Connecticut's Economic Condition and Outlook

	Overview Connecticut entered into a long period of recession during the winter of 1989. The recession claimed a total of 158,200 jobs before officially ending in December 1992.   The state's recovery began slowly, with little employment growth between 1993 and 1995. During this period, Connecticut's economy performed at a level well below that of the national economy. By 1996, Connecticut's economy was showing signs of expansion, as the state became a full participant in the strong national recovery. Today, Connecticut has reclaimed over 80 percent of the jobs lost to recession, and has posted the strongest income gains in the country. During the course of the recovery, the state economy has continued to diversify with much of its employment growth coming from small and medium sized businesses in the service sector rather than from large manufacturing concerns and the insurance industry. The export sector is also playing a larger role in the state's economy. In 1997, exports increased 14 percent from the prior year to 7.8 billion dollars. Over the past ten years, state exports have almost tripled. Employment Outlook Connecticut has experienced strong employment gains since 1996. Although employment growth has slowed somewhat during 1998, job additions are expected to continue at a moderate rate over the next year. The state's unemployment rate dipped to a ten-year low of 3.8 percent in October 1998. However, the unemployment rate in urban areas is well above the state average. Future state job growth will rely heavily on gains in Connecticut's urban centers. Over the past ten years, Connecticut experienced a shift in employment from the manufacturing and finance, insurance, and real estate (FIRE) sectors to the service sector (which includes business and personal services, health care, legal services, private education, technical and data processing). Manufacturing's share of total state employment slipped from 18.6 percent in 1988 to 14.1 percent in 1997. The employment share of the FIRE sector dropped from 11.6 percent to 9.5 percent between 1988 and 1997. By contrast, manufacturing and FIRE declines have been offset by growth in the service sector, which increased from 27.2 percent of total state employment in 1988 to 34.4 percent in 1997. The fastest growing occupations in the state are computer engineer; systems analyst; sales agent (securities and financial); physical therapist; human services worker; and home health aide. The fastest growing industries in the state are securities services; amusement and recreational services; hotel and lodging; social services; business services; and, general building contracting. State Income Connecticut continues to lead the nation in per capita income with a 1997 level of 35 thousand 954 dollars. In 1997, the state also experienced the strongest per capita income growth in the nation at 6.3 percent. In 1997, Connecticut's per capita income level was 42.1 percent above that of the nation and 18.1 percent ahead of the New England region, representing a ten-year high. Despite the strong total growth in state income, inflation adjusted median household income is 25 percent lower than its peak 1989 level. In part, this trend is explained by the replacement of high paying manufacturing jobs with lower paying jobs in the service sector. On a positive note, the state's inflation adjusted median household income had its strongest growth rate in five years, growing 2.1 percent in 1997. About half of the state's total earnings come from the services and manufacturing sectors. Although the FIRE sector declined in its share of total state employment over the past ten years, the share of total earnings that it contributes increased over the period from 11.5 percent in 1987 to 13.6 percent in 1997. This places the FIRE sector as the third largest contributor to state earnings. Income Inequality and Child Poverty One persistent threat to balanced and sustained economic growth is the unbalanced distribution of state income. Connecticut ranks as one of the top five states in income inequality. One of the most serious outgrowths of income inequality is a high rate of child poverty, especially in the state's urban areas. While Connecticut's overall poverty rate is relatively low at 10 percent, its child poverty rate is almost double the total rate. Although many states continue to see declines in child poverty, Connecticut is seeing alarming increases in this measure. Other Indicators The export sector of the state economy surged in 1997; it grew to 7.8 billion dollars and comprised over 6 percent of 1997 estimated Gross State Product of 120 billion dollars. Little growth is projected for the export sector in 1998, due to the problems with exports to Asia. About a quarter of state exports go to thirteen Asian countries plus Singapore and Hong Kong. New housing permits have grown in recent years. In 1997, permits increased 5.6 percent over 1996. In October 1998, the increase was 20.3 percent higher than the same month the previous year. New auto registrations expanded 21.5 percent between 1996 and 1997. Solid growth continued during the first half of 1998.

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