Growth Momentum
By Jungmin Charles Joo, Associate Research Analyst, DOL

What are the high employment growth industries in Connecticut? Of those industries, which have also experienced high growth in total wages? To answer these questions and to possibly help identify the most important new emerging industries in the State, we used an employment and wage growth analysis called "Growth Momentum." The growth momentum analysis of Connecticut's data in this article is based on a study done by the Indiana Business Research Center and the Indiana Department of Workforce Development, published in IN Context (May and June 2001). For this article, first quarter 1995 and first quarter 2000 Unemployment Insurance (UI) covered employment and wage data for 620 industries, at the four-digit Standard Industrial Classification (SIC) level, were analyzed.

Measuring Growth Momentum

Two common measures of employment growth are numerical change in employment and percent change in employment. Numerical change in employment tends to overlook significant growth in smaller industries, while percent change can overemphasize very rapid growth in extremely small industries. For example, employment in the fastest growing segment of the transportation services sector, packing and crating, rose by nearly 400 percent between 1995 and 2000, while statewide growth overall was just under nine percent. However, the rapid growth in packing and crating employment amounted to fewer than 200 jobs, a very small figure considering that there were a total of 1.4 million private industry jobs in 2000. On the other end of the scale there are large sectors whose employment grew, but not as rapidly as the average State growth. If the growth rate of a large sector was below the State average, then it will show a decline in its share of the State's employment. In the last five years, the State's largest sector, eating and drinking places, added nearly 6,000 more jobs, ranking as the State's fourth largest in numeric growth. However, the sector's 7.9 percent growth rate was below the State average of 8.7 percent, resulting in a decline in share.

Borrowing from the science of physics, growth momentum incorporates both numeric growth and the percent growth in one measure. In physics, the momentum of an object is calculated as the mass of the object times its velocity. A fast-moving small object and a larger but more slowly moving object might have the same momentum. If two objects have the same mass, then the one that is moving faster will have the greater momentum. Similarly, if two objects are moving at the same speed, the object with more mass will have the greater momentum.

To compute a measure of employment growth momentum, we multiplied the change in employment for an industry (similar to mass) by the growth rate for that industry (similar to velocity). The result quantifies employment growth in industry sectors, using both numeric growth amounts and growth rates.

High Employment Growth Industries

The table on the front page shows the 20 industries with highest employment growth momentum, whose employment growth rates were above the State average. The highest employment growth momentum occurred in the pension, health, and welfare funds industry of finance sector. In just five years, this small industry's employment swelled from 400 to over 5,000, a whopping 1,200 percent increase! In fact, four out of the 20 top employment growth momentum industries in Connecticut were from the finance and insurance sector. Explosive growth also occurred in the computer-related services industries, which had six of the top 20 industries and whose growth rates ranged from 58 to 375 percent over the five years. Amidst the declining manufacturing sector in the State, the small household audio and video equipment industry, which had only 298 workers on the payroll in 1995, garnered 740 more jobs by 2000, increasing by 248 percent. Among the big industries, help supply services, amusement & recreation services, and doctors’ offices also experienced the largest number of job gains and growth rates.

High Wage Growth Industries

When the growth momentum calculation was applied to total industry wages, the catalog and mail-order houses industry in the retail trade sector topped the list. Finance's pension, health, and welfare funds, though small in its amount of the total wages, showed a huge 2,036 percent increase since 1995, making it the second highest in wage growth momentum.

High Employment and Wage Growth Industries

Combining the top 20 employment and wage growth momentum industries reveals that 15 experienced high growth momentum in both employment and total wages (those in bold type). Most notable from this list is the pension, health, and welfare funds industry, whose employment and total wages jumped 1,205 and 2,036 percent, respectively, in the last five years, indicating that this industry has offered ample, well-paying employment opportunities.

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Running Towards a Healthy Economy
By Joseph Slepski, Research Analyst, DOL

Every Saturday and Sunday for most of the year, at least one city or town in the State of Connecticut plays host to the most simple of all events: a road running race. From the Litchfield hills to the back roads of Fairfield county, from the shoreline to the capital city, from the rural towns of northeast Connecticut to the green of the Elm City, runners and walkers lace up their shoes and pound the pavement. Some people do it for the competition, some for charity, some for physical fitness and some for a personal challenge, but the end result is the same: more and more people are taking part in weekend road races. While this seems like a nice human interest story, the truth is that road races serve to pump up the blood of the local economy. Whether it is a runner or walker, family member or spectator, these people are spending money in relation to these events.

