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Connecticut Economic Digest: February 2004 issue
A TALE OF SEVEN CITIES: clues to the Hartford region's economic future? | Housing Update

A TALE OF SEVEN CITIES: clues to the Hartford region's economic future?
By Daniel W. Kennedy, Ph.D., Senior Economist, DOL

Dickens's tale was about the cities of London and Paris during some turbulent times. This article focuses on the story of Hartford and six other New England cities during more recent turbulent times. The period of analysis begins in 1990 and runs through 2002. For some of the seven New England cities and their regional economies, it clearly was the best of times-at least up until the downturn in manufacturing and the bursting of the stock market bubble in 2000. For some, especially Hartford, it was not the best of times.

Our story begins in the obvious place: the goods-producing segment of the economy-especially manufacturing. Regions with a substantial manufacturing export base have been hit particularly hard since the downturn in manufacturing activity beginning in the summer of 2000. Having a significant manufacturing sector, the Hartford region has been affected. Average annual manufacturing employment declined by 8,000 between 2000 and 2002. Based on the first 10 months of 2003, the decline is nearly 12,000 since 2000. At the beginning of the period, the Hartford region was severely impacted by the real estate bubble and 1989-92 recession, the end of the Cold War, and the restructuring of the insurance industry. How has the Hartford region done since then? And, what lies ahead?

Framework and context

What follows is a perspective that goes beyond the business-cycle horizon to capture some medium-term trends extending over a decade or more. This will be approached by getting an overview on how Hartford's regional economy has performed-particularly as it pertains to job creation-and what may lie ahead for the remainder of this century's first decade. The trends addressed in the following discussion are based on NAICS-based, annualized employment data, which was used to assess employment growth over the period covering 1990 to 2002. The Hartford regional economy is pretty much captured by the definition of the Labor Market Area (LMA). In order to compare Hartford's performance with similar regions, six other small-to-medium-sized LMAs in New England are analyzed. Due to space constraints, the focus here will be at a high level of aggregation, and thus, summary in nature. Nevertheless, what follows should provide some suggestions for further investigation.

There is at least one LMA for each New England state and both northern and southern New England are represented. The LMAs studied had a 2002 nonfarm employment level of at least 100,000, but less than 1 million. This, of course, excluded Boston. The smallest LMA is Burlington, which had a nonfarm employment level of 107,800 in 2002. The largest LMA is Hartford, which had a nonfarm employment level of 608,400 in 2002. The mean level of employment for the seven LMAs in 2002 was 285,786. The median was 231,200. Reflecting New England's population distribution, the northern New England LMAs are smaller than the southern New England LMAs.

The Hartford regional economy: recent history and prospects
Decline of the job base in the nineties

The Hartford region was the only region to suffer a net decline in nonfarm employment between 1990 and 2002. Hartford had a net loss of 31,500 jobs, representing just under a 5 percent decline. This contrasts with an average gain of 13,200 jobs for the seven LMAs, representing an average growth rate of just under 5 percent. It should be noted that, in general, and reflecting population growth and migration patterns, there is a stark contrast between the performance of the northern versus the southern LMAs. The average gain for the northern LMAs was 22,533 net new jobs, representing an average 22 percent growth rate. This exceeds the 19 percent growth rate in U.S. nonfarm employment over the 1990-2002 period. The southern New England medium-sized LMAs could only add, on average, 6,200 net new jobs, or an anemic 1.5 percent growth rate over the twelve-year period.

What is behind the decline in Hartford's job base?

The most obvious culprit is the loss in goods-producing jobs, especially those in manufacturing. The Hartford region lost 33,500 goods-producing jobs, or 25 percent of the base between 1990 and 2002. Burlington and Manchester both gained goods-producing jobs, and had net increases in their nonfarm job base between 1990 and 2002. Portland's decline in goods-producing jobs was slight, and it too, had a net increase in nonfarm jobs over the 1990-2002 period. However, on further investigation, it might not be quite that simple. 'Blaming' it all on the decline in goods-producing--and especially manufacturing--jobs may be missing something important. A case in point: the Providence region suffered a worse decline in goods-producing jobs than Hartford-both absolutely and relatively. The region lost 37,800 jobs, or 27 percent of its goods-producing job base. Nevertheless, Providence gained over 30,000 net new nonfarm jobs between 1990 and 2002. To some extent, being a satellite of Boston's economy allowed it to benefit from a 'coattail' effect, but that does not explain everything.

