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Connecticut Economic Digest: January 1997 issue
Machinery industry examined | Housing Update | Occupational Information System (OIS) | Leading & Coincident Indicators

Machinery industry examined
By Kolie Sun Chang, Associate Research Analyst

Connecticut's industrial machinery & equipment industry (SIC 35) has been a major component of the State's manufacturing sector for many years. The industry's share of total State manufacturing employment, having ranged from 11% to 13% over the years from 1987 to 1993, is second highest to the transportation equipment manufacturing industry (SIC 37). How has this industry performed over time in Connecticut? In this brief analysis, we will examine and compare Connecticut and United States levels of machinery industry employment, establishments, output, exports, and productivity.

Employment

Between 1987 and 1993, machinery industry employment declined by 10.2% in Connecticut, and 8.8% at the United States level, pulled down equally by mix and competitive pressures. Employment losses occurred among both small and large businesses; 64.7% of employment losses occurred among establishments with 100 or more employees.

Connecticut's industry employment mix differs from the United States, with much greater reliance on computers and office machinery (SIC 357) which accounted for 28% of the state total compared with 13% for the United States. Connecticut has much less dependence on the production of construction equipment (SIC 353), 1% compared with 10% for the United States, and farm equipment (SIC 352), less than 1% compared with 5% for the United States. Thus, the United States distribution among the subgroups is more evenly spread.

Employment distribution by employment size of establishment remained stable from 1987 to 1993, although more than 60% of all industry employment is found in large firms (employment >100). Among firms with employment less than 100, employment distribution varied very little between 1987 and 1993.

Overall, State employment change in the industrial machinery industry has been similar to the change in national employment, first exceeding, then lagging the United States.

Establishments

Net establishment formation in Connecticut was down 9.9% between 1987 and 1993 as the number of businesses declined from 1,415 to 1,275, a loss of 140 businesses. During the same period net establishment formation in the United States was up 2.7% with a gain of 1,425 establishments.

Connecticut's manufacturing is more heavily concentrated in industrial machinery and equipment. One fifth of all manufacturing industry establishments are in the industrial machinery & equipment group in Connecticut, while the United States has about 14%. Connecticut also has led the United States substantially (33% compared with 21%) in the percentage of metalworking machinery establishments (SIC 354). For all other subgroups, Connecticut's distribution of establishments is very similar to the national percentages.

Exports

Connecticut's exports of industrial machinery and equipment increased from $687 million in 1988 to $825 million in 1995, with an annual average growth rate of 2.6%, while the United States posted a higher growth of 9.4% for the same period. If State exports had grown at the same rate as for the United States, we would have had an additional $460 million in exports in 1995. The Connecticut share of United States exports in the machinery industry has ranged from a high of nearly 1.4% in 1989 to a low of 0.7% in 1994, averaging 1.0% from 1987 to 1995.

Primary destinations of Connecticut's machinery and computer exports are Canada, the United Kingdom, Japan, and Germany. Canada accounted for onefourth of this industry's total exports, up from $146.2 million in 1988 to $208.6 million in 1995. However the largest rate of growth from 1988 to 1995 occurred with respect to Brazil where exports increased 210% from $6.7 million to $20.8 million, or roughly onetenth Canadian exports.

In 1995, industrial machinery ranked second only to transportation equipment in the total dollar value of Connecticut exports. Further perspective can be found in the Department of Economic and Community Development's quarterly and annual export report series.

Output

Between 1977 and 1992 Connecticut's machinery industry gross state product grew at an annual rate of 0.2%, only a fraction of the national rate of 1.8%. In other words, Connecticut's output lagged behind the national level during this time frame. An alternative method of measuring growth is to index the values. By comparing all subsequent values to the 1977 level, the index shows Connecticut output lagging the national level from 1977 to 1986. After a United States downturn in 1986, nationwide machinery industry output again took off at a faster rate than in Connecticut.

