Transportation and Public Utilities: Economics in Motion
By Noreen Passardi, Economist

Global competition, technological change, higher incomes, and more choices in leisure pastimes have placed new demands on most of the various modes of transporting people and freight. Deregulation, acquisitions, mergers, and antitrust violations have only begun to redefine and reshape the industries that transfer information, provide entertainment and supply energy. A broader concern for the environment has lead to efforts that yield clean water, cleaner air, and protection against disease through the proper disposal of hazardous wastes. These are some of the factors that will keep the Transportation and Public Utilities (TPU) industries in a constant state of change for some time, and may revise or expand several sections of economic texts in the future.

This article looks briefly at the employment and wage changes in the Transportation and Public Utilities industries (TPU) in Connecticut between the years 1992 and 1999. The graph below comparing the national and state employment percent changes between 1992 and 1998 for the TPU sectors shows that Connecticut experienced the same direction change as the Nation in all sectors except Motor Freight & Warehousing Transportation. Connecticut's employment and wage data is tabulated at the 2-digit, 3-digit and 4-digit Standard Industrial Classification (SIC) levels for select subsectors and appears on page 4.

Transportation

As regional efforts are in progress to ease Connecticut's congested highways and expand air travel accommodations at Bradley International Airport, employment levels have risen in many of the transportation industries, possibly a hint of what's to come. The Local, Suburban & Interurban Highway Passenger (SIC 41) group added 3,655 jobs (+37.5%) between 1992 and 1999. Air Transportation (SIC 45) more than doubled the number of jobs (+5,071) from its 1992 level – attributed in part to the entrance of Southwest Airlines and other small passenger and courier services that made fares at Bradley Airport more competitive. Water Transportation (SIC 44) grew by 40.3 percent, a nice splash of 749 additional jobs over the same period. The Transportation Services industries (SIC 47) added a total of 407 jobs with Travel Agencies (+262), Tour Operators (+165), and Packing and Crating (+128) the moving forces behind growth at the 4-digit level. Employment in the Motor Freight Transportation and Warehousing industries (SIC 42) lost a substantial number of jobs (-2,273) over the years.

Wages grew for most of the industries within Transportation sector between 1992 and 1999. Water Transportation (SIC 44) not only had the largest wage growth (+38%) but also had the highest average annual wage ($49,673) among the two-digit industry groups in the sector in 1999. Wages in Transportation Services (SIC 47) ranked second highest, reaching $46,462 and representing a growth rate of 23.6 percent. One of two industries at the 4-digit level to not experience wage growth over the years was Packing and Crating (SIC 4783), where wages actually declined by 33 percent. While Motor Freight and Warehousing (SIC 42) was the only industry group to lose a significant number of jobs overall, wages rose in the industry by 17.7 percent. It is worth noting that the three Transportation industries below the 2-digit SIC level in which wages are highest are Deep Sea Foreign Transportation of Freight (SIC 4412) at $83,106, Water Transportation of Freight, NEC (SIC 4449) at $72,778, and Arrangement of Transportation of Freight & Cargo (SIC 473) at $65,661. These wages are significantly above the Total Private and Total Private TPU industry averages.

Communications

In 1990 the world had 11 million mobile telephone users; by the end of 1998 the figure had reached nearly 400 million. The Federal Government is endorsing the provision of computers with Internet service to educational facilities across the nation. The rapid evolution of new technologies and the "more is better" ideology underlying consumer demand are imminent forces that have pushed at the industries' competitive boundaries. As a result, households and businesses have more choices in services and service models. While technology has expanded the list of communication services, such as mobile telephone and Internet service, service providers, in an attempt to compete, are offering "one-stop" service packages that are tailored to the total communication needs of consumers. Thus, separate service agreements for cable/satellite, television, local, long distance, mobile telephone services, Internet and other communications offerings could become a thing of the past.

Most of the Communications industries have realized job growth over the years. Overall employment grew 15.3 percent, a net gain of 2,545 jobs. The annual average wage increased by 52.9 percent and represents the largest wage growth of all the TPU sectors (2-digit level). The combining of modes of communication by firms is noted as a rise in employment in the Radiotelephone Communications (SIC 4812) subsector offset the loss in the Telephone Communications (SIC 4813) subsector, leading to an overall increase of 341 jobs. By no means obsolete, the Telegraph and Other Message Communication industries (SIC 482) added 15 jobs and ranks third highest in the level of wages ($67,215) for all the Communications industries. Cable and Other Pay Television Services (SIC 484), the driving force behind job growth in the Communications industries, added 2,008 jobs by 1999 with wage growth of 64.9 percent. Communications Services, NEC (SIC 489), comprised of establishments such as satellite earth stations, added 173 jobs and pays on average the highest annual wage ($84,626) of all the Communications industries. The Communications industries gained 106 new firms between 1992 and 1999, the largest employer growth for all the TPU sectors.

Electric, Gas, and Sanitary Services

Deregulation has begun to shape the energy sector in Connecticut. An Act Concerning Electric Restructuring (RB 5005, April 1998) mandated that by July 2000 all Connecticut residents will have the ability to choose their electric energy provider as they do their communications carrier. Acquisition of the State's gas companies has lead to the creation of two major gas distributors within Connecticut. Natural monopolies are alive and well and the implications and effects of deregulation will motivate authors of economic texts for years. Mergers that produce larger utilities are better able to compete in a deregulated environment. Job losses in the industry have sometimes resulted, but some of these losses may only be job transfers from the generating facility to the holding company (SIC 6719). Whether this is the case for Connecticut remains to be seen, but private employment in the Electric Services industries (SIC 491) has declined significantly since 1992 resulting in an overall loss of 1,086 jobs.

