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Connecticut Economic Digest: December 1999 issue
Much Ado About Services | Housing Update | Industry Clusters | Does the Leading Index Portend Future Change?

Much Ado About Services
By Jungmin Charles Joo, Associate Research Analyst

There is no doubt that the services industry has been a driving force behind new job growth in Connecticut and the nation for several decades. In the last ten years alone, this dynamic sector created well over 100,000 jobs in the State, while all private industries netted a loss of 35,000 jobs between 1988 and 1998. This article will provide an overview of this dominant industry's output, employment, establishment, and wage trends, as well as its emerging occupations and job outlook. Data on establishments, employment and wages for selected subsectors of the services industry for 1992 and 1998 are presented on page 4.

Phenomenal Job Growth

Of the 1.4 million private industry jobs in 1998, services had the largest employment share among the major industries, with 35.5 percent. This compared with other large industries, manufacturing and retail trade, which comprised 19.4 and 19.1 percent of Connecticut's private industry jobs, respectively. Over time, employment in the State has shifted the most in the manufacturing and services industries. The job share for services has increased from 19.6 percent in 1975 to 25.6 percent in 1987, 30.6 percent in 1992, and 35.5 percent in 1998. In contrast, the employment share in manufacturing has decreased from 38.1 percent in 1975 to 26.8 percent in 1987, 23.3 percent in 1992, and 19.4 percent in 1998.

As the chart below shows, services employment in the State has grown more rapidly than total private industry employment. Since 1975, services industry employment more than doubled, while all private industries only added roughly 40 percent more jobs in the last 23 years. On the other hand, nearly one out of three manufacturing jobs in the State were lost over the two decades. The only year during the 1975-98 period with a decline in services employment was 1991(-4%), the worst year of the last recession.

Output

The services industry accounted for one fifth of Connecticut's gross state product (GSP) in 1997, or $29.2 billion of the total $134.6 billion. Since 1982, this industry's real output grew by 89 percent, while it increased 65 percent for all industries. Manufacturing's gross product rose at a slower pace, 26 percent over the last 15 years. The services industry's output increased every year since 1982, except in 1991 when it fell by 3.7 percent.

Looking at the subsectors (2-digit SIC level) from 1987, the amusement and recreation services industry's output rose a whopping 115 percent (mostly from the two casinos), which helped to boost the overall services industry output by 38 percent. Other major contributing services subsectors were business services (+94%, where most of the growth was from computer and computer-related services) and social services (+79%). On the other hand, miscellaneous repair services saw a major decline of 25 percent in output over the decade.

Employment

Between 1992 and 1998, private industries added over 113,000 jobs in Connecticut, a growth of nine percent. Almost all of these new jobs were from the services industry, which grew 26 percent during the same period. Nearly all of the 3-digit detailed industry sectors in the services industry experienced positive employment growth, with the major exceptions of hospitals and engineering & architectural services. The hospital sector alone, which has the largest number of employees within the total services industry, shed nearly 6,000 jobs (-10%) since 1992. Managed care and strong competition have caused a restructuring of the health industry and a reduction in inpatient hospital stays, resulting in a sharp decline in hospital employment. (For more on the health services industry, see the April 1997 issue of the Digest at www.ctdol.state.ct.us/lmi/.)

Employment in many sectors within the services industry, however, took off sharply in the past six years. For starters, the amusement & recreation services sector added the largest number of jobs (+16,831), primarily from the openings of the Foxwoods (1992) and Mohegan Sun (1996) casinos in southeastern Connecticut. This sector's employment also grew the fastest at 135 percent (see table on page 4) between 1992 and 1998.

Another significant growth sector was personnel supply services, adding almost 16,000 jobs (+85%), as the trends of outsourcing and hiring temporary workers exploded across the industries. Computer programming & computer related services also have benefited from today's "Information Age", reaping over 10,000 jobs in the last six years alone, a growth of 79 percent. (An in-depth analysis on the computer services industry trends appeared in the November 1997 issue of the Digest.) Unlike hospitals, home health care services added over 6,700 jobs, a 79 percent increase. The management and public relations industry experienced 68 percent job growth, fueled by many startups of consulting businesses during this decade. Other big job gainers included nursing & personal care facilities and offices & clinics of medical doctors.

