employees, have been closed since March 17.

In the first week after the casinos shut down, some 3,700 Norwich residents filed unemployment compensation claims, Nystrom said. Eleven percent of the city’s population of nearly 40,000 people worked at one of the casinos. More than 160 businesses in the city were part of the casinos’ supply chain. Southeastern Connecticut lawmakers from both sides of the aisle pointed to such statistics in a May 13 letter in which they urged Lamont to turn his attention to the region’s plight.

In Nystrom’s view, Lamont “doubled down” this past week when he failed to correct remarks made by Dr. Ezekiel Emanuel, a high-profile adviser who told reporters the casinos’ economic contribution to the state was minimal though the public health risks they posed by reopening were significant.

“He’s no economist,” Nystrom said of Emanuel.

“I don’t want to diminish the seriousness of the virus,” the mayor said. “But other outcomes are just as devastating. Businesses, livelihoods are being lost forever. The level of domestic violence is rising. People need to go back to work.”

He said the city has been striving to help the unemployed, lowering interest rates on back taxes, extending pay periods and prohibiting evictions and utility shut-offs, measures that in some cases the governor has authorized. Lee-Ann Gomes, the city’s director of human services, has “moved mountains” to stretch the safety net beneath those in need, Nystrom said.

Told that New London’s unemployment rate in April was 15%, Mayor Michael Passero was taken aback.

“We’ve been working under the assumption that we’re closer to 25% or 30%,” he said. “Just the percentage of our population that works at the casinos will tell you that. And each one of these restaurants that have been closed have a pretty good size payroll. It’s frustrating that we don’t have better data.”

While restaurants were able to start serving outdoors this past week, many in the city decided against it, Passero said, either because they lacked the space or because they calculated it wouldn’t be worth it.

“It’s a matter of tight margins to begin with and no prospect of overcoming costs, given the limitations (in the first phase of the state’s reopening plan),” he said. “Some couldn’t cover the cost of their lease with only a few tables on a patio.”

Passero said the debate over whether to reopen or to continue hunkering down to prevent the spread of the coronavirus disease continues to rage in New London. The irony, he said, is that southeastern Connecticut has managed to limit its exposure to COVID-19 while bearing the brunt of the disease's economic impact.

'Stunning how deep the devastation is'

Economists and others were shocked by Connecticut’s April unemployment numbers, which the state Department of Labor released Thursday, cautioning that the official statewide unemployment rate of 7.9% was “severely underestimated” due to problems with data collection.

The department’s Office of Research estimated the state’s true unemployment rate to be about 17.5%, higher than the national rate of 14.7%.

“We knew the numbers were going to be bad but it’s really stunning how deep the devastation is,” said Joe Brennan, president and chief executive officer of the Connecticut Business and Industry Association and a member of the governor’s Reopen Connecticut Advisory Group.

Brennan said he assumes the numbers associated with the Norwich-New London-Westerly LMA reflect the impact of the casinos' closure.

“That has to be a huge part of it,” he said. “The other major employers like Pfizer and Electric Boat were deemed essential, so for the most part they haven’t had to lay off people. What we don’t know about is the self-employed people who don’t show up in the numbers. When you look at the large employers in Connecticut, it’s hard to think of an industry other than casinos that hasn’t been open.”

Manufacturers, large and small, insurance companies and banks have kept operating during the pandemic.

While he had no desire to get between the governor and the tribes regarding whether the casinos should reopen June 1, Brennan said the best way to ensure the casinos open soon and restaurants resume inside service is to keep driving down the COVID-19 infection rate. That means people have to keep washing their hands, distancing themselves and wearing masks, he said.

Donald Klepper-Smith, chief economist and director of research for DataCore Partners and a much-quoted student of Connecticut’s labor markets, noted that the Norwich-New London-Westerly LMA lost an estimated 34,200 jobs from March to April, a 26.7% drop.

On a year-over-year basis, comparing April 2019 to April 20, the jobs loss amounted to 27.6%.

Connecticut lost 266,300 jobs last month, almost as many as the combined total it lost in the 1989-92 downturn and the Great Recession of 2007-09, the two worst recessions in recent history, Klepper-Smith wrote in his monthly newsletter.

“Barring an immediate cure or vaccine for the coronavirus, this one-month job decline for April implies not only a harsh new economic landscape for Connecticut, but one that is apt to leave scars on the local economy and its residents for months and years to come in the same way that consumer behaviors were abruptly altered back in the 1930s,” he wrote, adding, “... policymakers simply don’t have a playbook for dealing with job losses of this magnitude.”

Tony Sheridan, president and CEO of the Chamber of Commerce of Eastern Connecticut, said he was hopeful the casinos will soon reopen and looked forward to the reopening of hotels and other forms of lodging in the second phase of the state’s restart scheduled for June 20. He noted two mainstays of the region’s tourism industry — Mystic Aquarium and Mystic Seaport — have reopened outdoor exhibits.

“It’s taken a heavy toll on us,” Sheridan said of the coronavirus. “We’re going to come back, but it’s going to be a slow process. I see a lot of positives in the way people have come together to fight this disease. The smart thing now is to do exactly what we’re being asked to do by the medical experts and the governor’ office."

“The worst possible thing that could happen is to have to do it again in November,” he said.


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