Department of Labor Home Connecticut Labor Market Information Home Connecticut Labor Market Information
Home  About  Contacts  FAQ  Glossary  Sitemap  Search  
LMI Calendar   
Connecticut Economic Digest: September 1999 issue
Gross State Product Reviewed | Housing Update | Industry Clusters | Connecticut Indexes Continue to Send Mixed Signals

Gross State Product Reviewed
By J. Charles Joo, Research Analyst

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.

GSP Industry Shares
 

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.


Return to Top

Industry Clusters
Human Resources

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.

Return to Top

Housing Update
July Permits Keeping Pace with Record '98

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.

Return to Top

Connecticut Indexes Continue to Send Mixed Signals

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.

Return to Top

LMI Home   Contact Office of Research   Site Map   Search 
Published by the Connecticut Department of Labor, Office of Research
Last Updated: October 15, 2002