Productivity

Overall productivity (output/ hours) is almost identical at the state and national level although there is noticeable variation at the industry subgroup level. For instance, Connecticut led in engines & turbines (SIC 351), special industry machinery (SIC 355) and industrial machinery, n.e.c. (SIC 359), but trailed in metalworking machinery (SIC 354) and general industry machinery (SIC 356), compared with the national levels based on 1987 & 1992 data from the Census of Manufactures. Connecticut's rate of capital investment (capital investment/output) was only one percent higher than the national rate in 1987, and 1.2% more than the United States level in 1992.

Forecast

An employment forecast calls for continued decline at both the state and national levels through at least 2005; Connecticut machinery industry employment (relative to 1969) will continue to lag the United States with the differences increasing over time.

Conclusion

Thus far, analysis has been completed for industrial machinery & equipment (SIC 35) and electronic and other electronic equipment (SIC 36). This type of analysis will be replicated for other industry clusters as we endeavor to examine all facets of industry performance.


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Housing Update
November housing permits decrease

The Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 683 new housing units in November 1996, a 8.4% decrease compared to October 1996 when 746 were authorized.

The Department further indicated that the 683 units permitted in November 1996 represent an increase of 12.2% from the 609 units permitted in November 1995, and that the year-to-date permits are down 7.6%, from 7,713 in 1995 to 7,125 in 1996.

Reports from municipal officials throughout the state indicate that New London County showed the greatest percentage increase in November compared to the same month a year ago: 65.9%. Middlesex County reported the greatest percentage decline: 34.4% for the same period.

Hartford County documented the largest number of new, authorized units in November with 181. Fairfield County followed with 149 units and New Haven County had 129 units. Manchester led all Connecticut communities with 62 units, followed by Stamford with 44 and New Haven with 25.

Year-to-date totals indicate that Hartford County has issued the most building permits through November of 1996 with 1,639, followed by Fairfield county with 1,485, and New Haven County with 1,418. Stamford authorized 292 new units during this period, followed by Southington with 172, Shelton with 156, and Waterford with 155.

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Occupational Information System (OIS)
By Carol Bridges, SOICC Occupational Information System Manager

Are you concerned about a qualified labor force for business and industry in your region? Does your job include planning or administration for vocational and technical education? Do you have to identify educational programs for students or trainees? If you answered "yes" to any of these questions, the Occupational Information System (OIS) was designed for you. The Occupational Information System is a computerized system that will enable you to do your research quickly and easily and will increase the efficiency and accuracy of your decisions.

The job of analyzing labor markets to identify a potential imbalance in the work force, and interpreting the causes of any imbalance, is as much an art as a science. The nature of a labor market sometimes precludes a precise answer to one's questions. Even if all the relevant data were collected, there is no simple way to determine which are the most influential factors. Occupational information cannot provide a planner with simple quantitative indicators such as "30 additional people need to be trained for occupation X." However, as more and more information of the right type becomes available, our ability to make connections, draw conclusions and answer our questions improves. When data items from multiple sources are considered together, they may indicate a pattern from which we can draw an informed conclusion. If you find confirming evidence from multiple items, and understand the constraints on each, a coherent picture of the labor market conditions begins to emerge. Good results come from knowing the structure of the local economy, understanding its past trends, and sensing the important variables at work. Combined with data from the Occupational Information System, this background provides a basis for informed intuition. Informed intuition requires the planner's judgment, reason, and experience. Input from advisory groups should supplement these skills. Occupational information is the remaining component in the process of making informed decisions.

The computerized Occupational Information System uses objective data to support an overall planning process. The key to that process is still the individual planner. The information system contributes to your efforts as you plan new programs or evaluate existing ones, explore opportunities for on-the-job training, or respond to the labor force needs of a new or expanding firm. In general, using the Occupational Information System in a systematic process increases your ability to meet the future needs of the labor market and saves you time and energy.

In Connecticut, there are currently two options for the Occupational Information System: the Micro-OIS and the Occupational Information System c/s. The Micro-OIS is a stand-alone version for IBM-compatible computers which was initially developed in 1985 by the Western Occupational Research Corporation (WORC) under contract from the National Occupational Information Coordinating Committee (NOICC). It has since been revised and updated several times. In 1995, a Windows version of the Micro-OIS was developed by the Utah Department of Labor and its State Occupational Information Coordinating Committee (SOICC). This version is currently being used in over 100 sites across Connecticut. The Occupational Information System c/s is the client/server version of the Occupational Information System, residing on a server in the Central Office of the Labor Department. Users access it via a personal computer connected to the Department's wide area network. It was developed by Fu Associates in Virginia and is being pilot-tested at three Job Centers in Connecticut. For more information on the Occupational Information System, contact Carol Bridges, State Occupational Information Coordinating Committee, Labor Department, Office of Research, 200 Folly Brook Boulevard, Wethersfield, CT 06109.

