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In November of 2001, the National Bureau of Economic Research (NBER) issued a
statement that designated March 2001 as the beginning of the nation's current
recession. This marked the end of an expansion that lasted exactly ten years:
March 1991 to March 2001, the longest expansion in the NBER's chronology. In
calling a recession, the NBER considers several different criteria. The popular
notion of the rule of two quarters of declining Gross Domestic Product (GDP) is
not one of them. The most important, but not the only, indicators considered
by NBER in declaring a recession, or a recovery, are nonfarm employment, real
personal income minus transfer payments, and two indicators with coverage of
manufacturing and goods: the volume of sales in the manufacturing and trade
sectors, adjusted for price changes, and industrial production.
Though national recessions are defined and dated by the NBER, there are no
corresponding organizations that provide official designations of turning points
at the state and regional levels. However, there has been a customary practice
of using turning points in nonfarm employment to designate turning points in
state and regional economies. As discussed above, the NBER considers nonfarm
employment to be one of the most important indicators of the economy's
performance at the national level. Thus, using Connecticut nonfarm employment
as the reference-series to designate turning points in Connecticut's economic
activity is a reasonable method for defining Connecticut's recessions and
expansions.
Turning Points and Durations
The following sketch of Connecticut's economic history covers a period that
begins with the Great Depression and the year that Hitler invaded Poland, and
ends with the bursting of the Dot.Com bubble and the worst foreign terrorist
attack on the continental United States. Over this period, the Connecticut
economy, as well as the U.S. economy, has gone through many incarnations.
Throughout the entire period, there were two recurring, but non-periodic,
phenomena: recessions and expansions. The business cycle existed
at the beginning of the period, and, contrary to the opinion of those who
prematurely announced its demise, it is quite clear that it still exists today.
Table 1 presents the eleven recessions, based on monthly data (annual data
define nine recessions), and the ten expansions that make up the nine complete
cycles, measured trough-to-trough, and ten complete cycles measured
peak-to-peak, from January 1939 to March 2002 for Connecticut. The first two
columns of Table 1 present the dates of turning points in Connecticut's
business cycles, based on the nonfarm employment series (referred to as employment
hereafter). The first column shows the trough. The trough is the
point where a period of contraction in economic activity comes to an end (in
this case, a decline in employment), and a period of expansion begins. It is
presented as the month and year that marks the end of the decline, and the
beginning of the upturn. The second column shows the date of the peak. The peak
is the point at which an expansion in economic activity (in this case,
an expansion in employment) comes to an end, and a period of contraction
follows. It is presented as the month and year that marks the end of the
expansion, and the beginning of the contraction. The third and fourth columns
depict the duration (i.e., length) of the contraction
(measured peak-to-trough), and expansion (measured trough-to-peak)
in months. The last two columns show the cycle length. One
complete cycle is measured either from trough-to-trough, or peak-to-peak.
Because the data begin in 1939, and the beginning of the first expansion of
the analysis period occurred in 1938, only the peak of that expansion is
available in Table 1. Thus, the first turning point occurred in January 1943,
and the last turning point, also a peak, occurred in July 2000, signaling the
beginning of Connecticut's current recession. The average recession over the
sixty-three year period lasted 18.6 months and the average expansion continued
for 50.4 months. Thus, the average expansion lasted 2.7 times longer than the
average recession.
The last row in Table 1 presents the coefficient of variation (CV).
This is simply the ratio of the standard deviation (shown in the second-to-last
row), to the mean multiplied by 100. It gives a standard, dimensionless measure
of variation, providing a meaningful comparison of the variation across means of
different scales. Based on the CV, the variation in the length of Connecticut's
expansions is about the same as the variation in the length of its contractions.
As evidence of how difficult it is to predict the beginning and end of economic
contractions and expansions, the CV indicates that any given expansion or
contraction can vary by 66 percent from their average length.