Establishments

From 1992 to 1998, the number of business establishments increased by 12 percent in the services industry, while they rose by only one percent for the entire private sector. Establishments in computer programming & computer related services grew the fastest at 88 percent to almost 2,500 businesses throughout Connecticut. In 1998, private households had the largest number of establishments (4,209), followed by management and public relations with 2,578. The videotape rental sector, however, experienced the biggest drop in the number of establishments (-39%) between 1992 and 1998, during which many small local stores were driven out of business by the megastores.

Wages

Unlike with employment and establishments, the overall services industry's wage growth of 21 percent was slower than all private industries' 27 percent increase between 1992 and 1998. While the prevailing misperception is that most high-paying jobs are concentrated in manufacturing or construction industries, there are many jobs within the services industry that indeed pay well. Wages in 14 out of 54 sectors within the services industry were above the entire private industry average of $41,101 last year. In fact, the average pay in management and public relations services was the highest at $86,189 in 1998, far higher than the entire services industry average of $35,439. Computer programming & computer related services commanded the second highest average wage within the services industry, $74,802. The largest increases in wages from 1992 to 1998 occurred in civic & social associations and consumer credit reporting agencies at 147 and 74 percent, respectively.

The lowest annual pay occurred in motion picture theaters and videotape rental businesses at $10,689 and $11,731 each, where many jobs are part time and pay minimum wage. The only sector within the services industry to experience a decline in wages was commercial sports, down by 15 percent from 1992.

Future Services

As of October 1999, the services industry added 13,500 jobs, or 2.6 percent, over the year. The Connecticut Department of Labor projects that the services sector will account for nearly two-thirds of the State's total forecasted employment increase in the next decade. Much of the job growth within the services industries will be in health services, particularly in nursing and personal care facilities and home health care services industries, as our population ages. The second largest job increase will occur in the business services sector, mostly in computer and data processing services

.
Selected Connecticut Services Industry Establishments, Employment, and Wages*
1992 and 1998, Annual Averages
Industry Code/Description

Establishments

Employment

Wages

   

92-98

   

92-98 Change

   

92-98

1992

1998

% Change

1992

1998

No.

