Economic Recovery Underway in 2004
By Jungmin Charles Joo, Research Analyst, DOL

Connecticut employment finally turned the corner in 2004 after three consecutive years of decline. The newly released revised annual average data show that Connecticut nonfarm employment increased by 0.4 percent, or 6,900 jobs. This follows losses of 20,400 jobs (-1.2 percent) in 2003, 16,200 (-1.0 percent) in 2002, and 12,100 (-0.7 percent) in 2001. Thus, using nonfarm employment as the proxy for Connecticut's economy, the current recession is over. More specifically, on a monthly basis, Connecticut's seasonally adjusted total nonfarm employment peaked in July 2000 at 1,700,200, and bottomed out in September 2003 at 1,638,800. Thus, the latest recession lasted 38 months and resulted in a net loss of 61,400 jobs, which compares to 46 months and 161,100 jobs lost during the previous February 1989-December 1992 recession. Although the State experienced its mildest job growth since 1993, and 41,800 more jobs still need to be added to reach its pre-recession level, last year's turnaround is good news for Connecticut's economy.

As the table below shows, many other indicators support the State's economic recovery. After declining for two years, real personal income of Connecticut residents rose in 2004 by 2.4 percent. The annual average unemployment rate fell in 2004, to 4.9 percent, reversing three years of increases. Average weekly initial claims for unemployment dropped for a second year in 2004, as the Hartford help wanted index remained stable from a year ago.

Consumers evidently continued to take advantage of very low interest rates as new housing permit activity finished 2004 remarkably, rising for the third consecutive year and breaking the 10,000 mark. It was the highest level of housing activity since 1989, the peak year before the previous recession. The construction contracts index also went up for the third year in a row, to an all time record high since 1969. Moreover, air cargo tons also rose last year, reaching its highest level since 1992. Connecticut's exports reversed two years of decline as well in 2004.

Industry Sectors in 2004

Five of nine sectors added jobs in 2004 (as opposed to only three in 2003, see the March 2004 Digest). Educational and health services continued to create the largest number of jobs, followed by construction and mining (which bounced back from the decline in 2003); leisure and hospitality; trade, transportation, and utilities (strong job growth after the decrease in 2003); and professional and business services (which also turned the corner from 2003).

On the other hand, government lost the largest number of jobs over the year. Manufacturing came in second, but with much fewer cuts than in 2003. Inflation-adjusted average hourly earnings of workers in manufacturing have sustained an increase for the fourth year, and manufacturing output, as measured by the Connecticut Manufacturing Production Index, also rose for the second year. Financial activities, which had added jobs in 2003, shed jobs last year. The information sector also lost jobs, although not as many as in 2003.

Since the peak of 2000, four of the nine sectors experienced job gains. Educational and health services gained the most jobs, while manufacturing and professional and business services posted the largest job losses over the four years.

Labor Market Areas in 2004

Among the new labor market areas (see "Changes in Labor Market Areas," December 2004 Digest), seven of the nine areas added jobs, while the Norwich-New London LMA showed no change and the Bridgeport-Stamford area lost jobs in 2004. Enfield LMA employment grew the most (2.0 percent), while the Danbury, Waterbury and Willimantic-Danielson LMAs all experienced very modest job growth of 0.3 percent.

While these gains are not great, they are certainly welcome. We can hope that 2004 was only the prelude to a recovery period similar in length to that which Connecticut experienced in the 1990s.

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Housing Update
Permit Activity Slows in January

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) announced that Connecticut communities authorized 627 new housing units in January 2005, a 9.0 percent decrease compared to January of 2004 when 689 units were authorized.

The Department further indicated that the 627 units permitted in January 2005 represent a 37.4 percent decrease from the 1,002 units permitted in December 2004.

Norwich led all municipalities with 80 units in January, followed by Groton with 69 and Danbury with 29. Five of the new nine Labor Market Areas (LMAs) showed gains compared to a year ago. From a county perspective, New London County experienced the largest gain of 129 units (or 280 percent) from last year.

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