The July 1960-February 1970 expansion was the longest for Connecticut over
the 1939-2002 period. It continued for 115 months, just under ten years. The
last expansion (December 1992-July 2000) was the second longest at 91 months.
The shortest expansion was the August 1980-September 1981 expansion, which
lasted a brief 13 months.
Connecticut's longest recession over the 63-year span is the February
1989-December 1992 recession, sometimes referred to as the Great Recession, lasting
for 46 months. The second longest, and the only other recession to exceed the
length of the average recession (18.6 months), was the January 1943-October 1945
recession, with a duration of 33 months. There are two recessions tied for the
title of Connecticut's shortest recessions: February-July 1960 and
March-August 1980.
Connecticut's longest complete cycle, measured trough-to-trough, was 133
months, from July 1960 to August 1971. The shortest trough-to-trough cycle was
the 24 months between July 1958 and July 1960. The longest cycle, measured
peak-to-peak was that of the last complete cycle of the period. The February
1989-July 2000 cycle was 137 months long. The shortest peak-to-peak cycle, was
the 18-month March 1980-September 1981 cycle.
Job Creation and Destruction
In Table 2 below, the third and fourth columns present the number of jobs
created during expansions and the number of jobs destroyed during recessions
over Connecticut business cycles. The last two columns show the percent creation
and destruction of jobs over the business cycles.
In assessing the number of jobs lost or created over the business cycle, the
percent of jobs added or subtracted should also be taken into account. Each
recession and expansion is coming off a different base. For example, the trough
signaling the beginning of the first recovery of the analysis period is October
1945. That expansion began off a base employment level of 635,500. On the other
hand, the last expansion, beginning in December 1992, started with a base
employment level of 1,518,900.
Connecticut's average recession over the 63-year analysis period destroyed
66,370 jobs, which represented a 6.4 percent contraction in employment. On
average, a Connecticut recession destroyed 3,568 jobs per month over 18.6
months. The average expansion added 155,163 jobs to the Connecticut economy.
That is an average increase of 15.6 percent. The average expansion created jobs
at a rate of 3,079 jobs per month over 50.4 months. Thus, for every job lost in
the average recession, the average expansion added back 2.3 jobs. Based on the
CV values in Table 2, there was more variation, in both absolute and percent job
losses, during Connecticut's recessions than there was in job gains over
Connecticut's expansions.
In addition to being Connecticut's longest expansion at 115 months, the
July 1960-February 1970 expansion ranked first in the total number of jobs
created and the percent increase in total jobs over the period studied. It added
303,624 jobs over its long life. That represents a 33.5 percent addition to
employment from trough to peak. The strongest expansion was that of October 1945
to March 1948. That expansion created jobs at a rate of 5,005 per month for the
29 months of its life.
The shortest expansion, at 13 months, was also the weakest expansion in terms
of total job-creation. The August 1980-September 1981 created 25,973 jobs. It
was also the smallest percent increase at 1.8 percent, and it was the most
anemic in its rate of job creation at a rate of 1,998 jobs per month.
Connecticut's deepest recession was the January 1943-October 1945
recession which destroyed 174,201 jobs over a 33 month period, resulting in the
largest percent decline in jobs at 21.5 percent. It was also Connecticut's
most severe recession, shedding jobs at a rate of 5,279 per month. The Great
Recession ranked second in total jobs lost, at 158,619, as well as being the
longest Connecticut recession at 46 months.
The shallowest recession, in terms of total job loss, was the
February-July 1960 recession, in which 11,508 jobs were lost. It also
represented the smallest percent decline at 1.3 percent. The September
1981-February 1983 recession was the mildest, shedding jobs at a rate of 1,229
jobs per month. For a highlighted summary, see Table 3 below.