%

1992

1998

% Change

Total Private Industries

99,712

100,703

1.0

1,309,581

1,423,145

113,564

8.7

$32,485

$41,101

26.5

Total Services

35,936

40,053

11.5

400,040

504,847

104,807

26.2

$29,328

$35,439

20.8

701. Hotels and Motels

313

302

-3.5

9,342

10,592

1,250

13.4

$15,108

$19,213

27.2

721. Laundry, Cleaning, & Garment Services

779

752

-3.5

5,446

5,630

184

3.4

$16,091

$18,723

16.4

723. Beauty Shops

1,777

1,625

-8.6

7,242

7,740

498

6.9

$12,997

$16,407

26.2

726. Funeral Service and Crematories

192

190

-1.0

936

1,058

122

13.0

$34,486

$40,199

16.6

729. Miscellaneous Personal Services

276

340

23.2

2,656

2,728

72

2.7

$19,095

$21,247

11.3

731. Advertising

460

451

-2.0

2,861

3,702

841

29.4

$54,305

$69,531

28.0

732. Consumer Credit Reporting Agencies

90

87

-3.3

810

979

169

20.9

$35,712

$62,296

74.4

733. Mailing, Reproduction, Commercial Art Services

750

695

-7.3

5,474

5,988

514

9.4

$35,893

$45,698

27.3

734. Pest Control & Building Cleaning

957

924

-3.4

13,267

15,075

1,808

13.6

$11,267

$13,271

17.8

735. Miscellaneous Equipment Rental and Leasing

252

258

2.4

1,520

2,097

577

38.0

$33,527

$41,091

22.6

736. Personnel Supply Services

736

966

31.3

18,575

34,349

15,774

84.9

$17,575

$22,967

30.7

737. Computer Programming & Computer Related

1,320

2,476

87.6

13,402

23,961

10,559

78.8

$50,886

$74,802

47.0

738. Miscellaneous Business Services

1,340

1,435

7.1

14,779

19,253

4,474

30.3

$21,519

$29,956

39.2

751. Automotive Rental and Leasing, Without Drivers

192

182

-5.2

1,732

1,991

259

15.0

$25,178

$34,771

38.1

752. Automobile Parking

69

55

-20.3

756

813

57

7.5

$13,476

$16,581

23.0

753. Automotive Repair Shops

1,706

1,818

6.6

6,296

8,217

1,921

30.5

$25,885

$29,607

14.4

754. Automotive Services, Except Repair

306

345

12.7

1,635

2,595

960

58.7

$14,855

$17,680

19.0

762. Electric Repair Shops

282

247

-12.4

1,139

1,288

149

13.1

$28,695

$35,124

22.4

769. Miscellaneous Repair Shops

574

553

-3.7

2,862

2,880

18

0.6

$34,813

$39,823

14.4

783. Motion Picture Theaters

68

67

-1.5

1,226

1,390

164

13.4

$8,476

$10,689

26.1

784. Video Tape Rental

306

186

-39.2

1,897

1,847

-50

-2.6

$8,877

$11,731

32.1

792. Producers, Orchestras, Entertainers

242

266

9.9

1,738

2,482

744

42.8

$26,063

$29,674

13.9

793. Bowling Centers

48

45

-6.3

999

828

-171

-17.1

$11,702

$13,423

14.7

794. Commercial Sports

58

82

41.4

1,450

1,569

119

8.2

$35,766

$30,497

-14.7

799. Misc. Amusement, Recreation Services

823

930

13.0

12,426

29,257

16,831

135.4

$17,884

$21,999

23.0

801. Offices & Clinics of Medical Doctors

2,838

2,592

-8.7

20,101

24,703

4,602

22.9

$59,816

$62,333

4.2

802. Offices and Clinics of Dentists

1,670

1,649

-1.3

8,927

9,785

858

9.6

$28,824

$34,171

18.6

804. Offices of Other Health Practitioners

1,035

1,172

13.2

4,448

7,046

2,598

58.4

$27,265

$32,101

17.7

805. Nursing and Personal Care Facilities

275

302

9.8

34,787

40,788

6,001

17.3

$21,434

$25,760

20.2

806. Hospitals

69

82

18.8

58,930

52,940

-5,990

-10.2

$31,731

$36,963

16.5

807. Medical and Dental Laboratories

296

234

-20.9

2,661

2,914

253

9.5

$36,985

$44,220

19.6

808. Home Health Care Services

128

177

38.3

8,515

15,271

6,756

79.3

$17,206

$20,260

17.7

809. Health and Allied Services, NEC

123

153

24.4

3,321

3,663

342

10.3

$30,364

$33,720

11.1

811. Legal Services

2,354

2,601

10.5

14,297

14,535

238

1.7

$40,597

$50,723

24.9

821. Elementary and Secondary Schools

165

218

32.1

9,575

12,084

2,509

26.2

$25,031

$29,372

17.3

822. Colleges and Universities

35

43

22.9

17,193

20,011

2,818

16.4

$37,273

$43,526

16.8

823. Libraries

98

85

-13.3

1,170

1,042

-128

-10.9

$14,519

$16,218

11.7

824. Vocational Schools

91

94

3.3

1,244

1,314

70

5.6

$24,200

$30,616

26.5

829. Schools & Educational Services, NEC

245

334

36.3

1,653

2,697

1,044

63.2

$18,664

$22,233

19.1

832. Individual and Family Services

567

657

15.9

8,737

11,722

2,985

34.2

$18,626

$21,966

17.9

833. Job Training and Related Services

163

223

36.8

4,144

5,029

885

21.4

$17,345

$17,926

3.4

835. Child Day Care Services

797

932

16.9

6,356

9,858

3,502

55.1

$11,439

$13,675

19.5

836. Residential Care

485

699

44.1

7,940

12,372

4,432

55.8

$19,410

$23,218

19.6

839. Social Services, NEC

264

286

8.3

3,110

3,179

69

2.2

$21,058

$25,709

22.1

841. Museums and Art Galleries

60

63

5.0

1,049

1,380

331

31.6

$16,616

$19,048

14.6

861. Business Associations

198

182

-8.1

1,322

1,229

-93

-7.0

$36,016

$45,175

25.4

863. Labor Organizations

321

322

0.3

1,928

2,301

373

19.3

$20,014

$30,701

53.4

864. Civic and Social Associations

814

802

-1.5

7,531

9,564

2,033

27.0

$10,990

$27,158

147.1

871. Engineering & Architectural Services

1,229

1,162

-5.5

9,937

9,334

-603

-6.1

$45,510

$55,435

21.8

872. Accounting, Auditing, & Bookkeeping

1,051

1,063

1.1

7,555

8,110

555

7.3

$47,563

$52,130

9.6

873. Research and Testing Services

449

577

28.5

4,719

5,915

1,196

25.3

$44,820

$61,389

37.0

874. Management and Public Relations

2,088

2,578

23.5

9,325

15,686

6,361

68.2

$69,503

$86,189

24.0

881. Private Households

2,851

4,209

47.6

3,657

5,521

1,864

51.0

$15,725

$17,894

13.8

899. Services, NEC

194

194

0.0

692

774

82

11.8

$59,341

$65,516

10.4


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Industry Clusters
Software/IT Announced

