Business Starts and Terminations by Industry
By Edward T. Doukas Jr., Research Analyst, DOL

If you are a conscientious reader of the Connecticut Economic Digest, you are aware that within the Economic Indicators section there is a segment labeled Business Starts and Terminations on page 9. You may have wondered where the figures attributed to Department of Labor (DOL) come from and may have even wished to see these figures presented in some industry detail. This article will explain how these figures are derived and will present 2000 data on major industry division and two-digit Standard Industrial Classification (SIC) level.

Where Do They Come From?

New business starts are based on a business establishment's initial date of liability. This is the date a new business establishment becomes subject to Unemployment Insurance (UI) reporting requirements. An initial date of liability is assigned when an employer begins operations for the first time in Connecticut and files an initial status determination form with DOL. This date determines when the establishment actually began operating and paying employees. Business starts reported in the Digest exclude business establishments with a predecessor - the previous owner of a business establishment. When a business has a change in ownership and is assigned a new UI account number, it is also assigned a new initial date of liability. It should be noted that all establishments that register with the DOL do not always open their doors and begin operations, for one reason or another.

Business terminations are based on the end of liability date recorded on the UI tax file. The end of liability date is the date a business ceases operations or no longer has employees or pays wages in Connecticut. Business terminations reported in the Digest exclude business establishments with a successor. A successor is the new owner of an existing business establishment; the establishment will continue operations under new ownership and change in UI account number.

Business starts and terminations also include reporting units of multiple worksite establishments. A multiple worksite establishment is a Connecticut employer that has more than one permanent worksite in the State. Reporting units of multiple worksite establishments that either initially began operations or permanently closed their doors are included in the start or termination counts.

Business Starts

In 2000, there were 9,937 reporting unit starts of which 99.6 percent were in the private sector while the public sector accounted for only 39 new units. As the table on right shows, among industry divisions, services had the largest number of starts with 4,689 or 47.4 percent of the private sector total. Within the services division, business services had the highest total of starts with 1,495. This was the highest total among all industries at the two-digit SIC level. Within business services, computer programming services recorded the most starts with 307, followed by information retrieval services with 243, and computer related services not elsewhere classified with 189 new reporting units. These industries accounted for almost half of all starts in business services.

Retail trade ranked second among industry divisions with 1,282 reporting unit starts. Within retail trade, eating and drinking places finished first with 488 starts, miscellaneous retail was second recording 324 new reporting units, followed by food stores with 152. Wholesale trade came in third among major industry divisions with 1,263 reporting unit starts. Durable goods accounted for 952 of the total while nondurable goods added 311 reporting units.

Business Terminations

A total of 7,491 reporting units closed their doors during 2000. Of this total, 7,441 or 99.3 percent were privately owned; the remaining 50 were public sector units. Among industry divisions, services recorded the largest number of reporting unit terminations, 3,175 or 42.4 percent of the total. Similar to starts, business services led the services division and all two-digit SIC industries with 803 terminations. Within business services, computer related services not elsewhere classified led with 150 reporting unit terminations, followed by computer programming services with 112, and information retrieval services with 68.

The retail trade industry ranked second in 2000 with 1,307 reporting unit terminations. Within retail trade, eating and drinking places had the largest number of unit closings with 433, followed by miscellaneous retail with 347 and food stores with 173. Wholesale trade ranked third with 904 unit closings. Durable goods accounted for 600 of the wholesale industry terminations while nondurable goods made up the remaining 304.

Net Gain/Loss

During 2000 with Connecticut's economy in an expansion mode, business starts out-gained business terminations by 2,446. As the chart on the front page shows, among industry divisions only manufacturing, retail trade, and government registered net losses in business establishments.

Within manufacturing, most two-digit SIC industries experienced net losses or remained the same. In retail trade, five of the eight industries that comprise the division showed greater reporting unit terminations than starts. Among all industries at the two-digit SIC level, insurance carriers had the greatest net loss of reporting units, 29.

On the other side of the ledger, the services division recorded the largest net gain in reporting units, increasing by 1,514. Business services accounted for 692 units, or 45.7 percent of the services division total, while leading all two-digit SIC industries in net gain. Wholesale trade of durable goods had the next highest net gain in reporting units with 352, followed by engineering and management services, 228 units.

What the Data Shows

An industry's starts and terminations should be viewed in the context of the total number of establishments in that industry. Doing this helps show a dynamic of an industry: what degree of turnover in businesses there is.

