Industry Clusters Report to Governor
by Mark Prisloe, Economist

A presentation to the Governor, legislative leaders, and commissioners on June 11, 1997, culminated the first 100 days of the initiative, Connecticut Business Agenda: Building the State of the Future. The purpose is to initiate unprecedented actions for the state's business climate and economic growth. This initiative has been launched by the Industry Cluster/ International Division of the Department of Economic and Community Development (DECD) led by Commissioner Peter Ellef and Administrator Jim Abromaitis, on loan from Fleet Bank.

Following three months of intensive industry-led advisory board meetings, about 90 Governor- appointed business executives, representing each of five major industry clusters reported preliminary results.

Priority Recommendations

Each industry cluster was asked to make a set of priority global-competitiveness recommendations. Among them were the following:

• develop a "manufacturing resource center," and a 21st century vocational-technical school system
• become "the managed care capital of the world," and achieve leading medical and biotechnology status
• streamline regulatory requirements to make it easier for small businesses to succeed
• re-focus educational curricula, incentives, and structures to expand job/career opportunities
• establish a permanent financial services growth collaborative
• create a high-powered marketing campaign to promote Connecticut as a business-friendly location
• position Connecticut as a smart, high-tech state, with a great quality of life
• protect key existing Connecticut industrial strengths and nurture new growth companies
• involve legislators, educators, and labor in the further development of these recommendations.

Quest for Global Competitiveness

The initiative was kicked off last February by Harvard Business School Professor Michael Porter. The quest by state industry clusters for greater global competitiveness focuses on concepts advanced by Porter's study of regional economies and markets throughout the world. Professor Porter also participated in the June 11th program.

Five Clusters Facilitated

Industry co-chairs directed advisory boards among five major industry clusters: manufacturing, telecommunications/information, financial services, health services, and high technology.

Connecticut's industry clusters (along with the tourism cluster already in progress) were identified based on their industry location quotients comparing the concentration of an industry in the state with the concentration of the industry nationally. A location quotient greater than 1.0 indicates that the industry is more dominant in the state economy than it is nationally.

Facilitators for each industry cluster conducted think sessions to identify issues and steps that both government and industry could take to help increase each industry's global competitiveness. These ideas were presented to the Governor on June 11th.

Connecticut at a Crossroads

Observing that "Connecticut is today at an economic crossroads," and referring to the presentation as "the end of the beginning," James C. Smith, Chairman and Chief Executive Officer, Webster Bank, and Financial Services Advisory Board Co-Chairman highlighted the need for "bold, targeted initiatives that accentuate local competitive advantages and stimulate productivity." Endorsing the concept of cluster development and an industry cluster as "a group of interconnected industries" his remarks expressed a determination "to smash barriers to competition in favor of sustained collaboration which will produce the economic engines that will drive future prosperity."

Workforce Development

The need for highly-skilled labor from both the college- and non-college populations emerged as a common theme among the clusters. Upgrading education and training links to business interested all the industry clusters. To discuss meeting the workforce challenge, state educational leaders met with the cochairs of this 100-day initiative, and provided input to the advisory boards.

International Connection

As industry clusters weighed the challenges of achieving global competitiveness, the attention to international activity was raised in such recommendations as internationalization of Bradley Airport, and for the sharp expansion of export assistance for medium and small businesses. (The Industry Cluster/International Division's ongoing commitment to international business is highlighted in its International Strategic Action Plan released in February 1997. It assesses Connecticut's experience, vision, and mission in world markets. Copies of the plan may be ordered by contacting the Industry Cluster/ International Division at the DECD.)

Commitment to Action

The closing remarks were made by Robert W. Fiondella, President and CEO, Phoenix Home Life Mutual Insurance Company, and Financial Services Advisory Board Co-Chairman. He summoned both public and private sector leaders to work together to more fully develop these recommendations. He stressed the importance of involving legislators, educators, and labor leaders, and the continued need to make it a bipartisan effort. Fiondella also suggested it was essential for both public and private sectors to have a better understanding of the realities of the global marketplace. To that end, he called for an economic summit, to provide an opportunity to embark on a "learning journey" together.

Governor Calls for a Plan

The Governor's response was very positive as he extended high praise to the cluster advisory board members. Governor Rowland then asked the leadership of this cluster initiative to come up with an Economic Competitiveness package by the end of the year. The industry cluster advisory boards will put together a plan to accomplish this by mid July.

Economic Conference Board Meets

In the interim, on June 25, the 22-member Connecticut Economic Conference Board (CECB) met to review the industry cluster results. Members of the board who served as liaisons to each industry cluster expressed enthusiasm for the progress achieved to date and a strong desire to see the industryled initiative move forward. The CECB is planning a November conference on the status of Connecticut's economy and the progress of the industry clusters. Based upon the results of this hearing, the CECB will prepare a report to the Governor and the legislature in January 1998.

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The Part-Time Story
by J. Charles Joo, Research Analyst

The services producing industries have generated most of the new jobs in Connecticut since 1993. But are these newly created jobs mostly part time (1 to 34 hours), with relatively low paying wages? Although no specific data by industry or occupation are available, the overall characteristics and trends of part-time workers in our State are identified through the Current Population Survey. In 1995, the latest year for which data is available, 20.7 percent of all employed persons said they worked part-time. This was an increase from 18.7 percent in 1993 when the economic recovery began. This trend was similar in New England and the nation.

