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The peace dividend for the
southeastern part of the
state in the early 1990's was an
alarmingly stagnant economy.
The outlook was gloomy for "the
submarine capital of the world,"
which was one of the most
defense dependent districts in
the nation. The old United
Nuclear Corporation in Uncasville
(the Mohegan Sun Casino is now
located on the site of this former
submarine component builder)
was shutting down, idling over
1,000 workers. Electric Boat in
Groton had strategic plans to cut
its workforce to 7,500 from
15,000 or more by the end of
1997 (cuts are still on schedule).
The Groton Naval Submarine
Base was on the Defense Base
Closure list, and the long established
New England Savings
Bank was heading for bankruptcy.
Commissioned regional
economic forecasters, as late as
May 1993, were spinning tales
25% unemployment, 32,000 jobs
lost, and 40,000 people
outmigrating from New London
county under a worst-case scenario
by 1998. Even the best-case
scenario of these forecasters had
the region losing 20,000 jobs by
the end of 1997. What these
forecasters failed to anticipate
was Yankee and Indian ingenuity.
What actually transpired was
that the region banded together
as best it could with its available
resources to fight and slow down
the eventual defense money
squeeze. This gave the area time
to adjust while the Indian governments
stepped in with casino
development and job creation to
pacify the defense-related recession.
The opening of the Mashantucket Pequot's Foxwoods
Casino in February 1992 with
2,500 employees really initiated
the road to economic recovery for
the southeast and, for a while,
employment at the fast-growing
casino made up most of the job
gains for the entire state.
Looking back just a few years
ago, it was as if the federal
government had its own defense
diversification plans in mind
Southeastern
when it recognized these local
tribes as separate governments.
Under the Indian Gaming Act of
1988 came the opening of the
door to casino gaming and economic
self-determinism. It would
not even be costly for the federal
government. What these Indian
casinos spawned was not only
jobs (around 17,000 on reservations
by early 1997, never mind
the thousands of construction
jobs that have been created), but
also a renewed drive and focus on
tourism that suddenly became
one of the cornerstones for the
economic revitalization of the
entire state. In addition, a slot
machine agreement was reached
with the State that has provided
State government coffers with
over $500 million since the
agreement was signed in January
1993. Other benefits include job
multiplier effects extended to
other sectors like construction,
wholesale trade, transportation,
real estate and services.
The land of Uncas, Sachem
of the Wolf People (Mohegans),
and the birthplace of Benedict
Arnold has always had a seasonal
tourism aspect to it with
attractions like Mystic Seaport
and Aquarium, the Nautilus,
the bark Eagle, proximity to
Long Island Sound and Rhode
Island beaches, and great
Indian, colonial, and whaling
history. Now, with the addition
of the Indian casinos (Foxwoods
is amongst the world's largest),
the area is attracting a whole new
influx of people to market to and
make the region a distinct destination.
The labor market area,
which extends from the easternmost
point of Westerly, R.I. to Old
Saybrook and north to Plainfield,
has seen bonafide hotel growth,
restaurant and retail expansion,
a New York Yankee minor league
team and stadium, and a surge
in new development proposals
that could include a Six Flags
Theme Park.
The Indians are also diversifying
from gaming and broadening
their reach into other sectors of
the economy. The Mashantucket
Pequots have bought other hotels
and restaurants, started a highspeed
ferry building facility, a
wholesale pharmaceutical enterprise,
a trout hatchery, and a
gravel operation. The
Mashantucket Pequots are also
leading a $15 million refurbishment
of downtown Norwich and
are hoping to use local financing.
In mid-1998 they plan to open a
$135 million American Indian
Museum. The newly up-andrunning
Mohegans have also laid
the groundwork for alternative
businesses like shell fish aquaculture
in the Thames River and
Long Island Sound. The tribes
also have more hotel and gaming
expansions on their reservations
in mind with sections of New
England's largest hotel at
Mashantucket opening this
summer. This new phase of
enlargement at Foxwoods will
eventually employ another 2,000 people.
