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: April 1997 issue
Health services employment undergoes change | Housing Update | Leading & Coincident Indicators

Health services employment undergoes change
By Kaila J. Riggott and David R. Walker, Ph.D., Associate Research Analysts, Connecticut Office of Health Care Access

Health services industry (SIC 80) employment, consisting of physician and dental offices, hospitals, nursing facilities and other allied medical services, is one of the fastest growing segments in both the national and state economies. According to national employment projections to the year 2005, the fastest growth rates will be concentrated in health services employment, expanding twice as fast as the economy as a whole. Of the ten fastest growing occupations through 2005, half will be health-related (Table 1 on page 3). Connecticut appears to be following the national trend. In 1991, Connecticut employed approximately 120,300 people in the health services industry. By 1996, that number had increased by 4,600, or about four percent, in spite of a recession and sluggish economic growth in the early 1990s. Occupational growth projections through the year 2005 for Connecticut's health services employment range from approximately 12 percent for dentists up to 40 percent for home health care aides, medical assistants and physical therapists.

Growth in health care employment has been accompanied by basic structural changes. The impact of legislative initiatives, economic forces and social health care reform has transformed the industry's employment composition (See Table 2). An examination of the factors influencing health services employment provides a framework for understanding the transformation in the health care marketplace.

Managed Care Growth is Major Influence

Perhaps the most notable influence on the composition of the industry is the recent growth in managed care. In Connecticut, 41 percent of the state's population is currently enrolled in one of 16 health maintenance organizations (HMOs). While the State continues to lag behind the nation in managed care penetration, it has experienced a 77 percent increase in HMO enrollment over the past five years. This growth in HMO enrollment may have been stimulated in 1994, when Connecticut created a more conducive environment for managed care's expansion when it deregulated hospital prices and discount arrangements and allowed hospitals to negotiate rates and payment methods with all payers, not just qualifying HMOs. In turn, managed care growth may have stimulated hospital and medical service plans (SIC 6324) employment, which increased by 55 percent (over 2,100 jobs) from 1991 to 1996.

Managed care enrollment grew in response to spiraling health care costs. With managed care, HMOs contract with health care providers for the treatment of enrolled members for a flat fee per person, known as capitation. The goal of managed care is to provide quality outcomes while controlling costs by monitoring patient utilization, encouraging the use of the most effective treatments and procedures, and emphasizing preventive care. Traditional indemnity insurance companies enable both patients and doctors to take advantage of state-of-the-art treatment, diagnostic testing and facilities, but do not necessarily provide incentives for consumers and health care providers to contain health care service consumption and spending.

Hospitals React to Managed Care

With increased managed care proliferation and a more competitive environment, hospitals must now more rigorously compete for patient volume as well as for shrinking federal, state and private health care dollars. Consequently, hospitals have enacted major cost-cutting programs in order to preserve profit margins. Nearly all of the State's 32 acute care hospitals have reacted by forming vertical and horizontal affiliations, alliances, mergers and in some cases, their own managed care organizations. Because the State is somewhat of a newcomer in terms of such integration, this trend may continue over the next few years.

Hospital mergers and affiliations, along with reduced occupancy rates, have forced many hospitals to reduce staff. All but eight of the State's acute care hospitals have experienced a decline in full time equivalent positions since 1991. As a result, general medical and surgical hospital (SIC 8062) employment in Connecticut has dropped by 9.5 percent or 5,600 jobs from 1991 to 1996 (Table 2).

Health Care Service Delivery Changes

Health care market changes have had a definite impact on health care service delivery. First, there has been a move from inpatient treatment to less costly outpatient treatment. Furthermore, medical advances and innovations are lessening the need for facility-based services that have virtually defined hospitals for years. Due to improved medical technology and changes in hospital reimbursement policies, outpatient volume has increased by approximately 30 percent from 1991 to 1995. On the other hand, hospital inpatient days have dropped by more than 21 percent during the same time period. A decline in inpatient admissions was at least partially responsible for the recent closing of Winsted Memorial Hospital.

