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Connecticut Economic Digest: April 1998 issue
A Short Look At Long-Term Employment Projections | The Impact Of Small Cities CDBG Program Awards | Housing Update | Coincident And Leading Indexes Reach Twin Peaks Once Again

A Short Look At Long-Term Employment Projections
by Mark Articolo, Programmer and John DiSette, Research Analyst

We have seen many encouraging signs of a robust economy. Nonetheless, one hurdle we have yet to surpass is employment levels exceeding those of the pre-recession levels. Newly revised numbers for 1997 indicate that we have reached the highest employment level since 1993. This is no small feat considering that the prolonged, severe job loss created an out-migration of total workers. Our labor force dropped from 1.85 million in 1991 to 1.71 million in 1995, but has since climbed to 1.74 million. While this is encouraging, this is not the same Connecticut it was four years ago. The State has witnessed broad changes in our workforce, and the latest round of the long-term projections released by the Connecticut Department of Labor reflect the new direction in our evolving economy.

Projections By Industry

Connecticut has long been reliant upon two primary industries: insurance and defenserelated manufacturing. Although insurance employment is not projected to return to its pre-1991 level, there has been a resurgence of insurance jobs in professional and technical occupations, mainly financial analysts, investment specialists, sales agents and computer specialists. This is due in large part to a recovery of positions in life insurance, as well as a broadening of focus within Connecticut's insurance industry. We are no longer simply the bastions of life insurance; we are now gaining distinction in the burgeoning Health Insurance and Managed Care Providers sectors as well. This seems to solidify the state's prominence as a leader in the insurance industry. Secondly, defense manufacturing seems to have finally overcome its free-fall and stabilized its employment. While defense manufacturing has shown some encouraging signs of success with federally allocated dollars, it is not showing a strong comeback in employment, mainly due to the changing expenditures in defense contracts. Overall, Connecticut manufacturing is expecting passive growth of 0.6%. This, however, is not the precursor to a slowed Connecticut job market as it once was. In fact, this may be responsible for the rapid growth in other industry sectors, particularly the service sector.

The service sector has been growing at a torrid pace since 1991. Currently, it is perched at an alltime high level and has hardly begun to peak. While casino gaming employment (included in the services industries, rather than government, for purposes of occupational projections) has been a major contributor to this growth, it is only one facet of this diverse sector that will flourish over the next ten years. The Amusement and Recreation Services industry will be a solid force in the eastern region, creating many direct employment opportunities as well as many spin-off employment gains. However, the service industry that will be driving Connecticut over the next ten years will be Computer-Related Services, which has fueled an enormous demand for computer engineers and systems analysts. Besides computer-related services, all five projection regions are growing rapidly in the Health Services and Social Services industries, creating a growing need for home health aides, child care workers, and social service workers. All of the regions have been displaying strong recent growth outside the service industries, as well, and this is expected to continue into the new millennium. Construction in particular is expected to increase in all regions regions for both residential and commercial endeavors.

Projections By Region

The capital region will be growing primarily in Business Services and Health Services industries, with a resurgence in the Insurance industry. Another of the leading employment sectors in this region has been aerospace technology; while we are not anticipating rapid growth, we do expect it to increase in employment and remain a keystone of the region. The capital region has also developed a niche in manufacturing with its upsurge of machine shops. Overall, the Hartford area will be looking to add over 51,000 jobs by 2006 - a 9% increase in employment.

The eastern region's 14% increase in employment will be driven strongly by the casinos and auxiliary tourism businesses such as hotels and restaurants. Other positive indicators in this region involve the turn-around in Engineering, Architectural, and Surveying Services; a stabilized defense industry; a tremendous growth in construction; and the expansion of highly skilled biochemical research employment.

The south central region is poised to maintain the sturdiest manufacturing base in the State, yet retain its identity as a solid residential community. This region will lead the expansion of Management Services and Business Services and will maintain its strength in Health Services and medical research. Also important in this region is its concentration on Educational Services, especially Higher Education. The south central region has also carved itself a niche in the wholesale industry where it will lead the state over the next ten years.

The southwestern region is projected to enjoy not only its current employment growth but to increase employment by over 41,000 jobs in the next ten years, an increase of 10%. This will be led by the growth in Securities and Investment Services which will introduce several thousand new jobs, mainly as financial and securities sales agents.