A new Software and Information Technology (IT) Cluster became official last month. Governor Rowland, joined by Laura Kent, President of the Connecticut Technology Council (CTC), as well as software executives, DECD, and other economic development officials announced the launching at TSI International Software in Wilton.

The Information Technology industries in Connecticut include 4,453 businesses and employ almost 72,000 at average salaries above $50,000. Information Technology is already the fastest growing sector of our economy.

Connecticut's Industry Cluster Initiative centers on the idea that nurturing the state's key industries improves the competitiveness of companies within these industries, in turn boosting Connecticut's economy. Companies involved with clustering share market knowledge and expertise and work with government, education, and economic development organizations to identify the overall needs of their industry.

Legislation sponsored by Connecticut's Industry Cluster Initiative has already increased the State's research and development  tax credit, increased the net loss carry-forward period from 5 to 20 years, and initiated a new tax credit exchange.

The CTC will house and manage the new Software and Information Technology Cluster. It is the second officially organized cluster in Connecticut, joining the BioScience Cluster, which was activated in October 1998.

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Housing Update
October Permits Down Slightly

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 747 new housing units in October 1999. The year-to-date permits are down 4.9 percent, from 9,595 through October 1998, to 9,123 through October 1999.

Reports from municipal officials throughout the state indicate that Windham County with 42.9 percent showed the greatest percentage increase in October compared to the same month a year ago. Middlesex County followed with a 5.7 percent increase.

Fairfield County documented the largest number of new, authorized units in October with 161. Hartford County followed with 142 units and New Haven County had 139 units. Hamden led all Connecticut communities with 37 units, followed by Danbury with 31 and Groton with 16.

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Does the Leading Index Portend Future Change?

The Connecticut coincident employment index dropped from its August peak in the current expansion with the release of (preliminary) September 1999 data. The Connecticut leading employment index also dropped for the second month in a row. The current expansion's length now exceeds all post- World War II expansions. Fed watchers continue to monitor closely Federal Reserve actions, including the state of Greenspan's briefcase, as Fed actions will affect the future of the national and thus Connecticut economies.

The coincident index, a gauge of current employment activity, fell primarily because of the increase in the unemployment rate from 2.1 to 2.7 percent. The other three components experienced small positive movements between August and September.

The leading index, a barometer of future employment activity, has bounced around considerably during the last several years. Since late 1996, however, it has remained in the neighborhood of its current level. This month's release generated a substantial month-to-month decline. (See the accompanying chart.) Similar substantial onemonth declines in the leading index have occurred on several occasions during the current expansion - January 1996, September 1997, and August 1998. In each case, the next month experienced a substantial rebound from the prior month's decrease. Compared to September 1998, the average workweek is up and the initial claims are down; but, the average workweek is lower and the initial claims are higher than any other month since last September. We continue to monitor closely the leading index.

The September release continues the unusual event noted in the last three columns - total employment is below nonfarm employment, although the gap narrowed significantly with nonfarm employment now only 2,100 jobs higher than total employment.

In summary, the coincident employment index rose from 96.8 in September 1998 to 101.1 in September 1999. All four components of the index point in a positive direction on a year-overyear basis with higher nonfarm employment, higher total employment, a lower total unemployment rate, and a lower insured unemployment rate.

The leading employment index rose from 86.8 in September 1998 to 87.7 in September 1999. Three index components sent positive signals on a yearover- year basis with lower initial claims for unemployment insurance, a higher average workweek of manufacturing production workers, and a lower shortduration (less than 15 weeks) unemployment rate. Two components sent negative signals on a year-over-year basis with lower Hartford help wanted advertising and higher total housing permits.

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]. Stan McMillen and Jingqui Zhu [(860) 486-3022, Storrs Campus] provided research support.

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Last Updated: October 15, 2002