The Current Recession
In July 2000, Connecticut's employment began declining, signaling a
turning point in Connecticut's economic activity. Based on current data,
subject to revision, employment has declined 1.7 percent, or by 28,500 jobs,
over the last 20 months (July 2000 to March 2002). Thus, Connecticut led the
nation in going into the current recession. The U.S. turning point has been
identified as March 2001 by NBER. Compared with the average Connecticut
recession (see Table 1), this one seems to be relatively tame - so far. It
should be kept in mind that this recession is still unfolding, so these
observations are tentative. The total job decline, at this point, ranks this
recession as the one with the second lowest job loss. The 1.7 percent decline in
employment, up to this point, is the smallest of any recession over the last 63
years. Although, at 20 months old, it has already exceeded the duration of 18.6
months for the average recession, it has also been mild up to this point. So
far, the Connecticut economy has been shedding jobs at a rate of 1,425 jobs per
month, less than half of the 3,568 jobs-per-month rate for the average
recession.
With Connecticut's current recession beginning with the July 2000 turning
point, a 91-month expansion, which began in December 1992, came to an end.
Though this was Connecticut's second longest expansion, it was the nation's
longest expansion. As expansions go, it was not all that impressive. From
December 1992 to July 2000, Connecticut's employment grew by 178,735, or by
11.8 percent. Though it surpassed the 155,163 jobs created by the average
expansion, the percent increase in employment fell below that for the average
Connecticut expansion (15.6 percent). Further, in terms of the rate of job
creation, it added jobs at an anemic pace of 1,964 jobs per month. This was far
below the 3,079 jobs per month created during the average Connecticut expansion.
See Table 4 below for comparisons of selected periods.
At the time of writing, there are signs that the U.S. and Connecticut
economies may have turned around. Nevertheless, the question still remains: At
the beginning of 2002, was there a turning point marking the end of the
recession? The second half of 2002 will be a critical period. It will reveal
whether or not what appears to be a recovery is, in fact, a recovery, or whether
we are in for a double-dip recession.
Whatever the outcome, it is clear that the business cycle is not going away
anytime soon. Thus, if, in fact, a trough did occur in the beginning of 2002,
and if the history of the last 63 years of the Connecticut economy is any guide,
then a peak will follow that trough. And another trough will follow that peak,
and so on and so on.
Introduction
Often associated with the words "precision" and "high
technology," the instruments and related products manufacturing industry
(SIC 38) is composed of a wide variety of products and applications, ranging
from search and navigation equipment, measuring and controlling devices, and
surgical/medical apparatus to photographic equipment, watches and clocks. It is
undoubtedly a contributor to Connecticut's High Technology Cluster and a
factor in Connecticut's overall productivity and high-wage employment. The
industry is an integral part of Connecticut's highly regarded manufacturing
sector.
Employment and Establishments
In 2000, employment in the instruments industry averaged 19,504, lower than
it was at the start of the decade, 26,913, and when it peaked in 1992 at 27,532,
but considerable enough to make major contributions to the State's economy
(chart). Establishments also edged down slightly from a 1995 peak of 320 to 295
in 2000. Thus, the number of establishments remains just above the 1990 level of
293. The modest level of employment and establishments somewhat belie the more
impressive output and wage growth in this industry. Perhaps not surprisingly,
the employment concentration in the industry is highest in the Danbury and
Stamford Labor Market Areas.
Among some of the largest in terms of employment are U.S. Surgical in Norwalk
and North Haven, Gerber Scientific headquartered in South Windsor, Timex based
in Middlebury, Purdue Pharma, LP in Stamford, Zygo Corporation headquartered in
Middlefield, and TRC Companies, Inc. in Windsor. Most of these companies also
rank in Connecticut's "Top 100" in terms of revenue. Some of
Connecticut's firms have been primary recipients of defense contracts, while
others have made strides in ranking the State as a major producer of medical
devices.
According to the U.S. Commerce Department's Bureau of Economic Analysis
(BEA), the employment and earnings multipliers are 2.50 and 1.97, respectively.