Race and Economy

A local five-kilometer race will attract between 100-200 competitors, and the popular five-mile Thanksgiving Day Manchester road race draws 12,000 runners. These participants will spend anywhere between ten and twenty dollars to enter the race. This entry fee will benefit specified non-profit causes. Education, charitable institutions and community-based activities are the most common designees of the entry fees. Local merchants also benefit. Tee shirt and trophy companies are just two types of businesses that will benefit from a local road race. Local restaurants and gasoline stations also benefit because the majority of walkers and runners are from out of town. To be sure, the community hosting this race must sacrifice by closing local roads and having a police presence. What the community gets back, however, far outweighs what is given out. While the five kilometer race is easily the most popular, the race that generates the most business is the 26.2 mile marathon. Even though most of the attention is focused on marathons that take place in Boston, New York and Chicago, the State of Connecticut plays host to at least two annual races, the Greater Hartford Marathon and the Mystic Places (formerly called the East Lyme) Marathon.

The Greater Hartford Marathon

Since 1994, the second Saturday in October has been the date for the Greater Hartford Marathon. The marathon goes through the towns of Hartford, East Hartford and South Windsor. There is also a 13.1 mile half-marathon race, along with a five-kilometer run. Children can participate in a one-kilometer walk/run. Last year, over 5,000 runners and walkers entered these events. Representing forty-five different states, almost sixty percent of the participants were from outside of Connecticut. In addition to the runners, 25,000 spectators lined the streets to witness the events. Marathon officials estimate that more than two million dollars was poured into the local economy that weekend. With such a large proportion of out of state participants, local hotels were booked to near capacity levels. Restaurants reported doing brisk business. Car rental firms had to scurry to keep up with the demand for vehicles. Local retail establishments rang up rising sales as visitors shopped for snacks, clothing articles, souvenir memorabilia, sunblocks and camera film. Movie theaters also did a brisk business. After the race was completed, local restaurants were flooded with hungry racers and spectators alike.

Run Connecticut Run

While two million dollars in revenue came into Hartford that October weekend, the State, area and city received something else that cannot be measured in dollars and cents. The exposure received was immeasurable. People come from out of state to watch or participate and they make an event out of it. This one weekend in October has become a reunion for people who have not seen one another for an entire year. This is evidenced by the fact that since 1994, when the first race was held, the number of runners, spectators and dollars spent have increased every year. National companies come to Hartford to advertise their products and services, and various local charities have reaped the benefits by collecting a higher portion of race revenue.

The success of the Hartford event has prompted the former East Lyme Marathon to become the Mystic Places Marathon. Local businesses are jumping on this as a vehicle of increasing tourism in the southeastern part of the State. The numbers of runners competing is expected to rise from 300 to approximately 5,000. While road races are fun, it is obvious that in addition to promoting physical fitness they also do their small part to promote a healthy economy.

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Town/City Profile: Willington
By Noreen Passardi, Economist, DOL

Introduction

The town of Willington is snuggled within the northeast woodlands and is sprawled over 33 square miles of gently sloping terrain. It is located about 60 miles from Boston, 25 from Hartford, and the northern section abuts Interstate 84 at Exits 69 through 71. As every rural New England town, it has its own history, charm and scenic beauty. But only recently have the long time residents been able to joke that they no longer have to go out of town to buy a pound of hamburger.

Economy

Established in 1727, Willington was a quiet agricultural town until the Industrial Revolution. At the time, the Willimantic River became recognized as an important asset and woolen textile mills were built along the banks. The town's first large industry, a glass factory, commenced operation in 1811. With the advent of electric power, the mills eventually became obsolete and land again became predominantly used for agriculture. The past couple of decades have changed that trend again as land has been opened up to residential and commercial development. By 2000, Willington had left behind its agricultural heritage and retail trade was the dominant industry.

