Study Warns Connecticut’s Economic Recovery Could Fizzle

HARTFORD (AP) — The weak economic recovery could sputter out, leading to more job losses in the state, a University of Connecticut study says. The possibility of significant cuts in government jobs to reduce an anticipated $3.4 billion state budget deficit in 2012 also likely would thwart any major recovery in employment, said the Connecticut Economic Outlook issued by the Connecticut Center for Economic Analysis.

The state’s unemployment rate has climbed steadily from 4.9 percent in December 2007, the start of the recession, to 8.8 percent in June. It peaked at 9 percent in April.

“Dramatic revisions in federal economic data show that the Great Recession was significantly worse than previously thought,” the report said. “Thus, Connecticut’s economy probably has been weaker than previously recognized.”

On August 10 the Federal Reserve announced that the pace of the recovery “has slowed in recent months,” downgrading its June outlook when it said the recovery was proceeding and the job market was improving. High unemployment, poor income growth, declining home values, and tight credit are restraining the pace at which Americans are spending, usually a major source of powering the economy.

The report also criticized the state government, which has a $19 billion spending plan for 2012, for failing to collect useful data that could help researchers analyze economic changes.

“Connecticut has poor administrative data, knows little about the dynamics of firm creation or disappearance and has not developed an integrated data system to track its general economic performance,” the report said.

The director of the Connecticut Center for Economic Analysis, Fred Carstensen, said the state’s government pursues policies that are ineffective and waste taxpayer money.

The study’s author, Peter Gunther, said some good news can be found in the otherwise grim economic outlook. Although Connecticut has not seen much job growth in 20 years, an analysis of job data suggests it has regained higher-wage jobs such as nursing, while lower-wage employment shrank.

Still, the number of critical, high-pay occupations such as chief executive officers and lawyers has fallen, the report said.

The report cites continuing troubles in the housing industry, which led to the start of the recession. In the first six months of the year, Connecticut was the only state in the tri-state region where the number of housing permits declined for the fifth successive year.

The quarterly study is the second consecutive report detailing a gloomy outlook for Connecticut’s economy. In May, the UConn study saw few prospects for a recovery and said that even where there are signs of prospective growth, caution was warranted.