Elsewhere, existing companies
outside of defense contract work
have steadied their presence in
the area with leading employers
like Pfizer streamlining some
production, but also expanding
its research campus in Groton for
future growth and better paying
jobs (adding 700 researchers over
the next few years). Mariner
Health has also grown and
expanded its presence into
downtown New London. Let's not
forget the small employers who
have generated opportunities and
have adapted to the changing
business climate while also
backfilling lost defense positions.
The area still faces some high
economic hurdles, including dealing with the loss of the Naval
Underwater Warfare Center in New London. This defense research
facility was on the defense consolidation list (over 1,000
personnel moved to Newport,
R.I.). The remaining facility, Fort
Trumbull, is a choice waterfront
parcel. Although it did not get the
promised submarine school
expansion, the sub base was
spared. It will be the eastern port
for the Seawolf class of subs,
which are being built at Electric
Boat. The second of the three
planned Seawolf subs will be
named the Connecticut.
The closures and consolidation
of some state mental facilities
will also hurt the area initially,
but may eventually be
beneficial because of the possibilities
these prime pieces of land
present for future development.
Some area manufacturers are
feeling the pressures of
Connecticut's higher costs and
are moving south. This is to be
expected with NAFTA in full gear, causing
some of the less sophisticated production
sectors like textiles to head for
lower wage locales. There are
other concerns, too, like Northeast
Utilities' Millstone nuclear
complex in Waterford that has all
three reactors off line right now
with safety issues to address
before they restart, as well as
deregulation to contend with. A
recent phenomenon that may be
adverse is labor shortages appearing
in the area in the less
skilled job areas like kitchen help
and retail sales. And an all
encompassing anxiety of the area
is that it will become too reliant
on gaming, similar to the dependence
the region had on defense
contracts in the past. The area
suddenly became the third
largest in the nation for square
footage in gaming space behind
Las Vegas and Atlantic City.
Southeastern Connecticut has
been lucky so far because Massachusetts,
Rhode Island, and New
York have not really opened their
states to full expanded gaming,
keeping the high per capita
income market of the Northeast
fairly exclusive to Connecticut's
federally recognized tribes.
Looking back to the heydays
of the late 1980's when unemployment
rates were below 3%
(Fig. 1) and employment peaked
in the New London-Norwich
Labor Market (Fig. 2) and then to
the swift decline of jobs in the
early 1990's, one can easily see
the stabilizing effect that Indian
gaming employment has had on
the area's nonfarm payrolls and
the region's unemployed. And
instead of the predicted
outmigration, the area currently
has the fastest growing labor
force in the state. The mix of
jobs, however, has shifted from a
goods producing-based labor
market, that averaged close to
28% of nonfarm employment
derived from manufacturing
positions in 1988, to more of a
service producing labor region
that gets less than 20% of
nonagricultural employment from
production sectors in 1996. This
shift will persist as defense
downsizing continues. One
concern is the quality of new jobs
being created in terms of pay and
skills. These new casino and
other Indian-related jobs, which
require a wide range of skills,
appear to average well over
$20,000 per year with generous
benefit packages included. You be
the judge, but do not forget that
better paying manufacturing
positions have been lost all
across the nation and are very
hard to replace in the nation's
advancing service economy. This
is especially true with leaner
defense spending budgets, which
had artificially kept wages high,
becoming the norm.
If the region can play its
cards right, it could end up with
a more balanced economy that
provides jobs from many specialized
sectors. One can envision a
tourist destination with beaches
and recreation areas that include
gaming, fine historical attractions,
amusement parks, an
expanded aquarium, minor
league baseball, affordable
lodging, and varied dining experiences.
