Spending on defense procurement has dropped precipitously in the past decade.
The amount spent on procurement contracts is half what it was ten
years ago, and Connecticut is receiving only one third of what it
did then. It is a measure of the success of the state's defense
diversification effort that this is not an ongoing crisis.
The specific numbers are as follows: spending on defense
procurement dropped 43% from 1985 to 1995, from $179 billion in
1985 to $101 billion in 1995 (both in 1992 dollars); Connecticut's
share of those defense procurement dollars dropped 64% over the
same period, from $7.1 billion to $2.5 billion (also in 1992 dollars).
A rough estimate of the employment impact is that a $5 billion
loss in contracts would be expected to cause a loss of 100,000
jobs. Connecticut's economy did in fact lose just about that number
of jobs, suggesting that the recession of the early '90s may have
been in large part due to those cuts.
The distribution of defense dollars within the state has been
changing as well. Defense contracts are concentrated in three
counties: Fairfield, Hartford, and New London.
The level of defense dependency within Connecticut varies greatly.
One way to measure dependency is to examine the ratio of defense
contracts to total personal income earned in a county. Table 1 shows
the ratio of defense contracts to personal income in these two
periods. We see from this that New London is extraordinary in its
defense dependency. The region has made a difficult transition,
reducing its defense dependency by more than 60% in this period.
The towns that have high levels of defense contracts have not
changed as much as the counties, however. Among these towns,
three of those in Fairfield county increased their defense contracts
over this period. Groton, on the other hand, suffered the largest
loss of defense dollars, though it remains the second largest recipient
in the state. East Hartford suffered a loss almost as large,
with less than 15% of its total contract awards the last four
As we reported last year, more than 90% of the defense dollars
coming into the state came to these ten towns. There has been a
slight flattening of the distribution, however, with the remainder of the
towns receiving 11.5% in the later period as opposed to 7.9% in 89-91.
The Connecticut Department of Economic and Community Development announced that
Connecticut communities authorized 684 new housing units in June 1996, a 19.1 percent
decrease compared to May 1996 when 846 were authorized.
The Department further indicated that the 684 units
permitted in June 1996 represent a decrease of 4.5 percent
from the 716 units permitted in June 1995, and that the year-todate
numbers are down 13.8 percent, from 4,037 in 1995 to 3,481 in 1996.
Reports from municipal officials throughout the state
indicated that Windham County showed the greatest percentage
increase in June compared to the previous month: 3.3 percent.
Hartford County reported the greatest percentage decline: 42 percent.
Hartford County documented the largest number of new, authorized
units in June with 151. New Haven County followed with 141
units and Fairfield County had 123 units. Griswold led all Connecticut
communities with 32 units, followed by Wolcott with 20 and
Rocky Hill and Guilford, each with 17.
The permit activity figure for June included the following statewide
amounts by structure type: detached single-family units, 619; attached single-family units, 20;
two unit structures, 4; three and four-unit structures, 13; structures
containing five or more units, 28.
Year-to-date totals indicate that Hartford County has issued
the most building permits through the first half of 1996
with 824, followed by New Haven County with 730, and Fairfield
County with 709. Rocky Hill has authorized 118 new permits
during this period, followed by Stamford with 100, Southington
with 94, Wallingford with 93, and Milford with 85.
Private defense-related employment in Connecticut dropped
by 34,700 jobs or 36.1 percent between 1988 and 1995. Estimated
at 61,500 for 1995, it was down from 1988's annual average
of 96,200. Nationally, private defense-related employment
dropped 24.6 percent or 475,500 positions during the same time
period, from 1988's annual average of 1,935,600 to 1,460,100 in 1995.
Private defense-related employment increased nationally from
1988 until the official end of the Cold War in 1990, then it fell off
dramatically. Statewide, private defense-related jobs steadily
declined from 1988 through 1995. The early lead in defense
downsizing, coinciding with the state's recession, was felt prematurely
in Connecticut because of its' reliance on big ticket defense
programs like submarines and sophisticated aircraft that were the
first to get cut in the prospects of a Cold War thaw.
