The Bureau of Economic Analysis of the U.S. Department of Commerce recently released the
latest gross state product (GSP) estimates for states and industries. GSP is the value
added in production by the labor and property located in a state. It is defined as total
gross output (sales or receipts and other operating income, commodity taxes, and inventory
change) minus intermediate inputs (consumption of goods and services purchased from other
U.S. industries or imported). Thus, GSP is often considered the state counterpart of the
nation's gross domestic product (GDP), measuring each state's health of the
overall economy.
In this report, Connecticut's economic output for 1997, in current
dollars, was estimated at $134.6 billion, or 1.7 percent of the U.S. total of $8.1
trillion. This article will touch on current data and review the historical data for both
the total and industry trends. Comparisons between Connecticut and the nation will also be
discussed. A complete table of Connecticut real GSP data for 1982 through 1997 by major
industry division is on page 4.
1996 - 1997
According to the Bureau, Connecticut's GSP, in 1992 dollars
(adjusting for inflation), increased by 5.3 percent over the year, outpacing the
nation's 4.3 percent. Connecticut's growth ranked 10th among the 50 states, and
was the second largest among the New England states; New Hampshire was tops at 7.5
percent.
In Connecticut, all major industries but mining and government
experienced increases in output in 1997. The major contributors to the growth in real GSP
were wholesale trade (14%), agriculture (9%), retail trade (6%), and finance, insurance,
& real estate (FIRE) (6%). Even manufacturing industry output increased by 6 percent
over the year, as its employment also began to rise. The services sector produced 4.5
percent more, while construction and transportation & public utilities (TPU) outputs
increased by 2.5 and 1.1 percent each.
|
Connecticut |
U.S. |
CT relative to U.S. |
Industry |
1982 |
1997 |
1982 |
1997 |
1982 |
1997 |
Agriculture |
0.4% |
0.7% |
1.7% |
1.8% |
-1.3% |
-1.1% |
Construction |
3.1% |
3.1% |
3.8% |
3.8% |
-0.7% |
-0.7% |
Manufacturing |
24.2% |
18.5% |
17.8% |
18.9% |
6.4% |
-0.4% |
TPU |
6.4% |
6.4% |
8.3% |
8.9% |
-1.9% |
-2.5% |
Wholesale |
5.3% |
7.5% |
5.4% |
7.3% |
-0.1% |
0.2% |
Retail |
8.0% |
8.3% |
8.5% |
9.8% |
-0.5% |
-1.5% |
FIRE |
22.1% |
26.6% |
19.2% |
17.7% |
2.9% |
8.9% |
Services |
18.1% |
20.8% |
18.4% |
19.3% |
-0.3% |
1.5% |
Government |
12.2% |
8.2% |
15.4% |
11.4% |
-3.2% |
-3.2% |
1982 - 1997
In the last 15 years, Connecticut's GSP growth rate averaged 3.4
percent per year, faster than the U.S. growth rate of 3.2 percent. However, when the
periods before and after the recession are observed, Connecticut's economy paints a
different picture. Between 1982 and 1989, our State's economy grew at an annual rate
of 5.7 percent, significantly faster than the national rate of 4.0 percent. Subsequently,
output declined in 1990 and 1991 by 0.3 and 3.0 percent, respectively, while it declined
only in 1991 for the U.S., by 0.8 percent (measured by employment, the State's
recession lasted four years, 1989 through 1992). Then from 1992 to 1997,
Connecticut's economy turned around at an annual rate of only 2.5 percent, now
producing at a slower pace than the nation's 3.3 percent.
Industry Growth
The chart on the front page depicts the real gross state product
originating in Connecticut's industrial sectors from 1982 to 1997. This figure not
only shows the growth of various sectors, but also their relative contribution to the
overall economy and shifts in importance over time.
From 1982-1990, growth trends were very different among individual
sectors. Government, TPU, and agriculture showed consistent growth over those years. The
construction sector followed a similar pattern, with some acceleration during the 1983-87
period, and reached its peak in 1988. The wholesale and retail trade, services, and FIRE
sectors all showed marked increases in output until the recession. Even manufacturing,
despite losing jobs, sustained positive growth in output through 1988.