This could be built on a
core base economy that still
consists of the traditional defense
manufacturing and subcontracting,
stabilized by an augmented
pharmaceutical and marine
research sector, and complemented
by other long-standing
production industries like paper,
printing, primary and fabricated
metals, and instruments and
machinery. The banking sector has
endured, consolidated,
and is now strengthening to
help provide the needed capital for growth. Add
some modern engines of growth
like motion picture production
(scenes for Spielberg's Amistad
were recently filmed in the
region), aquaculture, water
transportation and shipping,
computer and internet services,
financial services, and healthcare
to steady the seasonal job fluctuations
and for future job
evolution. The area has a well-established
educational base to draw upon that includes a
branch of the state university, a
wide serving community-technical
college, the Coast Guard
Academy, Connecticut College,
and advanced degree programs
from University of New Haven
and Rensselaer Polytechnic
Institute (RPI). A well developed
and diversified economy could
emerge that would prosper in
future economic downturns.
Connecticut's best kept secret is
getting out !
The Connecticut Department
of Economic and Community
Development announced that
Connecticut communities
authorized 909 new housing
units in March 1997, a 53.3%
increase compared to March
1996 when 593 were authorized.
The Department further
indicated that the 909 units
permitted in March 1997
represent an increase of
105.6% from the 442 units
permitted in February 1997,
and that the year-to-date permits
are up 44.9% from 1,282 through
March 1996, to 1,858 through
March 1997.
Reports from municipal
officials throughout the state
indicate that New Haven County
showed the greatest percentage
increase in March compared to
the same month a year ago:
168.6%, followed by Middlesex
County with a 65.7% increase.
New Haven County documented
the largest number of new, authorized units in March
with 282. Hartford County followed with 226 units and
Fairfield County had 174 units. Woodbridge led all
Connecticut communities with 93 units, followed by
Manchester with 66, and Wolcott with 51.
With the release of the revised
employment data by the Labor Department last
month, we indicated that
Connecticut's economic growth in
1996, as tracked by
Connecticut's coincident employment
index, was more restrained
than what we had reported
previously. We noted, in addition,
that the coincident index, a
barometer of current employment
activity, still rose more in 1996
than in prior years of the current
expansion despite these revisions.
Now, with the release of
(preliminary) February data, the
January and February movements
in the coincident index
have returned to a
more rapid growth rate, increasing
by 3.3 percent in these two
months (or just over 20 percent
on an annual basis). This acceleration
in the movement of the
coincident index mirrors a similar
pattern in this index last year
at about this time.
Connecticut's leading employment
index also rose in both
January and February. Nevertheless, the leading index, a barometer
of future employment activity,
continues to bounce around.
The leading index has still not
moved in the same direction,
either up or down, for more than
two consecutive months since
December 1994. It presently is
near its November 1996 peak in
the current expansion.
Together the coincident and
leading employment indexes are
sending signals consistent with a
continuation of the current
expansion. Of course,
Connecticut's recovery hinges
critically on the continued recovery
of the national economy.
Current concerns about if, and
when, the Federal Reserve will
apply more of the monetary
breaks to head off inflationary
pressures raise serious questions
about the future of the national
recovery. If the national recovery
heads south, then the Connecticut
recovery will most likely
follow. But some analysts see our
next recession as much less
severe than the last due to the
restructuring and downsizing
experienced in Connecticut
during the late 1980s and early
1990s.
In summary, the coincident
employment index rose from 82.9
in February 1996 to 89.0 in
February 1997. All four index
components continue to point in
a positive direction on a yearover-
year basis with higher
nonfarm employment, higher
total employment, a lower insured
unemployment rate, and a
lower total unemployment rate.
The leading employment index
rose from 88.5 in February 1996
to 89.7 in February 1997. Four index
components sent positive signals
on a year-over-year basis with
a lower short-duration (less than
15 weeks) unemployment rate,
higher total housing permits, lower
initial claims for unemployment insurance,
and higher Hartford helpwanted
advertising. The lone negative
signal came from a shorter average
work week of manufacturing
production workers.
Source: Connecticut Center for Economic Analysis, University of Connecticut. Developed by Pami Dua [(203) 461-6644,
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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