Springfield, like Hartford, is also too far from Boston to have benefited from its late-nineties boom. Yet, though Springfield's relative decline in goods-producing jobs was close to that of Hartford's, it still managed to eke out a net gain of 6,400 jobs over the twelve-year period. The last four columns in Table 1, under the heading 'Service-providing' may provide a clue to the erosion of Hartford's job base over the 1990-2002 period. Significantly, the Hartford region was the only economy of the seven studied to create virtually no net, new service-providing jobs between 1990 and 2002!

Service-providing jobs: key to the Hartford region's economic vitality?

Clearly, the perception of service jobs as low paying with little, if anything, in the way of benefits or longevity is a legitimate concern in many, though not all, of the service industries. Nevertheless, for the most part, it is the most likely segment of the economy to generate new jobs. Graph 1 on the front page depicts a scatter-plot with the percent change in nonfarm employment on the vertical scale, and the percent change in service-providing jobs on the horizontal scale. (It should be noted that the scatter plot is strictly descriptive, and no statistical inference is implied.) There appears to be a strong, positive linear pattern, which suggests that the stronger the growth in service-providing jobs, the stronger the growth in nonfarm employment. As can be seen, the point representing Hartford in Graph 1 is the only point not in the first quadrant. The significance of this is that the point represents flat growth in service-providing jobs and a net decline in nonfarm employment. To be sure, there is also a discernible pattern to a scatter-plot of the change in nonfarm employment versus the change in goods-producing employment. However, it does not suggest the strong linear pattern observed in Graph 1. Scratching a bit below the service-providing 'surface' may provide some clues as to where Hartford's job growth was deficient. Graph 2 on page 2 shows the percent growth in four major, private-sector supersectors of the service-providing segment of the seven regional economies over the 1990-2002 period.

What stands out is that Hartford's region was the only one to suffer declines in two of the service-providing sectors. Hartford's region lost almost 10,000 jobs in the trade sector (a 10 percent decline), the worst performance of the seven regions. Springfield, with the next poorest performance, had a two percent decline. The Hartford region also had a decline in transportation and utilities employment, while the other six regions added jobs in this sector between 1990 and 2002. And, though Hartford's employment in professional and business services and education and health care grew over the twelve-year period, its growth rate ranked it in sixth place in both sectors among the seven regions considered. Slow growth, in conjunction with losses in trade and transportation and utilities, resulted in the Hartford region's creating virtually no jobs in the service-providing segment of the economy between 1990 and 2002.

It could be argued that the Hartford region's 1990 nonfarm employment was still at artificially inflated levels due to the real estate and construction bubble, and that comparing that level to the 2002 level is presenting a misleading picture of greater Hartford's job-creation performance over that twelve-year period. However, some of that distortion was reflected in the construction sector. Manufacturing, with the end of the Cold War, also could not sustain its 1990 employment levels. Both construction and manufacturing are part of the goods-producing segment of the economy. In fact, between 1990 and 1992, on an annualized basis, 52 percent of the decline in the Hartford region's nonfarm employment was in goods-producing jobs. Thus, it comes back to what the above discussion suggests: that is, even more critical than the loss of goods-producing jobs has been the inability of greater Hartford's economy to generate new jobs in the service-providing segment. With no offsetting growth in service-providing jobs, the Hartford region's losses in goods-producing jobs were more readily translated directly into a net decline in nonfarm employment over the 1990-2002 period. This suggests that the future health of the greater Hartford region lies in its ability to create jobs in the service-providing segment of its economy.

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Housing Update
2003 total permits: highest since 1999

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) announced that Connecticut communities authorized 829 new housing units in December 2003, a 37.0 percent increase compared to December of 2002 when 605 units were authorized.

The Department further indicated that the 829 units permitted in December 2003 represent an 8.2 percent increase from the 766 units permitted in November 2003. The year-to-date permits are up 3.9 percent, from 9,607 through December 2002, to 9,985 through December 2003.

“The 9,985 permits issued in 2003 represent the highest permit total since 1999 and the third highest since 1989,” said Commissioner Abromaitis. "Connecticut’s housing market continues to be a solid performer, and a major economic driver for the state.”

From a county perspective, New London, Hartford and New Haven counties had year-to-date gains of 22.9 percent, 11.3 percent and 8.0 percent respectively. New London led all municipalities with 48 new units, followed by Milford with 37 and Danbury with 34.

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Last Updated: February 3, 2003