Employment Projections: 1998-2008
By Dana Placzek, Research Analyst

Economists in general are not satisfied with merely describing the economy via indicators; they want to predict, with an eye to directing the economy. Municipal planners likewise use economic predictions to plan various programs. We at the Connecticut Department of Labor are no different. Presented in this article are highlights of the Office of Research's 1998-2008 statewide industry employment projections. Future articles will focus on projections of employment by occupation and for different regions of the State.

Connecticut's employment is predicted to grow by 9.7 percent from 1998 to 2008, from 1.7 to 1.9 million. The labor force, although not up to its 1991 peak, has shown growth in 1999 and 2000. Preliminary data from the Census Bureau show Connecticut's population at 3.4 million, an increase of 3.6 percent from 1990 and significantly more than the July 1998 estimate of 3.3 million. Then there are the very low unemployment rates, below 2.0 percent in recent months. The overall view is of a strong and resilient Connecticut economy, despite the national slowing trend.

Industry Projections

Digging into the construction and mining sector first, we expect growth in both special trades contractors and building construction - general contractors, at 10 percent and 5 percent respectively. Despite making up a mere 3 percent of State employment, this growth in the construction sector is an indication of an overall strong economy. With the completion, or near-completion, of much of the highway and road repairs in the State, a slight decline of 2 percent in heavy construction, excluding building construction, contractors is predicted. However this will be more than offset by the growth in the other construction industries.

Overall employment in the manufacturing sector will experience a mild decline of about 2 percent. However, several industries within this sector are anticipated to show strong growth. Leading this is chemical manufacturing, with growth of 8.5 percent, pushed on by the pharmaceutical companies in the eastern and southwest regions of the State; pharmaceutical and biomedical industry employment (including research and development) is expected to grow by 27 percent. Also projected to grow is electronic and other electrical equipment manufacturing, which includes fiber optics but not computer equipment.

In the transportation and public utilities sector, the largest growth should be in communications, especially radio & television, and telephone. Also expected to show strong growth will be local & interurban transit and trucking and warehousing.

Making up a fifth of Connecticut's total economy is the trade sector, expected to show growth of just under 7 percent. Leading this sector are the retail trades: retail stores, restaurants, and food stores. Also growing at a healthy 14 percent will be building materials and garden supplies, confirming perhaps the trend for people to renovate and add on, rather than buy new. (This is also supported by the growth in special trades contractors.)

Predicted to lead the growth in the finance, insurance & real estate (FIRE) sector is security & commodity brokers, growing by 45 percent. Also increasing by 45 percent will be holding & other investment offices, with Fairfield County noticeably leading the expansion. Both are reflections of the stock market's performance, as well as a caveat that a good part of Connecticut's economy is tied to the stock market's performance. Insurance, long a mainstay of Connecticut, is projected to grow between 7 and 8 percent, just below the State overall average of 9.7 percent growth. Still, insurance carriers and insurance agents will employ about 70,000, or just over half of the FIRE sector.

The State's economy will continue to be driven by the services sector, which accounts for 42 percent of total employment in the State. The top five industries, based on annual openings due to growth, are all in the services sector. Leading this growth, and in top place, is business services, projected to grow a whopping 32 percent. Propelling this growth is an anticipated 62 percent increase in computer & data processing services and 30 percent increase in personnel supply services. Overall, the business services industry is predicted to add almost 33,000 new jobs to Connecticut's economy. As the population of Connecticut ages, health services will continue to grow, adding over 26,000 new jobs and growing at 16 percent, putting health services in the second place spot of Connecticut's largest industries. And with the expansion of tourism and the casinos in Connecticut, amusement & recreation services will continue to grow, at a rate of 17 percent.

For complete details on the 1998-2008 employment projections, visit the Connecticut Department of Labor's Web site at www.ctdol.state.ct.us/lmi, and look for the forthcoming publication titled "Connecticut Forecast 2008: New Decade, New Careers".

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Expansion Continued in 2000
By Jungmin Charles Joo, Associate Research Analyst, DOL

Connecticut's economic expansion continued in the year 2000, with newly released revised data confirming gains in jobs and declines in the jobless rate. Although last year's employment grew at a slower pace than in 1999 and less than the nation grew in 2000 (2.0%), there was a net increase of 24,300 jobs, a solid growth of 1.5 percent. The unemployment rate fell to 2.3 percent last year, which was well below the nation's low 4.0 percent. Also, real personal income of Connecticut residents reached its highest level in the last ten years.