The manufacturing industry, while on a continuing decline in Connecticut shows much lower turnover than other industries due in part to its higher level of property, plant and equipment investment. Its 201 starts in 2000 represented only 3.4 percent of all establishments in this industry. The construction industry on the other hand, characterized by smaller firms, some who are out-of-state contractors working for a short term on a Connecticut project, had greater turnover, with starts representing 9.3 percent of all establishments and terminations representing 7.6 percent. The still-expanding economy of 2000 is reflected in the high percentage of new to total establishments in the services industries: 11.1 percent, with a smaller percentage of termination to total: 7.5 percent. The technology boom, peaking in 2000, is particularly demonstrated by the starts to total ratio of 17.6 percent in the business services industry, while terminations represented 9.4 percent of total establishments.

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The "X" Economy
By Daniel W. Kennedy, Ph.D., Senior Economist, DOL

Ever since the U.S. economy began to falter in the last half of 2000, there has been discussion about whether or not the economy was in a "V," a "U," or an "L." Those who argued that we were in a "V" contended that the economy would experience a short downturn followed by a healthy recovery. Others saw a longer downturn, before a recovery began. They believed that the decline and eventual rebound of the economy would be U-shaped. There were a few who saw the U.S. economy entering into a secular decline in economic activity best characterized by the letter "L." All that changed on September 11, 2001.

Consumer Confidence

There has been no shortage of comparisons with past disasters - both natural and man-made - in an attempt to determine what lies ahead for the economy. Some studies show that the market was not necessarily down six months after a crisis event. Other studies have broadened the scope to an international perspective. Probably the most important finding to inform us about our current situation was a study referenced by David Leonhardt and Louis Uchitelle in their article in the Sunday New York Times (September 16, 2001), in which the Survey Research Center at the University of Michigan found that the ability of the economy to absorb a disaster depended on consumer confidence.

There is evidence that consumer confidence began to slide before the September eleventh attacks. The Michigan Consumer Sentiment Index, released September 13th and, conducted before the attacks, fell to 83.6, its lowest level since 1993. The Conference Board's Consumer Confidence Index, released on September 25th, dropped to 97.6 in September from a revised 114.0 in August. It was the biggest drop since October 1990, when U.S. troops were being deployed to the Persian Gulf region. The Conference Board said the bulk of the survey was done before September eleventh, and further, that there was only a slight difference between the before and after results.

September Eleventh

Consumers have been the difference in the economy over the last three quarters, and whether or not we were already in recession by September eleventh, consumer confidence will make the difference in the months ahead. The response of the U.S. economy to past disasters offers little guide to what we can expect over the next several months. In the final analysis, there has not been anything like the September eleventh attacks before. It was not a natural disaster - it was an act of war. It was the first time that thousands of American lives were lost in a hostile action on the mainland U.S. since the Civil War. And, unlike Pearl Harbor, the World Trade Center attack was against civilians. It was a direct assault on our economy. This is not to diminish the attack on the Pentagon, which was an attack on our military power, and also resulted in civilians dying. Furthermore, there is no way of knowing how this will play out.

Our response has already been met with threats of reprisals, and the latest developments indicate that some of those threats may have already been carried out. This does not mean that we should not have responded. It just means that we do not know, at this point, what exactly it is that began on September 11, 2001 and what the effects on the economy will be. If, in the face of continued domestic terrorist attacks, coupled with an open-ended widening war, consumer confidence is pummeled, then the economic outlook could be quite grim. On the other hand, if future terrorist attacks are thwarted and the war produces clear victories, confidence should be buoyed. Further, if the Federal Reserve's injection of liquidity into the economy, along with current fiscal stimulus Congress passed and President Bush signed, not to mention other planned fiscal stimuli to the economy, have their intended effect, the economy should recover after the initial shock wears off.

The "X" Economy

It is unclear at this time which scenario best fits the economy's outlook over the next several months. There is really no precedent for the present situation and the economy now faces uncertainty. In a risk situation, there is information about the possible alternative outcomes that may be observed. In an uncertain situation there is no information on the alternative possible outcomes. In algebra, the unknown is indicated by the letter "X." After September eleventh, and probably for the next several months, the best representation of the economy is the letter "X."