This means that there are 1.5 additional or indirect jobs for every job in this
industry, and 97 cents in earnings elsewhere in the economy from direct earnings
in this industry. As with most other manufacturing industries, these multipliers
are higher than for those of most service industries.
Wages and Gross State Product
Average annual wages in instruments manufacturing in Connecticut were $64,594
in 2000. This was below its 1999 peak of $69,680, but still 40 percent above the
private industry statewide average of $46,027. Wages grew rather steadily and
nearly 70 percent overall during the period from 1990 to 2000 (chart).
Gross State Product, the total dollar value of all final goods and services
produced in the State and a key measure of overall economic health, was
comprised of $2.1 billion in output from the instruments and related products
industry in 1999, the latest year for which BEA data are available. A
traditional measure of productivity, namely gross product per employee, came in
at $101,965 for the industry, 12 percent above the average statewide
productivity estimate. In fact, productivity in this industry nearly doubled
over the decade.
Outlook
Instruments and related products commodities ranked as Connecticut's third
largest source of merchandise exports in 2001, at nearly $770 million in value,
and about nine percent of all State exports. These are encouraging statistics
for an industry competing in an increasingly global world market. The
Connecticut Department of Labor's projections show the continued decline in
employment in this industry, losing 1,344 jobs over the next ten years, or 6.2
percent. Again, smaller employment may not translate into a declining sector
since strong productivity and output gains, as we have already seen throughout
the last decade, have come via improvements in technology and the admirably high
skills of the workforce in this noteworthy Connecticut manufacturing industry.
For Further Information:
Connecticut Department of Labor, employment projections by industry, http://www.ctdol.state.ct.us/lmi/misc/proctind.htm
Bureau of Economic Analysis, gross state product data, http://www.bea.doc.gov/bea/regional/gsp/
The Inner City Business Strategy component of the Industry Cluster Initiative
received national recognition in April when The Initiative for a Competitive
Inner City (ICIC) released the results of its 2002 ICIC-Inc Magazine Inner City
100 list, and Connecticut took top honors. Thirteen Inner City 100 winners are
located in six Connecticut inner cities - a higher representation than any other
state.
Drawn from close to 4,300 nominations from 191 cities, the top 100 companies
had the fastest revenue growth from 1996 to 2000. Average 2000 revenues for the
13 State companies were more than $5 million. Five-year growth rates for
the Connecticut companies ranged from 141 percent to a whopping 2,726
percent (GRT Corporation of Stamford). Just over 700 full-time and part
time employees worked for the Connecticut-based 2002 Inner City 100
winners.
The winners were: GRT Corporation (Stamford), Chanler Lewis, Inc.
(Waterbury), Horizon Staffing Services (East Hartford), Rego Realty
Corporation Hartford), Salamander Designs, Inc. (Hartford), Horizon
Services Corporation (East Hartford), VA Construction Co., LLC (Waterbury),
ArchivesOne, Inc. (Watertown), Q-Tran, Inc. (Bridgeport), Innovative
Display and Design, Inc. (Bridgeport), GimaSport (Hartford), OTR Management,
Inc. (Hartford), and Prime Resources Corporation (Bridgeport).
Commissioner James F. Abromaitis of the Connecticut Department of Economic
and Community Development today announced that Connecticut communities
authorized 1,061 new housing units in April 2002, a 36.2 percent increase
compared to April of 2001 when 779 units were authorized.
The Department further indicated that the 1,061 units permitted in April 2002
represent a 39.2 percent increase from the 762 units permitted in March 2002.
The year-to-date permits are up 5.6 percent, from 2,895 through April 2001, to
3,057 through April 2002.
Stamford Labor Market Area added 165 new housing units, an increase of 115
units compared to a year ago. Stamford led all Connecticut communities with 114
units, followed by Wolcott with 46 and Danbury with 40 units. From a county
perspective, Fairfield County had the largest percentage gain (71.2 percent)
compared to a year ago.
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