The Occupational Information System is especially useful for:

  • Economic developers who examine the labor market and determine where growth is likely to occur and use that information for focusing their efforts.
  • Program planners who need to understand the current and future labor market and the training programs that can help meet labor market needs.
  • Counselors and other service providers who work with students and job seekers and wish to identify occupations with good employment outlook and related training opportunities for those occupations.
  • Businesses that need to look at the availability of an adequate workforce and training resources for new and current staff.

There are a number of advantages to using the Occupational Information System:

  • The Occupational Information System can provide, in one location and one operation, information from a variety of resources.
  • The Occupational Information System provides projections of future employment developed by the Department of Labor, Office of Research, using standard models and including projections for employment by industry and for employment in different occupations.
  • A computerized Occupational Information System can do a selective search to help you find items with special characteristics.
  • The Occupational Information System contains a built-in crosswalk between different classification systems, such as the Occupational Employment Statistics (OES), the Dictionary of Occupational Titles (DOT), and the Classification of Instructional Programs (CIP) coding systems. The Occupational Information System combines the codes from these different classification systems thus making it easier to analyze related information.
  • Occupations and programs are clustered so you can work with your target occupation and related occupations at the same time.

(Material adapted from Unlocking the Power of Occupational Information, Occupational Information System (OIS) Casebook, NOICC, Wash. DC, July 1996)


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Leading & Coincident Indicators
Coincident and leading indexes stuck in different gears

Connecticut's coincident employment index moved,once again, to its highest level in the current recovery with the release of the (preliminary) October data, having not fallen on a month-to-month basis since December 1995. Connecticut's leading employment index backed off its near peak last month, although still remaining higher than October a year ago.

We asked in our last commentary with the release of the September data whether the Connecticut economy could continue to prosper. The coincident index is still sending strong positive signals. The leading index has been stuck in neutral for almost two years. We still wait for the leading index to shift into gear. Will it be drive or reverse? The data from future months will provide the answer.

The coincident index, a gauge of current employment activity, continued its strong upward momentum. This recent momentum reflects in large part the lower insured unemployment rate, down 15.3 percent over the last 12 months. But it also reflects higher total employment, up 3.3 percent, and higher nonfarm employment, up 1.0 percent. Lastly, the total unemployment rate contributed a bit to the positive momentum, down 2.0 percent over the last year.

The leading index, a barometer of future employment activity, has bounced around considerably since reaching a peak in December 1994. It has not moved in the same direction, either up or down, for more than two consecutive months since then. Which components have contributed to its ups, and which to its downs? On the plus side, the short-duration (less than 15 weeks) unemployment rate fell by 13.8 percent and the initial claims for unemployment insurance fell by 11.9 percent since December 1994, both significant movements. On the negative side, Hartford help-wanted advertising fell by 12.5 percent, total housing permits declined by 5.1 percent, and the average work week in manufacturing production workers dropped by 1.6 percent.

The coincident employment index rose from 83.5 in October 1995 to 89.1 in October 1996. All four index components continued to 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 rose from 87.5 in October 1995 to 88.9 in October 1996. Four of the five index components sent positive signals on a year-over-year basis with lower initial claims for unemployment insurance, a lower short-duration (less than 15 weeks) unemployment rate, higher Hartford help-wanted advertising, and higher total housing permits. The final component sent a negative signal on a year-over-year basis with a lower average work week of manufacturing production workers.

Source: Connecticut Center for Economic Analysis, University of Connecticut. Developed by Pami Dua [(203) 322-3466, Stamford Campus (on leave)] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Tara Blois [(860) 486-4752, Storrs Campus] provided research support.

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Last Updated: October 15, 2002