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Town/City Profile: Hamden
By Kolie Sun Chang, Senior Research Analyst, DECD

Introduction

Welcome to the town of Hamden, "Land of the Sleeping Giant." The town was originally settled in 1638 as part of the New Haven Colony. In 1786, settlers named the town after the English statesman John Hampden. The population at the time was roughly 1,400. Today, Hamden's land area is about 33 square miles and has a population of 56,913 (2000 Census). The city of New Haven, and the towns of Cheshire, North Haven, Bethany and Woodbridge surround Hamden. The town is governed by a Mayor and Council. In fiscal year 1999, the mill rate was set at 35.06, on a $2.4 billion Grand List.

Population and Demographics

According to the 2000 Census, Hamden's population increased 8.5 percent from 52,434 in 1990. It is now ranked the 14th largest municipality in the State, having grown over the decade at a pace well above the statewide average of 3.6 percent. Hamden is a very diversified municipality whose minority population share more than doubled from 11.1 percent in 1990 to 22.7 percent in 2000. Among ethnic groups, Hispanics showed the largest increase of 129 percent, followed by Asians, 115 percent, and Blacks with a 94 percent increase. Hamden had a median age of 40.3 in 2000, compared to 37.7 for the State. During 1999 and 2000, Hamden issued housing permits for 598 new dwelling units to accommodate its growing population.

Employment and Wages

As the table below shows, services industries employed the most workers of all major industry groups in 2000, with 7,934 jobs, followed by retail trade, with 4,316. These sectors combined accounted for 62 percent of total jobs in Hamden. Manufacturing ranked third, with employment at 1,725. Overall, Hamden registered a 3.1 percent decrease in the number of jobs from 1990. Only services, agriculture and the federal government showed a gain in employment from 1990 to 2000. In the year 2000, wholesale trade and finance, insurance and real estate were the two top paying industries, with wages of $48,031 and $47,640, respectively. Local government compensated their employees with an average annual wage of $45,626.

"Sleeping Giant"

Hamden offers many fine amenities, including access to a large variety of retail businesses. Within a one-mile stretch of Dixwell Avenue, there are several major national chain stores such as Old Navy, Pier 1 Imports, T.J. Maxx & More and Marshalls, which helped to contribute to the $384.7 million in sales generated in 2000. Hamden's close proximity to New Haven and Yale University provides many cultural, educational and entertainment venues. Hamden boasts the "Sleeping Giant" state park, one of the most prominent in the State with its varied hiking trails and four-season beauty. I am happy to call Hamden my "home."

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Industry Cluster
Call for 2002 Inner City 10 Entrepreneurship Award Entries

The fundamental purpose of the Connecticut Inner City 10 awards is to highlight and celebrate ten of the fastest growing, privately owned companies located in inner cities throughout Connecticut. 

In February 2001, the Governor, DECD, and ICIC selected 11 companies as the first recipients of the Connecticut Inner City 10 Awards initiative. Then in April, six of Connecticut's Inner City 10 Award winners went on to rank in the prestigious 2001- ICIC/ Inc. Magazine Inner City 100, a national award which recognizes the fastest growing privately owned companies located in America's inner cities. One of Connecticut's six companies, Rego Realty of Hartford ranked in the top ten nationally – placing ninth out of 100. 

Winners of the Connecticut Inner City 10 will be automatically entered as Connecticut's nominees in ICIC/ Inc. Magazine's Inner City 100 national contest in April 2002.  Entries were due October 26, 2001. 

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Housing Update
September 2001 Housing Permit Activity

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) announced that Connecticut communities authorized 598 new housing units in September 2001, a 20.4 percent decrease compared to September of 2000 when 751 units were authorized.

The Department further indicated that the 598 units permitted in September 2001 represent a decrease of 43.3 percent from the 1,055 units permitted in August 2001. The year-to-date permits are up by 0.3 percent, from 7,074 through September 2000, to 7,092 through September 2001.

Hartford Labor Market Area (LMA) recorded the largest loss of new authorized units (113) or 34.7 percent compared to a year ago. Hamden led all Connecticut communities with 22 units, followed by Southington with 14 and Middletown and Torrington with 12 units each. From a county perspective, comparing year-to-date data, Fairfield and Hartford counties surpassed last year's levels by 10.8 and 12.2 percent respectively. Litchfield and Windham counties are slightly ahead of last year's pace.

Towns and municipalities are required by the Census to report new residential permits on a monthly basis. This data is then compiled and transmitted electronically from the Bureau of Census to DECD.

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