If you were to summarize the near future of Connecticut’s economy the way you would offer a weather forecast, the prediction might be bright with partial clouds and dependent upon how the system from the southwest tracks. That was the take-away when economics students at Sacred Heart University recently presented their Connecticut Economic Outlook for 2017-2019.
Under the guidance of Professor Lucjan Orlowski at SHU’s Jack Welch College of Business, six teams of students—mostly juniors and seniors—offered their perspectives on various state macroeconomic indicators, beginning with a non-technical summary and ranging from insights about the labor market to aspects of the financial sector. Taking a long view, Orlowski said Connecticut’s economy is improving gradually, “though it is not as robust as we would like to see. The taxation burden is too high, and manufacturing jobs are being replaced by services. And the median household income is still lower than historic levels.”
Students Eileen Hawley, Catherine Troy and Anthony Milone kicked off the session with the non-technical summary, pondering whether state growth rates will reflect forecasted national rates for 2017. The national forecast, the students noted, include a 2.1 percent rise in gross domestic product (GDP), a drop in the unemployment rate to 4.4 percent and a 1.5 percent increase in interest rates. Moreover, manufacturing is expected to grow at 3 percent in upcoming years, and oil and gas companies’ profit margins likely will continue to increase.
Connecticut is well positioned because of its proximity to New York City and access to major markets, according to the trio. It also is seen as a technological center, with industries that include biosciences and medical technology. In addition, the state is home to 14 commercial banks. However, the state’s tax policies are inflexible, which has driven several large corporations out of Connecticut. If that trend continues, the students predicted, the state’s labor market will be affected, with unemployment already on the rise from 4.4 percent in December 2016 to 4.8 percent this past March.
Edward Shaw, Jacob Friar, Brett Polinsky and Conan Schuster spoke on the “Outlook for the Real Economy of Connecticut.” They commented that the U.S. has experienced many significant changes that will affect the country’s economic outlook, including a new president, new policies and changing interest rates. On a positive note, they said, unemployment rates have dropped, inflation is close to the Federal Reserve’s target rates, and there’s a hopeful outlook for GDP growth. Increased government defense spending is a boon to Connecticut, they said, because of the state’s concentration of large employers in that sector, such as United Technologies and General Dynamics, which may receive valuable contracts.
Like the first team, this group identified taxes as having a negative impact on the state’s economy, noting that the more taxes the state collects, the less money individuals will spend for personal consumption, which in turn will affect Connecticut’s GDP growth rate. Another negative factor is the general decline in agriculture gross domestic product, which affects Connecticut as a large supplier of nursery stock, eggs, shellfish and dairy products, they said. Additional negative economic factors facing the state include the growing margin between its budget deficit and income tax receipts and the perception that Connecticut is as not as business-friendly as other states.
Patrick La Roux, Zachary Niles, Jason Wyman and Andrew Murrone reported on “Structural Changes in the Connecticut Economy and the Labor Market.” Their opening serve was the unsettling statistic that the state is losing population, from 3.6 million residents in 2013 to less than 3.58 million in 2016. Manufacturing jobs are also in decline due to increasing automation, and corporate tax collections are expected to decline. On the other hand, nearly half of Connecticut residents are employed in nonfarm roles, which is up since the 2008 financial crisis. State unemployment is also at its lowest rate since 2007, real median household income is on the rebound and construction jobs and financial activities have been increasing gradually.
Evan Jasper, Justin Danforth, Jeffrey Carroll and Erlich Doerksen—whose topic was the state budget analysis—reported the state budget has grown by 10.3 percent since 2012, but Connecticut is running a budget deficit because of increased pensions for public school teachers and state employees, the cost of health care for retired state employees and debt service on bonding for capital projects. The group forecast that the state deficit will increase by $500 million in the next two years and that Connecticut is on pace to run a budget deficit of almost $2.2 billion.
Weighing in on “Education and Science: Connecticut’s Comparative Advantage,” Zoe Kelly and Maryann Victoria shared brighter news. They reported that Connecticut ranks third in the country for an adult population with advanced degrees, and there has been a steady increase in those degrees over the past six years, from 14 percent to almost 17 percent. There also has been a steady rise in state residents ages 25+ who have a high school degree, from 88 percent to 90 percent over the past six years. They reiterated that Connecticut is flying high in the science sector, crediting Yale University, access to Long Island Sound, open farmlands and an abundance of hospitals. Other positive factors they cited are Connecticut’s ideal location between New York City and Boston and its wealthy population, whose taxes help support education research and contribute to scientific breakthroughs.
Justin D’Aleo, John Harrington and Dominick Ferro offered their findings on “The Housing Market: Chances for a Rebound.” They noted the first financial quarter of 2017 showed promise with regard to sales of family homes and condos, a decrease of 4.9 percent in average days on market, a 3.1 percent increase in prices and the growing appeal of homes with upgrades and fixer-uppers. And they had more good news: median home values are on the rise in Connecticut, and there’s a surge of millennials and baby boomers seeking homes in the state.
The final presentation came from Eduard Carneiro-Zardo, Bruna Sourbeck-Bon and Nicholas Schnelle, who spoke on “The Financial Sector: Policies to Regain Its Strength.” Among their hopeful news: Connecticut has better quality assets, lower sovereign risk (potential of defaulting on its debt), low total capital ratio, more profitable banks than the national average and steady recovery in the sector’s employment.