While there have been medical and surgical acute care employment losses, other areas of the health care industry have experienced gains. Patients not well enough to go home following hospitalization for illness or surgery are frequently transferred to nursing facilities rather than remaining in higher-cost hospital settings. From 1991 to 1996, employment in Connecticut's skilled nursing care facilities (SIC 8051) grew by 22 percent or 6,500 jobs. In addition, the state's intermediate care facilities' (SIC 8052) employment grew by 12.5 percent or 300 jobs. Furthermore, analysts predict long-term care could more than triple in the next five years. Connecticut's aging population will place even greater demands on the health care delivery system over the next several decades.

As shorter hospital stays (down 21 percent over the last five years) and technological advances have taken hold, the home health care services industry (SIC 8082) has benefited. Treatments formerly only available in hospitals can now be administered in the patient's home at a lower cost. Nationally, the overall job market for home health care is projected to grow at an annual rate of 20 to 25 percent with pediatrics, geriatrics and persons with AIDS representing most patients. According to national projections, the number of home health care aides will more than double by the year 2005. In Connecticut, home health care services employment grew by nearly 60 percent or 4,700 jobs from 1991 to 1996 (Table 2) and is projected to grow by over 40 percent through the year 2005.

National projections indicate medical and dental labs (SIC 8071 and SIC 8072) should continue to flourish as managed care forces some hospitals to contract out more of their lab work due to cost and efficiency concerns. In addition, federal restrictions and paperwork requirements of the Clinical and Laboratory Improvement Amendments of 1988 have caused thousands of physicians to discontinue laboratory testing in their offices and instead use outside labs to perform their routine testing.

While kidney dialysis centers' (SIC 8092) marked increase in employment is not the result of the growth of managed care, it is interesting to note that within the health services industry, it has experienced the greatest increase, at 200 percent (Table 2). This jump is likely the result of a shortage of dialysis centers in the early nineties, coupled with the fact that as the State's population continues to live longer, dialysis services are needed more frequently.

Connecticut's psychiatric and specialty hospitals (SIC 8063 and SIC 8069), which include cancer, rehabilitation and children's facilities, have experienced overall declining employment since 1991, likely due to limitations on length of stay by payers. But, if Connecticut follows other states' initiatives, industry employment appears to be poised for growth during the coming years. Like many states, Connecticut is considering legislation requiring insurers to include psychiatric coverage in their medical benefits packages. Furthermore, possible increased use of psychiatric facilities could stem from improved drug and alcohol treatments and changing social attitudes which have lessened the stigma associated with dependency or mental illness problems.


The health services industry is a key contributor to the wellbeing of Connecticut's economy, comprising nearly 25 percent of the State's services sector employment. Despite experiencing profound changes in recent years, it continues to grow. It will no doubt expand in the future as technological advances, an aging population, shifting patient settings, new treatment methods and increased competition among providers place new and even greater demands on service delivery.

The Connecticut Office of Health Care Access, through the collection of hospital financial and billing data, is a resource in the analysis and reporting of evolving trends in the utilization of health services, access and quality of care. Additional data used in this article were provided by the Connecticut Insurance Department and the Connecticut Department of Labor.


The 10 Fastest Growing Occupations
1994-2005, National Projections
Occupation Number (in thousands)
Number (in thousands)
Percent Change
Personal and Home Care Aides 179 391 118%
Home Health Aides 420 848 102%
Systems Analysts 483 928 92%
Computer Engineers 195 372 91%
Physical and Corrective Therapy Assistants and Aides 78 142 82%
Electronic Pagination Systems Workers 18 33 83%
Occupational Therapy Assistants and Aides 16 29 81%
Physical Therapists 102 183 79%
Residential Counselors 165 290 76%
Human Services Workers 168 293 74%

Source: U.S. Bureau of Labor Statistics 1994-2005 Employment Projections.