The western region will boast the second highest percentage increase of employment at 12%. This region seems poised for dramatic growth in Computer-Related Services (72%) and General Building Construction (32%).

Overall, each region is expected to grow at a steady pace over the next ten years. An apparent strong economic base, combined with greater diversification of employment among the industry sectors, can lead our tiny State to focus on the varying strengths of its regions. At the same time, the service sector and construction opportunities that have been created continue to blanket and support our State. It is still important to note that defense manufacturing and insurance remain major contributing industries in our State, but while our commitment to them is still strong, we have learned to temper our reliance upon them.

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The Impact Of Small Cities CDBG Program Awards
by Michael Santoro, Community Development Specialist

According to recent reports, small to medium-sized businesses are responsible for most of the business growth in the United States today. As indicated in its International Strategic Action Plan published by the Department of Economic and Community Development (DECD) in February 1997, DECD has decided to take a proactive focus on the small and medium-sized companies. It was felt that the limited time and resources of DECD would be best used to assist those most prepared to expand into international markets. In addition, the newly announced and publicized "Partnership for Growth" is expected to have long term ramifications on various key industries, leading to the expansion of small and medium- sized "linkage industries" throughout Connecticut.

On the negative side, however, the recent report by the Connecticut Economic Conference Board, The Status of and Outlook for The Connecticut Economy, highlights the fact that Connecticut is a costly state in which to do business. As explained, this is due in part to the high quality labor force in Connecticut and the added community services demanded by these workers.

There has been and continues to be a more "locally-based" program to address both sides of this equation. This program is the federal Small Cities Community Development Block Grant program (CDBG) administered by the State of Connecticut Department of Economic and Community Development.

DECD administers this federally funded program, issuing grants to municipalities with populations of less than 50,000 people to create safe, decent living environments and expanded economic opportunities for families with low and moderate incomes. Since the State assumed responsibility for the program in 1982, more than $155 million in grants have been awarded statewide. Small Cities grants focus on programs that benefit low and moderate income people through housing, economic development, job creation, and public and community facilities, that aid in the prevention or elimination of blight, and that address urgent and unique community needs.

Through this program, the DECD recently announced the 1997 awards to 33 communities and 4 multi-jurisdictional applicants, much of which is contributing to the growth and preservation of small to medium-sized business. Of the $12.9 million available from the 1997 allocation, $2.1 million has been awarded to various communities for economic development activities related to small and medium-sized businesses. These awards range in size and type from $56,610 for job training to $500,000 for a small business incubator. In addition, grants for housing/neighborhood rehabilitation, wastewater collection systems, municipal infrastructure improvements, demolition of blighted buildings, faηade improvements to local businesses and rehabilitation to ensure handicapped accessibility to public facilities were also made.

In addition, municipalities can "band together" and apply for multi-jurisdictional activities; those which have a more regional impact. Typically, these are housing rehabilitation loan programs, shared social service facilities, or business loan programs of varying type.

Small Cities CDBG has four major types of activities which can be funded: 1) Community Facilities, like day care facilities, senior centers, and handicapped accessibility; 2) Public Services, like homebuyer counseling, elder care services, and employment counseling; 3) Economic Development, such as employer-based workforce development, business loans, business incubator facilities, and job training; and 4) Housing, which includes acquisition of land or buildings, homeowner rehabilitation, moderate or substantial rehabilitation, demolition, and first-time homebuyer assistance.

In the Economic Development category, this latest round of awards include: renovation of space at the Palmer Building in Ansonia into a "Small Business Center"; continuation of a Job Training Program in Enfield; completion of roadway improvements and installation of utilities to a 17 acre, four lot area in Putnam; site and building construction of a 10,000 square feet. small business incubator site in Tolland; the acquisition and demolition of a vacant deteriorated building and transfer of the empty lot to an expanding company in Windham; facade improvements to the Windsor Shopping Center; expansion of a regional business revolving loan program to include Brooklyn, Canterbury, Eastford, Killingly, Plainfield, Pomfret, Putnam, Sterling, Thompson, and Woodstock; and, establishment of a revolving micro-loan program for the towns of Barkhamsted, Colebrook, Goshen, Hartland, Harwinton, Litchfield, Morris, New Hartford, Norfolk, Torrington, and Winchester.