Other economic indicators pointing to a good finish for the year 2000 include: a further decline in the number of initial claims for unemployment, which attained its lowest level since its pre-recession level in 1988; another record high in the number of new automobile registrations processed; and a new high in State tax collections. (See page 5 for a full page of annual Connecticut economic indicators for the past ten years.)

Industries

The construction industry division once again led in the rate of job growth last year, as it did in 1999. The manufacturing industry division, however, continued to shed jobs over the year, notably in the transportation equipment and printing & publishing sectors. Inflation-adjusted average hourly earnings in manufacturing also dropped in 2000 after rising during the past three years. The services industry division, led by the rapidly expanding business services sector, continued to pump the biggest number of jobs into the State economy over the year. The finance, insurance, and real estate (FIRE), transportation and public utilities (TPU), wholesale and retail trade, and government industry divisions all added jobs in 2000 as well.

Labor Market Areas

Seven of the ten labor market areas (LMAs) in Connecticut added jobs in 2000. As the chart above shows, the Danielson labor market area experienced the largest percentage job growth, while New London's employment grew the least. The Torrington, Waterbury, and Bridgeport labor market areas lost jobs over the year. Changes in employment in the major industry divisions of each labor market area are shown in the table below.

2001: An Economic Odyssey

The consensus among experts is that there appears to be a slowdown or recession in the offing for the nation. What's in store for Connecticut? There are some negative indicators, such as two consecutive years of decline in the Hartford help-wanted index and new housing permit activity, and a decrease in the number of major attraction visitors to our State last year, which hint at slower economic growth in 2001.

On the other hand, this year is off to a good start with January jobs showing 1.0 percent growth from a year ago. Overall, as mentioned in the beginning of this article and shown on page 5, there are many more indicators that suggest a continuing economic expansion in the State. Connecticut proved to be resilient last year. We will soon see what the economic odyssey of 2001 brings us.

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Coincident and Leading Employment Indexes Recalibrated for the New Millennium

The Connecticut coincident and leading employment indexes recently celebrated their fifth birthday. Originally appearing in the Connecticut Economic Monitor, they have appeared in The Connecticut Economic Digest since July 1996. The Connecticut Center for Economic Analysis (CCEA) at the University of Connecticut maintains and calculates the indexes. The Connecticut Department of Economic and Community Development, the Connecticut Labor Department, and CCEA contracted with the Economic Cycle Research Institute (ECRI), founded by the late Dr. Geoffrey Moore, the father of coincident and leading indexes, to evaluate and update those two indexes. The following discussion describes how ECRI modified the indexes and unveils the new CCEA-ECRI Connecticut coincident and leading employment indexes.

Drs. Pami Dua and Stephen M. Miller constructed the original Connecticut indexes working with Dr. Moore and his staff and using Department of Commerce procedures. We have always reported the raw (not-trend-adjusted) coincident and leading indexes in our charts and discussions, since a problem existed with the original trend-adjusted series.

ECRI's Director of Research, Anirvan Banerji, conducted the evaluation and modification. The resulting adjustments fall into two categories -- new improved procedures calculate the two indexes and two new data series augment the information in the leading index. The problem with the trend-adjusted series traces to a quirk in the Department of Commerce method. ECRI's new composite index method eliminates that quirk.

Coincident and leading indexes identify turning points in economic cycles. Using one economic series to identify cyclical turning points can produce false signals or fail to signal actual turning points. Both errors are problematic. Thus, coincident and leading indexes include several different series to capture more information on cyclical activity. A turning point requires that the index itself turns along with a clustering of turning points in the index's component parts.

The old trend-adjusted coincident index provides a useful illustration. It reached a trough in June 1996. While total employment also reached a trough in 1996, the other three components reached troughs in 1992. But, the raw (not-trend-adjusted) coincident index reached a trough in February 1992. The Department of Commerce procedure implicitly gave too much weight to the total employment series in its trend adjustment. The new ECRI procedure solves that problem. We now report trend-adjusted indexes. For example, the new trend-adjusted coincident index still dates the trough of the Great Recession as February 1992 (see charts).