Land allocated to residential development lead to the issuance of 179 new housing permits over the 1990 to 2000 decade. Data from the 1990 and 2000 U.S. Censuses further indicates the number of households rose from 2,193 to 2,353. In contrast, the town's population, which reached 6,131 in 1998, ironically fell to less than its 1990 level by the year 2000. The labor force also declined by 344 people over the decade. While out-migration influences both latter statistics, the age distribution of the population influences the size of the labor force. Between 1990 and 2000, the number of residents in the 55 years and older bracket increased from 12.1 to 15.6 percent, evidence that an increasing number of residents may be retired. Nevertheless, the median age of residents was 33 years in both decennial censuses.

Expansion of the commercial land base over the past decade added 136 jobs to this small rural town, a 21 percent increase. Willington employment was at 784 in 2000. Retail trade, which was equal with local government in number of jobs in 1990, took the lead with the addition of 105 jobs. The opening of a truck stop in 1996 off Interstate 84 at Exit 71 brought a Burger King, Dunkin' Donuts, restaurant, gift shop and Days Inn hotel. Recent development near the center of town added a grouping of antique shops. A nearby mini-shopping center provides a grocery store, bank, dry cleaner, video store, liquor store, women's health center, pizza restaurant, and a corner niche with several physicians' offices. Similar to trends in the State and nation, jobs in the services sector increased and jobs in manufacturing decreased over the decade. Some services provided by self-employed residents include cabinet making, locksmithing, dog/cat grooming and boarding, and furniture restoration.

As the table below shows, average annual wages to employees working in town reached $28,344 by 2000, an increase of 35 percent over the decade. The largest wage increases were in the services sector followed by manufacturing, 63.1 and 61.5 percent, respectively. Retail sales increased by more than four times its 1990 level, totaling $49.1 million in 2000.

Outlook

Town officials have been dedicated to keeping the old firms in town while also keeping an eye out for new businesses. As a result, a nice mix of industries comprises the town's business sector. Employment is expected to remain steady in the short term, but opportunities exist for further economic growth. Prime commercial land is available to businesses needing access to Interstate 84 and a strategic location relative to major cities and airports. Residential land or housing awaits prospective residents who want affordable prices, a good education for children, and country living. And for both residents and businesses, the town now has hamburger!

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Ask the Digest: What are Business Cycles?
By Daniel W. Kennedy, Ph.D., Senior Economist, DOL

Business cycles are the recurring rises and falls in overall economic activity as reflected in production, employment, profits, prices, wages, and other macroeconomic series. Business cycles are recurring, but nonperiodic, and one cycle must be more than a year, otherwise, it would be considered a seasonal cycle. Business cycles reflect the inability of the marketplace to accommodate smoothly such factors as new technologies, changing needs for occupational skills, shifting markets for new and substitute products, and risks in business investments. Business cycles can also reflect shortages and high prices created by external shocks such as war, cutbacks in oil production by the Organization of Petroleum Exporting Countries (OPEC), bad harvests, and natural disasters.

Actually, cycles exist throughout many aspects of business activity. Some cycles are of short duration such as the two-to-four-year inventory cycle. Others can last for decades, such as those tied to demographics and technology waves. The specific nature of the activity determines the duration of the cycle. Many of the separate activities that drive the various cycles interact and cause or affect macroeconomic cycles of the three-to-four-year variety. Though no two cycles are exactly alike, these three-to-four-year (or longer) cycles display similar tendencies in the aggregate, and it is these cycles that are referred to as business cycles. Thus, the business cycle is a consensus of cycles in many specific activities that have a tendency to peak and trough around the same time.

The graph provides a stylized presentation of the business cycle. Six phases of the business cycle are illustrated: Peak, Recession, Contraction, Trough, Recovery, and Expansion. One complete cycle can be measured from Peak-to-Peak or Trough-to-Trough. The vertical axis in the graph measures Gross Domestic Product (GDP), and the horizontal axis measures Time, which is interpreted as quarters. Beginning with the peak, the six phases of the business cycle unfold as follows.