Since the recession, patterns of growth have changed. While government,
TPU, and agriculture have maintained their shares of GSP, construction returned closer to
its earlier levels. Wholesale trade, except for a decline in 1993, continued rising
rapidly, reaching a new peak in 1997. Retail trade output fell during 1990 through 1992,
then steadily increased and regained its peak 1989 level in 1997. Despite falling in 1990
and 1991, FIRE output continued to soar to a new high in 1997, nearly doubling 1982's
level. The services industry continued to produce more after a setback in 1991.
Manufacturing, after three years of decline, bounced back strongly, its output reaching a
new high in 1997.
Industry Shares
As the table on page 2 shows, since 1982, manufacturing's share of
Connecticut's real GSP dropped from nearly a quarter of the total output to 18.5
percent in 1997. Construction's share was the same in 1997 as it was in 1982. Despite
the decline in its employment share in the last 15 years, output in wholesale trade
actually has increased. Even though TPU's employment share was 4.6 percent in 1997,
its output share was higher at 6.4 percent. Retail trade's employment made up almost
one-fifth of total State employment in 1997, but its output share was less than 10
percent. FIRE, on the other hand, commanded over a quarter of the State's total
output, even though its employment share was less than one-tenth of total State
employment. The services sector's employment share increased from 20.2 percent in
1982 to 30.7 percent in 1997, while its GSP share increased by only 2.7 percentage points
(18.1% to 20.8%). Government's job share was maintained at 13 percent over the years,
but its output share dropped from 12.2 percent in 1982 to 8.2 percent in 1997.
CT and U.S.
Comparing Connecticut's dependence on each industry sector with the
national average reveals some interesting differences. The table on page 2 contains data
on the industry share of real GSP for both the State and nation for 1982 and 1997. These
data reveal changes both within regions and between regions over time. For instance,
manufacturing as a share of GSP has dropped dramatically in Connecticut, falling from 24.2
percent in 1982 to 18.5 percent in 1997, while the FIRE sector has increased its share of
State output from 22.1 percent to 26.6 percent.
The chart on page 3 also shows the differences in industry sector share
of GSP in Connecticut relative to the nation. For instance, the share of
manufacturing sector product in Connecticut in 1982 was 6.4 percentage points higher than
in the nation. By 1997, it had dropped to a level just below the nation's share. This
confirms that Connecticut, which used to be more manufacturing-dependent than the nation
as a whole, is now comparable to the U.S. Elsewhere, we find an increasing relevance and
divergence from the national norm in the FIRE sector. Unlike in the past, the services
sector contributes relatively more to our economy than it does to the nation's.
Negative numbers indicate sectors whose relative contribution to the
State are less than their role nationally. TPU and retail trade, for example, are less of
a factor in Connecticut than in the U.S. and the differences between the two regions are
increasing over time. The biggest divergence from the U.S. average, however, was in the
government sector. Government declined in its share of gross product by four percentage
points both nationally and in the State between 1982 and 1997, indicating a reduced
relative role in the economy at both levels.
In addition to (1) strategic location, (2) integration with
local clusters, and (3) unmet local demand, the fourth and final competitive advantage of
the inner city cited by Harvard Business Professor Michael Porter is (4) the strength of
its human resources. Many employers surveyed in Porter's research report great
satisfaction with their inner-city workforce.
Porter's research debunks three deeply
entrenched myths, namely, a lack of a work ethic, a lack of entrepreneurs, and a tendency
to relocate to more affluent areas. Porter notes that many problems associated with inner
city workforces can be remedied with new approaches to education, job placement, and
training. Workforce readiness challenges can be overcome. Faulty perceptions are more of
an obstacle to progress than reality.
