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Connecticut Economic Digest: December 2003 issue
Connecticut earnings: a look at income from current production | Housing Update

Connecticut earnings: a look at income from current production
By Daniel W. Kennedy, Ph.D., Senior Economist, DOL

Earnings are composed of the sum of three components: wage and salary disbursements, other labor income, and proprietors' income. Earnings compiled by industry can be used in the analysis of regional economies as a proxy for the income generated from participation in current production. Thus, it can serve as an indicator of the State economy's ability to generate income.

Earnings growth by industry

Beginning with the July 23, 2003 release, the U.S. Bureau of Economic Analysis (BEA) converted its presentation of State and local personal income, including the earnings by industry breakdown of quarterly personal income, from the 1987 Standard Industrial Classification system to the 2002 North American Industry Classification System (NAICS). What follows analyzes the growth in Connecticut earnings by industry broken out by NAICS industry sector.

Table 1. Industry earnings, 2002-2003 change
INDUSTRY 2002Q2-2003Q2
Management of companies and enterprises 480 16.68
Educational services 170 7.93
Finance and insurance 1,167 7.90
Health care and social assistance 667 6.50
Wholesale trade 319 6.34
Mining 7 6.19
Forestry, fishing, related activities, and other 2 5.26
Real estate and rental and leasing 69 4.14
Total private 2,403 2.73
Total nonfarm 2,737 2.70
Information 87 2.56
Government and government enterprises 334 2.48
Accommodation and food services 55 2.23
Retail trade. 117 1.82
Administrative and waste services 45 1.33
Other services, except public administration 23 0.95
Transportation and warehousing 16 0.86
Utilities 8 0.75
Professional and technical services -103 -1.05
Manufacturing -450 -3.17
Construction -227 -4.36
Arts, entertainment, and recreation -51 -5.51
Source: Connecticut Department of Labor, Office of Research

Table 1 presents the 20 NAICS sectors ranked by the size of their percent growth in earnings between 2002:Q2 and 2003:Q2 (based on BEA's October 2003 release of state and local personal income for 2003:Q2). From left to right, the first column lists the NAICS sector. The second column shows the year-to-year (YTY) dollar change in earnings for 2003:Q2. The third column depicts the given sector's YTY percent change in earnings for 2003:Q2.

Save mining, those sectors whose earnings grew faster than private and total nonfarm earnings were in the service providing segment of Connecticut's economy. The management of companies and enterprises sector had the strongest relative growth in earnings (+16.7 percent) between 2002:Q2 and 2003:Q2. The military breakdown (not shown in Table 1) in the government sector had the next strongest growth in earnings, increasing by 8.2 percent in 2003:Q2, on a YTY basis. In addition, earnings in educational services and finance and insurance both grew by more than 7.9 percent. Forestry-fishing, Federal civilian (part of the governments sector-not shown), wholesale trade, health care, mining (the only fast growing goods producing sector), and real estate and rental and leasing all grew between just over 4 percent to just under 7 percent between 2002:Q2 and 2003:Q2. And their growth outpaced that of private (+2.73 percent) and total nonfarm earnings (+2.70 percent).

Information, accommodation and food services, and administrative and waste services all grew by more than 1 percent, but less than private earnings and nonfarm earnings. Other services, transportation and warehousing, and utilities had anemic earnings growth over the 2002:Q2-2003:Q2 period, each sector growing by less than 1 percent. Earnings for professional and technical services, manufacturing, construction, and arts, entertainment, and recreation contracted between 2002:Q2 and 2003:Q2. Two of the three sectors with the largest declines in earnings were in the goods producing segment of the State's economy. Manufacturing declined by more than 3 percent, and construction by 4.4 percent. Nevertheless, the largest decline occurred in a sector from the service providing segment. Arts, entertainment, and recreation earnings contracted by 5.5 percent. Thus, the fastest growing and steepest declining sectors in earnings over the 2002:Q2-2003:Q2 period are both in the service providing segment of the Connecticut economy.