The Peak is the high point of continuous expansion just before the downturn in economic activity. This is followed by a Recession, the immediate downturn in economic activity after the peak in the business cycle, and represents the downward region of the cycle from the peak to the trough. If overall activity falls below the lowest level (i.e., trough) of the previous recession (lower horizontal dotted line on the graph), then this more severe decline may be referred to as Contraction. The only time this has occurred in the post-World-War II era was the 1981-82 recession when economic activity fell below the trough of the 1980 recession. As would be expected, the U.S. economy experienced contraction at the beginning of the Great Depression.

The Trough is the lowest point of the recession phase of the business cycle just before economic activity turns upward. Once economic activity turns upward, the economy is then in Recovery. This phase of the business cycle immediately follows the trough, and is characterized by the continuous expansion of economic activity. The economy is in Expansion when overall activity in the recovery phase exceeds the peak of the previous business cycle (upper horizontal dotted line).

Sometimes during the upward phase of the business cycle, the expanding economy may not be increasing production fast enough to absorb those entering the labor market, and may even result in some of those already employed being laid off. That is, overall production and unemployment rates are both rising. This situation is known as a growth recession. If the opposite occurs, that is, if the economy expands beyond the long- run sustainable growth rate for a significant period of time, then this period may be characterized as a boom. Booms are usually followed by a recession.

So how do we know when we are in a recession? There may be obvious signs that the economy is in a recession, such as slack business activity and a rising unemployment rate. We may be affected personally, by having our workweeks reduced or even by losing our jobs. But there is also a set of observable measurements of a recession. These measurements provide the criteria for clearly defining dates for the peak and the trough. By common agreement in the economics profession, a private, nonprofit organization, the National Bureau of Economic Research (NBER), officially designates national recessions. While various numerical tests are applied to the indicators to assess their direction, ultimately the decision is based on the judgment of the NBER committee. For example, a recession is generally defined as occurring when quarterly Real GDP declines two quarters in a row. However, this is not a fixed rule, and the NBER considers a variety of monthly and quarterly data before making a designation.

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Please e-mail your questions to dol.econdigest@po.state.ct.us. Thank you!

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Industry Clusters
Legislature, Governor Advance Cluster Initiatives

During the 2001 legislative session, acting on recommendations put forth by the Governor's Council on Economic Competitiveness and Technology, the General Assembly and Governor enacted measures and provided funding to expand Connecticut's industry clusters. This support will enable Connecticut to add $20 million over the next two years to the Bioscience Facilities Fund which finances laboratory space, create a Bioscience Office within DECD, and establish a Bioscience Ambassador position to advise the DECD Commissioner. Funding is also provided to market the State as a bioscience and information technology (IT)/e-business "hot spot."

Separately, a 15-member Connecticut Transportation Strategy Board was established and $30 million set aside for priority transportation projects. Simultaneously a seven-member board of directors for Bradley International Airport was, in partnership with the Department of Transportation, strategic to develop goals, approve a master plan and budgets, and identify development opportunities to fully leverage Bradley's potential.

Elsewhere, a "Digital Compact" of IT companies and policy organizations will oversee implementation of IT initiatives supported by a "Digital Strategic Fund." Pilot programs will also be supported offering intern-ships, co-ops, and the development of skill standards and IT assessment exams. Finally, the DECD's Connecticut Film, Video and Media Office will receive $400,000 in this and future fiscal years to attract filmmakers and production companies.

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Housing Update
July 2001 Housing Permit Activity

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) announced that Connecticut communities authorized 910 new housing units in July 2001, a 1.3 percent increase compared to July of 2000 when 898 units were authorized.

The Department further indicated that the 910 units permitted in July 2001 represent an increase of 14.8 percent from the 793 units permitted in June 2001. The year-to-date permits are down by 1.9 percent, from 5,546 through July 2000, to 5,439 through July 2001.

Hartford Labor Market Area (LMA) recorded the largest gain of new authorized units (88) compared to a year ago. Danbury Labor Market Area experienced the largest percentage increase (77.4) from 62 units in July 2000 to 110 units in July 2001. Danbury led all Connecticut communities with 38 units, followed by West Hartford with 36 and Glastonbury with 29. From a county perspective, Hartford County demonstrated the largest gain (85 units) and highest percentage gain (55.2 percent) of new authorized units from a year ago.

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