Connecticut Health Services Industry Employment
SIC Number SIC Name June 1991 June 1996 Difference
Percent Change
8051 Skilled Nursing Care Facilities 29,600 36,100 6,500 22.0%
8052 Intermediate Care Facilities 2,400 2,700 300 12.5%
8059 Nursing & Personal Care Facilities, Not Elsewhere Classified (NEC) 2,800 2,200 -600 -21.4%
8062 General Medical & Surgical Hospitals 59,200 53,600 -5,600 -9.5%
8063 Psychiatric Hospitals 5,200 4,200 -1,000 -19.2%
8069 Specialty Hospitals, Except Psychiatric 2,800 2,400 -400 -14.3%
8071 Medical Laboratories 2,200 2,500 300 13.6%
8082 Home Health Care Services 8,200 12,900 4,700 57.3%
8092 Kidney Dialysis Centers 100 300 200 200.0%
8093 Specialty Outpatient Facilities, Not Elsewhere Classified (NEC) 3,100 2,700 -400 -12.9%
8099 Health & Allied Services, Not Elsewhere Classified (NEC) 600 1,200 600 100.0%
80 Health Services (TOTAL) 116,200 120,800 4,600 4.0%

Source: Connecticut Labor Department.

Return to Top

Housing Update
February housing permits increase

The Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 442 new housing units in February 1997, a 2.1% increase compared to January 1997 when 433 were authorized.

The Department further indicated that the 442 units permitted in February 1997 represent an increase of 14.8% from the 385 units permitted in February 1996, and that the year-to-date permits are up 25% from 700 in 1996 to 875 in 1997.

Reports from municipal officials throughout the state indicate that New London County showed the greatest percentage increase in February compared to the same month a year ago: 60.7%. Litchfield County reported the greatest percentage decline: 22.7% for the same period.

Fairfield County documented the largest number of new, authorized units in February with 112. New Haven County followed with 103 units and Hartford County had 77 units. Milford led all Connecticut communities with 20 units, followed by Newtown with 16 and South Windsor with 11.

Year-to-date totals indicate that Fairfield County has issued the most building permits through February of 1997 with 225, followed by New Haven County with 195 and Hartford County with 165. Milford authorized 26 new units during this period, followed by Fairfield, Newtown, and Shelton with 23.

Return to Top

Leading & Coincident Indicators
How strong was that expansion during 1996?

This month marked the release of the annual benchmark revisions in Connecticut employment data, which affects the Connecticut coincident index. We've reported in this column over the past 12 months how much more robust the expansion in 1996 was relative to the prior years of the current recovery. Well, the revised data tell a more restrained story. The estimated number of State residents employed (household survey) was revised significantly downward and, correspondingly, the total unemployment rate was revised significantly upward in all of 1996. The average of the preliminary unemployment rates for 1996, before revision, was just under 5.0 percent; after revision, 5.7 percent. The quandary with the benchmark revisions does not stop here. The new data indicate that the (preliminary) January 1997 unemployment rate drops to 5.1 percent, which seems more consistent with the data before this latest revision. And only in March 1998 will we get the next benchmark revisions and see whether this January 1997 unemployment rate sticks, or is revised upward. Conversely, estimates of jobs were mostly revised upward. Annual average nonfarm employment for 1996 was 3,400 higher than originally estimated, with January 1996's estimate slightly lower and December's 10,000 higher.

What is the bottom line? The robust growth in the coincident index identified over 1996 has turned into a more modest expansion, although still better than in years prior to 1996. Connecticut's coincident employment index, nevertheless, did generally rise since January 1996, only falling slightly in September 1996. The January 1997 upward blip in the coincident index (see chart) must be viewed with some skepticism.

Connecticut's leading employment index, which is unaffected by the benchmark revisions, rose from its December value with the release of the (preliminary) January data. The leading index also rose significantly above its level a year ago in January. 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 currently remains close to its recent (November) peak of 89.9.

In summary, the coincident employment index rose from 81.9 in January 1996 to 88.4 in January 1997. All four index components point in a positive direction on a year-over-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 83.2 in January 1996 to 89.5 in January 1997. All five 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, higher Hartford help-wanted advertising, and a longer average work week of manufacturing production workers. This year-over-year rise in the leading index, largely due to the one month fall in January 1996 to its lowest level since April 1992, needs careful interpretation.

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.

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