In addition to these awards, an additional $10 million is being provided to 27 communities and 2 multi-jurisdictional applicants in the other three categories. These dollars provide the State's small cities and towns with the means to address their own specific business needs. These activities can have a big impact on the community service needs of the communities involved. For example, the Town of Enfield has received a grant of $20,330 for improvements to their Domestic Abuse Shelter, and $45,000 for their After School Program. The Domestic Abuse Shelter proves a safe haven, and a source of counseling and other services for people affected by domestic abuse. The After School Program provides activities, educational opportunities and services to children in families with working mothers, allowing them to remain focused and productive without having to worry about "who is watching the kids".

These are just a couple of examples of the positive impact that these grants can have on communities and their economy. At this time, DECD is reviewing another 133 applications for the 1998 Small Cities CDBG allocation of about $14 million. Applications are rated and ranked by category, and like activities compete with each other to determine the award winners. This "in category" competition prevents any conflicts which would otherwise arise when deciding between the economic needs and the social needs of a community. This latest round of awards is due out by the end of April 1998.

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Housing Update
February Housing Permits Up 24.4%

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 647 new housing units in February 1998, a 24.4 percent increase compared to February of 1997 when 520 were authorized.

The Department further indicated that the 647 units permitted in February 1998 represent a decrease of 12.2 percent from the 737 units permitted in January 1998. The year-to-date permits also are up 46.1 percent, however, from 947 through February 1997, to 1,384 through February 1998.

"The first two months of 1998 indicate that strong growth in the housing sector continues," James F. Abromaitis said. "We have now sustained fourteen months of rising permit activity."

Reports from municipal officials throughout the state indicate that Tolland County with 87.5 percent showed the greatest percentage increase in February compared to the same month a year ago. Hartford County followed with an 86.1 percent increase.

New Haven County documented the largest number of new, authorized units in February with 163. Fairfield County followed with 149 units and Hartford County had 147 units. New Haven led all Connecticut communities with 40 units, followed by Hartford with 38, and Hamden and Stamford both with 31.

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Coincident And Leading Indexes Reach Twin Peaks Once Again

The Connecticut coincident and leading employment indexes both reached new peaks in the current expansion with the release of (preliminary) January data. The release of the January data also corresponds with the benchmark revisions for a number of employment series. For example, the non-farm and total employment series were significantly smoothed as compared to their movements over 1997 as reported before these most recent benchmark revisions.

The coincident index, a barometer of current employment activity, now records positive movements in every month since January 1997. This smoother movement in the coincident index replaces a choppier pattern based on the data available prior to the benchmark revisions. Since January 1997, non-farm employment increased by 38,700, or 2.4 percent, while total employment rose by 28,300, or 1.7 percent.

The leading index, a barometer of future employment activity, rose in January to a new peak, largely as a result of the huge increase in housing permits. Seasonallyadjusted housing permits increased by almost 150 percent on a year-over-year basis. The mild weather conditions in January probably contributed to this number. It is likely that builders were getting a head start because of the unusually warm weather in January. As a result, permits may slow in February and March.

Taking a longer view, the coincident index was last at its current level of 94.5 in September 1990 while the leading index was last at its current level of 91.7 in September 1989. Moreover, the Connecticut economy is still below the previous peak in the coincident index in February 1989 of 102.5 while it is still below its peak in the leading index in May 1987 of 100.7. As such, the current movement and level of the coincident and leading indexes provide no signal of slowing or reversing in the current recovery. As we stated in this space last month, the current expansion should have no difficulty continuing through the end of the year.

In summary, the coincident employment index rose from 86.2 in January 1997 to 94.5 in January 1998. All four index components continue to point in a positive direction on a year-overyear 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 89.8 in January 1997 to 91.7 in January 1998. Three index components sent positive signals on a year-over-year basis with a lower short-duration (less than 15 weeks) unemployment rate, lower initial claims for unemployment insurance, and higher total housing permits. The other two components - average workweek of manufacturing production workers and Hartford help-wanted advertising, both remained unchanged on a year-over-year basis.

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]. Kathryn E. Parr [(860) 486-0485, Storrs Campus] provided research support.

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Published by the Connecticut Department of Labor, Office of Research
Last Updated: October 15, 2002