Private industries included in the estimates are: weapons,
ordnance and accessories (except vehicles and guided missiles); aircraft and parts; shipbuilding
and repairing; guided missiles and space vehicles and parts; tanks
and tank components; search and navigation equipment; explosives;
and radio and communication equipment. Also included are
research industries that contributed to defense such as physical,
biological, economic, sociological and educational research and
their testing laboratories.
These industries were isolated by the United States Bureau of Labor Statistics (BLS)
defense model which concluded that at least 40
percent of the product of these industries was related to defense.
Since many defense contractors also have commercial production
lines, it is difficult to determine the exact number of defense-related
jobs. The United States Bureau of Labor Statistics defense model definitions are used here as
a measure of the change occurring in defense-related employment in
Connecticut, but should in no way be considered a definitive count.
These well-paying defense-related positions have a large impact on the Connecticut
economy and help support many other industries such as trade and services. The job spill-over effect
for defense-related positions varies by industry and is very difficult to assess.
According to the United States Department of Commerce, the Connecticut transportation
equipment industry, which is largely defense-related, has an employment
multiplier of 2.5, meaning that for every job in that industry
another 1.5 jobs are supported in the economy.
In general, it may be said that for every defense-related job, one
to two other employment positions are supported in areas ranging
from defense subcontractors to grocery stores, gas stations, real
estate agents, etc.
In the future, however, the defense multipliers will be more
capital and research intensive, resulting in fewer job gains from
prospective increases in defense spending for programs like the
new attack submarine and the new jet engine for the next generation
of fighters (F-22). These defense job multipliers have
weakened over the years because of labor productivity gains and
* A labor-management dispute in the third quarter of 1988 at a major
employer considerably impacted private defense employment. The above figure does not include
the data for months the company was involved in the labor-management dispute.
Connecticut's leading employment
index continues to yo-yo
with the release of the (preliminary)
May data, rising to nearly its
highest level in the current expansion.
The coincident index continues
to send a positive signal, rising
once again and not having fallen
on a month-to-month basis since
The coincident index, a gauge of
current employment activity, sent
strong positive signals in January
and February, largely due to the
benchmark revisions and the
February surge in employment
data, and after pausing briefly in
March, continued to move upward
in April and in May. The coincident
index accelerated its upward
movement this year from its prior
slow increase during the current
recovery. No end is now in sight for
the current recovery, based on the
The leading index, a barometer
of future employment activity,
experienced its largest one-month fall in January and rebounded
dramatically in February. It rose in
March, fell in April, and popped
higher in May. Nonetheless, the
leading index currently matches
its level in December 1995 and
exceeds its level in every other
month over the past two years,
save two, December 1994 and
The May release, therefore,
provides increasing support for a
strengthening of the current
recovery, at least in the short
term. The longer-term expectation
for the current recovery remains
somewhat uncertain -- as long as
the leading index continues to yoyo.
Whether its next major move is
up or down still remains in doubt.
Future monthly data will sharpen
the focus on our view of the future
of the Connecticut economy.
Compared to a year ago, the
coincident employment index rose
from 84.7 in May 1995 to 89.5 in
May 1996. All four index components
continued to point in a positive direction on a year-overyear
basis with higher nonfarm
employment, higher total employment,
a lower total unemployment
rate, and a lower insured unemployment
The leading employment index
rose from 87.7 in May 1995 to 89.2
in May 1996, or somewhat below
its previous peak of 89.4 in September
1995. Only one component
sent a negative signal on a yearover-
year basis -- a lower average
work week of manufacturing
production workers. The other
components sent positive signals
with lower initial claims for unemployment
insurance, higher Hartford
help wanted advertising, a
lower short-duration (less than 15
weeks) unemployment rate, and
higher total housing permits.
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