Over the 2002:Q2-2003:Q2 period, 13 nonfarm NAICS sectors generated $3.566 billion in earnings, while the remaining six sectors sustained an $831 million loss in earnings. The net result was a $2.735 billion growth in Connecticut nonfarm earnings between 2002:Q2 and 2003:Q2, compared to $2.050 billion for 2002:Q1.

The largest contribution to total nonfarm earnings over the 2002:Q2-2003:Q2 period was made by the finance and insurance sector. Earnings grew by $1.167 billion, and accounted for almost 33 percent of earnings growth in 2003:Q2. Earnings for health care and social assistance grew by $667 million and represented 18.7 percent of the growth in Connecticut's total nonfarm earnings between 2002:Q2 and 2003:Q2. Government earnings grew by $334 million and accounted for just under 10 percent of earnings growth over 2002:Q2-2003:Q2.

More than one half of the contraction in nonfarm earnings for Connecticut was in the manufacturing sector. Earnings contracted by $450 million, and one half of the decline in manufacturing occurred in durable goods (-$227 million).

Trends in Connecticut earnings

Chart 1 follows the YTY growth rate in Connecticut total nonfarm earnings, private sector earnings, and government, or public sector earnings for the 24 quarters spanning 1996:Q2 to 2003:Q2.

Up until 2001, private sector earnings had grown slightly faster than total nonfarm earnings in Connecticut. And, save the spike in the second quarter of 2000, government earnings grew much more slowly than nonfarm or private earnings. That changed in 2001. But interestingly enough, the first spike in 2001 was in the first quarter, which was two quarters before the Terrorist Attacks on September 11, 2001. The second, and higher, spike in government earnings does coincide with the quarter of the attacks (2001:Q3). Though the increases have decelerated since then, government earnings growth has exceeded both nonfarm and private earnings. To get a more detailed perspective, Chart 2 traces the YTY growth rate of earnings for the major breakdowns of the government sector from 2002:Q2 to 2003:Q2.

The growth in military earnings has far outpaced that of the other two major breakouts of government earnings: federal civilian and state and local. In fact, growth in federal civilian and state and local earnings have trended downward over the entire 2002:Q2-2003:Q2 period. Military earnings growth has also trended down since its peak growth rate in 2002:Q3. However, as Graph 2 depicts, since 2002:Q4, double-digit increases in military earnings have pulled up the growth rate in total government earnings.

Charts 3 and 4 show the relative size of each major public sector component to government earnings in 2002:Q2, and the relative contribution the major components made to total government earnings growth between 2002:Q2 and 2003:Q2. Though federal civilian and military earnings represented 11 percent and 5 percent of total government earnings in 2002:Q2, they contributed three times their relative size to the growth in government earnings between 2002:Q2 and 2003:Q2. Civilian military earnings growth contributed 32 percent to total government earnings growth, and military earnings contributed 16 percent. Conversely, state and local government earnings accounted for 84 percent of total government earnings in 2002:Q2, but contributed only 52 percent to total government earnings growth over the 2002:Q2-2003:Q2 period.

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Housing Update
2003 year-to-date permits up 1.9 percent

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) today announced that Connecticut communities authorized 1,121 new housing units in October 2003, a 21.3 percent increase compared to October of 2002 when 924 units were authorized.

The Department further indicated that the 1,121 units permitted in October 2003 represent a 25.5 percent increase from the 893 units permitted in September 2003. The year-to-date permits are up 1.9 percent, from 8,231 through October 2002, to 8,390 through October 2003.

The Bridgeport Labor Market Area showed the largest increase in permits (117) compared to a year ago—a 142.7 percent gain. Milford led all municipalities with 118 new units, followed by Stonington with 42 and Danbury with 38. From a county perspective, only Hartford and New London counties had year-to-date gains of 18.1 percent and 12.1 percent respectively.

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Published by the Connecticut Department of Labor, Office of Research
Last Updated: December 2, 2003