Moreover, despite an undoubtedly undereducated,
under-skilled, and disproportionately ill equipped for work population, research shows a
meaningful proportion of unemployed or underemployed inner-city residents who are ready
and able to be good employees. The inner-city workforce may be diverse and complex, but
the urban initiative is aimed at fostering the climate whereby the inner-city
residents' talent and commitment can build businesses that become meaningful
employers and create wealth for the inner city. Porter adds that as the awareness of inner
city economic opportunities grows, more will follow.
Commissioner James F.
Abromaitis of the Connecticut
Department of Economic and
Community Development announced
that Connecticut communities
authorized 977 new
housing units in July 1999, a
24.7 percent decrease compared
to July of 1998 when 1,297 were
authorized.
The Department further
indicated that the 977 units
permitted in July 1999 represent
a decrease of 20.6 percent from
the 1230 units permitted in June
1999. The year-to-date permits
are down 1.8 percent, from 6,610
through July 1998, to 6,491
through July 1999.
"With the exception of 1998's
record level, permits for July are
at their highest level in five
years," Commissioner Abromaitis
said. "I am pleased to note that
six out of Connecticut's eight
counties continue to experience
growth exceeding last year's
record level of housing permits."
Reports from municipal
officials throughout the state
indicate that Tolland County
125.0 percent showed the greatest
percentage increase in July
compared to the same month
year ago. Middlesex County
followed with a 72.1 percent
increase.
New Haven County documented
the largest number of
new, authorized units in July
with 227. Hartford County
followed with 166 units and
Fairfield County had 153 units.
Ellington led all Connecticut
communities with 50 units,
followed by Cheshire with 44 and
Hamden with 29.
With the release of (preliminary)
June data, the
Connecticut leading and coincident
employment indexes continue
to drift with no obvious trend
in 1999. The coincident and
leading indexes both dropped
slightly and currently lie just
below their December 1998 levels.
The most recent June data
records the first instance in our
data, which extend back to January
1969, that total employment
falls below nonfarm employment.
In every other month, total employment
exceeds nonfarm employment.
We discussed this issue
previously in "Employment: A Tale
of Two Series" ( The Connecticut
Economic Digest, June 1999, p.
when the total employment number
came very close to, but was
still just above, the nonfarm
employment number. Nonfarm
employment, which is developed
from the employer survey, measures
jobs; total employment,
which is developed from the
household survey, measures
people. So people with multiple
jobs are counted once in the
household survey, but more than
once in the employer survey. The
employer survey, however, does
not include the self-employed; the
household survey does. The
relationship between the total
employment and nonfarm employment
series may have experienced
a structural change. Of course,
those data series are still subject
to revision. Whether current
observations will continue to hold
after next year's benchmark
revisions, only time will tell. We
shall evaluate revisions when they
occur.
The national economy slowed
considerably in the second quarter
of 1999, with real GDP growing at
2.3 percent. This performance
compares to a first quarter growth
of 4.3 percent and a fourth
quarter 1998 growth of 6.0 percent.
But it was a year ago in the
second quarter that real GDP grew
by only 1.8 percent. As noted
before in this column, the Connecticut
economy cannot long
follow a growth path different from
the national economy. As a consequence,
slowed growth for the
nation could translate into slowed
growth for Connecticut.
In summary, the coincident
employment index rose from 96.5
in June 1998 to 98.3 in June
1999. Two components of the
index point in a positive direction
on a year-over-year basis with
higher nonfarm employment and
higher total employment. The
other two components point in a
negative direction on a year-overyear
basis with a higher insured
unemployment rate and a higher
total unemployment rate.
The leading employment index
fell from 91.1 in June 1998 to 89.6
in June 1999. Four index components
sent negative signals on a
year-over-year basis with a lower
average work week of manufacturing
production workers, lower
Hartford help wanted advertising,
a higher short-duration (less than
15 weeks) unemployment rate,
and lower total housing permits.
The fifth component sent a positive
signal on a year-over-year
basis with lower initial claims for
unemployment insurance.
SOURCE: Connecticut Center for or Economic Analysis, University of Connecticut. Developed by Pami Dua [Economic Cycle
Research Institute; NY,NY] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Kathryn E. Parr and Hulya Varol [(860) 486-0485, Storrs Campus] provided research support.
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