Firms in the Gas Production industries (SIC 492) lost a total of 734 jobs from 1992-1999. Firms in Combination Electric and Gas (SIC 493) industries are the only energy entities to have realized job gains (+141). The Sanitary Services industries (SIC 495) have had a significant gain of 1,404 jobs over the years. Policy that sets environmental standards, such as the clean-up of coastal and inland waters and mosquito eradication (both under SIC 4959) translates into jobs. The data indicates that the Electric, Gas, and Sanitary industries earned the highest annual average wage of all the TPU sectors (at the 2-digit SIC level) in both years, reaching $65,154 by 1999.

The effects of deregulation, technological advances, mergers, and environmental policies are only some of the forces that will continue way into the future to redefine and reshape the Transportation and Public Utilities industries. It may be people, freight, voice, picture, or hazardous waste that is being transported, but it is Economics in Motion.

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Industry Clusters
Smart Start Up

Smart Start," a business registry service initiated by the Office of Policy and Management (OPM) and the Department of Economic and Community Development (DECD) is up and running. Overseen by the Connecticut Economic Resource Center, Inc. (CERC), the system has been instrumental in guiding new and expanding businesses through the regulatory process. Smart Start simplifies the registration process by helping businesses complete forms and submitting them to appropriate agencies while collecting agency fees in one check.

The Partnership for Growth report identified streamlining the regulatory process as one of the basic economic foundations of a successful Industry Cluster Initiative. In response, OPM, DECD, and CERC launched Smart Start in 1998 as a free service. Since then, Smart Start has handled over 160 appointments, provided assistance   to an additional 1,500 individuals and businesses, and processed more than 100 phone inquiries each month, experiencing a steady increase in overall activity.

Marketing activities in support of Smart Start included a six-week radio campaign, television appearances, live radio interviews, press kits and stories, creation of a legislator newsletter, networking functions and speaking engagements. The program continues to expand, and now has an office in Bridgeport (open every Wednesday) as well as in Rocky Hill.

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HOUSING UPDATE
Permits Down 2.2 Percent from May

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 844 new housing units in June 2000, a 31.4 percent decrease compared to June of 1999 when 1,230 units were authorized.

The Department further indicated that the 844 units permitted in June 2000 represent a decrease of 2.2 percent from the 863 units permitted in May 2000. The yearto- date permits are down 15.7 percent, from 5,514 through May 1999, to 4,648 through May 2000.

New Haven County documented the largest number of new, authorized units in June with 189. Hartford County followed with 173 units and Fairfield County had 171 units. Southington and Stamford both led all Connecticut communities with 26 units, followed by Danbury with 23 and North Haven with 21.

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Is the Air Too Thin for a Soft Landing?

Near the end of his recent best seller, Into Thin Air, J. Krakauer describes the successful attempt to rescue two severely frostbitten Mount Everest climbers. A helicopter was dispatched to bring the two climbers down from around 26,000 feet above sea level to a lower altitude for needed medical attention. The critical issue faced by the helicopter pilot was whether he could actually land at such a high altitude. The air was so thin that it severely hindered the performance of the helicopter.

Chairman Greenspan faces a similar challenge in trying to engineer a soft landing for the national economy. The national economy has moved ahead at an extraordinary pace in recent quarters. Such growth, not withstanding the views of the new economy pundits, if continued, must surely ignite inflation. Tight labor markets and rising energy prices contribute to the potential. The series of six interest rate hikes implemented over the past year by the Federal Reserve has attempted to slow the economy to a more sustainable pace without throwing it into a recession. And of course, the Fed’s ability to achieve this outcome will have important ramifications, as the future of the national economy is a fundamental driver of the Connecticut economy.

Recent economic news suggests that the Federal Reserve may be on track for a soft landing. Employment growth has softened; growth of consumer spending has slowed; and home and auto sales have slackened. Finally, at the time of this writing, the growth of second quarter gross domestic product will probably drop to about half its pace in prior quarters, based on the consensus forecast. All in all the performance of the Fed to date has been excellent. Let’s hope that the air is not too thin for a soft landing and that pilot Greenspan will pull it off.

The coincident index, a gauge of current employment activity, remained unchanged at its peak in the current expansion with the release of (preliminary) May data. The leading index, a barometer of future employment activity, fell in May, but still remains in neutral, something that we have reported since late 1996.

In summary, the coincident employment index rose from 96.3 in May 1999 to 103.2 in May 2000. All four components of the index point in a positive direction on a year-over-year basis with higher nonfarm employment, higher total employment, a lower total unemployment rate, and a lower insured unemployment rate.

The leading employment index fell from 90.0 in May 1999 to 89.7 in May 2000. Two index components sent positive signals on a year-over-year basis with a lower short-duration (less than 15 weeks) unemployment rate and lower initial claims for unemployment insurance. Three components sent negative signals on a year-over-year basis with lower total housing permits, a lower average workweek of manufacturing production workers, and lower Hartford help wanted advertising.

SOURCE: Connecticut Center for Economic Analysis, University of Connecticut. Developed by Pami Dua [Economic Cycle Research Institute; NY,NY] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Stan McMillen and Jingqui Zhu [(860) 486- 3022, Storrs Campus] pro provided vided research suppor support.

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