Several new series were considered for inclusion in the leading index -- the average workweek for construction workers, Moody's BAA corporate bond yield, the Dun and Bradstreet employee optimism index for New England, Dun and Bradstreet business starts in Connecticut, and the Hartford help-wanted advertising index divided by the number of unemployed. The average workweek for construction workers and the Moody's BAA corporate bond yield provide useful information and are added to the leading index. We splice the average workweek for construction workers, which begins in 1982, to the average workweek for manufacturing production workers. The Dun and Bradstreet employee optimism index in New England and the Hartford help-wanted advertising index divided by the number of unemployed do not exhibit leads over the coincident index. The Dun and Bradstreet business starts in Connecticut only become available in 1996 and possess too much noise.

The Moody's BAA corporate bond yield acts as a long leading component to the coincident index with a median lead of 14 months over the employment cycle. Total housing permits also acts as a long leading index with a median lead of 14 months. The remaining components in the leading index -- average workweek of manufacturing production and construction workers, the Hartford help wanted advertising index, the short-duration unemployment rate, and the initial claims for unemployment insurance -- have shorter median leads of 6 months, 2.5 months, 9 months, and 6 months, respectively.

In sum, the newly recalibrated Connecticut leading employment index possesses a median lead of 10 months over the employment cycle, as measured by the Connecticut coincident employment index, while the old index possessed a median lead of 6 months.

The CCEA-ECRI Connecticut coincident and leading employment indexes (new series) both reached their all-time peaks with the release of (preliminary) December data, with the coincident index matching its level in November. Federal Reserve Board Chairman Greenspan suggests that the national economy's expansion has stopped in its tracks, at least temporarily. If correct, then we should see some slowing of the coincident index, because the national economy strongly influences the Connecticut economy. Consistent with that event, the leading index generally marked time during 2000, even though it rose to its all-time peak in November and December.

The coincident employment index (new series) rose from 110.1 in December 1999 to 112.8 in December 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 (new series) rose from 113.4 in December 1999 to 114.2 in December 2000. Three index components sent negative signals on a year-over-year basis with lower Hartford help wanted advertising, lower total housing permits, and a lower average workweek of manufacturing production and construction workers. The other three components sent positive signals on a year-over-year basis with a lower short-duration (less than 15 weeks) unemployment rate, lower initial claims for unemployment insurance, and a lower Moody's BAA corporate bond yield.

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Industry Clusters
Maritime Launched

On January 31, Lieutenant Governor M. Jodi Rell announced the official launch of the State's newest industry cluster. The Connecticut Maritime Coalition (CMC) represents the organizational center for the Maritime Cluster which includes five components -- transportation, manufacturing and services, commercial fishing, recreation, and environment. CMC is currently made up  of 21 member businesses. It is estimated the maritime industry in Connecticut employs more than 12,000 and generates revenues in excess of $2.6 billion annually. 

The cluster is already at work on workforce development, transportation strategy, dredged material management and commercial fishing advocacy, and plans to initiate activities to strengthen Connecticut's cluster within the worldwide maritime market. Connecticut's industry cluster initiative, under the direction of the Connecticut Department of Economic and Community Development (DECD), centers on the idea that nurturing the State's key industries improves the competitiveness of companies within these industries. 

The Connecticut Maritime Cluster joins five other already operational clusters -- Aerospace, led by Aero-space Components Manufacturers; Bioscience, overseen by Connecticut United for Research Excellence (CURE); Metal Manufacturing, under the direction of Metal Manufacturing Education & Training Alliance (META); Soft-ware/ Information Technology, managed by the eBizCT partnership of the Connecticut Technology Council; and Tourism, run by the DECD Tourism Office. 

More information about the CMC and the maritime cluster can be found at www.ctmaritime.com. 

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Housing Update
January 2001 Housing Permit Activity

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development today announced that Connecticut communities authorized 849 new housing units in January 2001, a 5.7 percent increase compared to January of 2000 when 803 units were authorized.

The Department further indicated that the 849 units permitted in January 2001 represent a significant increase of 42 percent from the 598 units permitted in December 2000.

Stamford Labor Market Area documented the largest number of new authorized units in January with 364. Hartford Labor Market Area followed with 220 units. Six out of ten labor market areas demonstrated increase in new housing authorization compared to a year ago. Hartford labor market area showed the 35 units of gain, followed by Stamford labor market area with 24 units. Stamford led all Connecticut communities with 341 units, followed by Southington with 24 and Danbury with 21.

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