Between 1993 and 1995 the number of part-time workers increased 6.7 percent (21,000), while the number of full-time employees actually dropped by 6.2 percent (84,000). From 1990 to 1993, the number of part-time workers rose at a much slower pace of 2.6 percent, while the number of full-timers declined by 2.0 percent. This suggests that Connecticut firms have not only been hiring more part-time workers, but have been hiring them at a faster rate in recent years.

Despite the expanding services services sector, it was not always sales or clerical positions that were being added to the State's economy. From 1993 to 1995, the number of managerial and professional specialty jobs increased by 6 and 20 percent each, while sales and clerical positions declined by 2 and 11 percent. And although it is not clear how many of these new jobs were part-time, their wage rates were relatively high according to a Connecticut Labor Department survey. In 1993, 69 percent of part-time workers were women. By 1995, that ratio increased to 70.4 percent. The number of Hispanic part-time workers in Connecticut grew 120 percent between 1993 and 1995, while the number of black parttime workers rose 33 percent. In 1995, 71,000 teenagers (16 to 19 years of age) made up 21.3 percent of all part-time workers. That number was an increase of 14.5 percent from 1993, growing twice as fast as part-time employees overall. (Table 1 below)

Almost half of the total parttimers worked between 15 and 29 hours a week in 1995, while 29 percent worked 30 to 34 hours. About 21 percent worked between 1 to 14 hours. As Table 2 summarizes below, there were various reasons for working less than 35 hours. About 28 percent said they worked part-time because they were in school or training. For men, this was the major reason, making up 42 percent. For women, almost 35 percent cited other family or personal obligations as the major reason for working part-time.

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Housing Update
May: housing permits decrease

The Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 836 new housing units in May 1997, a 1.2% decrease compared to May 1996 when 846 were authorized.

The Department further indicated that the 836 units permitted in May 1997 represent an decrease of 19.3% from the 1,036 units permitted in April 1997, and that the year-to-date permits are up 34% from 2,783 through May 1996, to 3,730 through May 1997.

Reports from municipal officials throughout the state indicate that Fairfield County showed the greatest percentage increase in May compared to the same month a year ago: 44.1%, followed by New Haven County with a 33.7% increase.

New Haven County documented the largest number of new, authorized units in May with 218. Fairfield County followed with 196 units and Hartford County had 160 units. Hamden led all Connecticut communities with 34 units, followed by Danbury with 31, and West Haven with 25.

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Is the Connecticut Recovery the Little Engine That Could?

The Connecticut coincident employment index, a barometer of current employment activity, continues its lengthy climb, reaching a new peak in the current expansion with the release of (preliminary) April data. The growth of the coincident index (see chart) slowed from the more rapid growth seen in the first part of 1997, increasing by 3.7 percent in the first four months (or just over 11.6 percent on an annual basis).

Connecticut's leading employment index, a barometer of future employment activity, continued its recent pattern. The leading index has still not moved in the same direction, either up or down, for more than two consecutive months since December 1994. It did, however, reach its peak in the current expansion in March 1997.

The movement in the coincident index since April 1996 reflects a more-buoyant employment market. Over the last 12 months, the coincident index expanded by 6.4 percent. Nonfarm employment rose by 23,000, or 1.5 percent, while total employment rose by 30,900, or 1.9 percent. In addition, the insured unemployment rate fell from 3.02 percent to 2.41 percent, or a 20.2 percent decrease. Finally, the total unemployment rate fell from 5.7 percent to 5.2 percent, or an 8.8 percent decrease. All in all, the coincident index remains on an upward path.

The movement in the leading index presents a mixed picture. Over the last 12 months, the leading index grew by only 1 percent. Seasonally-adjusted housing permits were up from 721 to 930, or 29.0 percent. The short-duration unemployment rate fell from 1.62 to 1.47 percent, or a 9.3 percent decrease. And the Hartford help-wanted advertising increased from 34 to 36, or 5.9 percent. Conversely, initial claims for unemployment insurance rose from 18,639 to 19,302, or 3.6 percent, while the average workweek for manufacturing production workers fell slightly from 42.6 to 42.5 hours, or 0.2 percent. Even though the leading index continues to bounce around, the overall trend is still up.

In summary, the coincident employment index rose from 83.9 in April 1996 to 89.3 in April 1997. All four index components continue to point in a positive direction on a year-over-year basis with higher nonfarm employment, higher total employment, a lower insured unemployment rate, and a lower total unemployment rate.

The leading employment index rose from 88.4 in April 1996 to 89.3 in April 1997. Three index components sent positive signals on a year-over-year basis with a lower short-duration (less than 15 weeks) unemployment rate, higher total housing permits, and higher Hartford help-wanted advertising. Two components sent negative signals with higher initial claims for unemployment insurance and a shorter average work week of manufacturing production workers.

Source: Connecticut Center for Economic Analysis, University of Connecticut. Developed by Pami Dua [(203) 461-6644, Stamford Campus (on leave)] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Kathryn E. Parr [(860) 486-3022, Storrs Campus] provided research support.

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