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Connecticut Economic Digest: February 2005 issue
Defense-Related Employment-Can Connecticut Stop the Decline? | Housing Update

Defense-Related Employment-Can Connecticut Stop the Decline?
By Lincoln S. Dyer, Economist, DOL

In August 1996, the Office of Research at the Connecticut Department of Labor (CTDOL) performed an analysis on Connecticut's private defense-related employment by tracking industries that were isolated from a U.S. Bureau of Labor Statistics defense model ("Employment in private defense-related industries drops again in 1995," This input-output model of the U.S. economy concluded that at least 40 percent of the product of these industries was related to defense (under the old Standard Industrial Classification System - SIC). Since many defense contractors also have commercial/civilian production lines, jet engines for example, it is difficult to determine the exact number of pure private defense-related jobs. This is why we utilized this BLS model. It helped provide a baseline of confirmed industries strongly influenced by defense expenditures to measure the employment levels year to year. These industries under the previous SIC definitions included weapons, ordnance and accessories (except vehicles and guided missiles) (348), aircraft and parts (372), shipbuilding and repairing (3731), guided missiles and space vehicles and parts (376), tanks and tank components (3795), search and navigation equipment (381), explosives (2892), and radio and communication equipment (3663, 3669). Also included were research sectors that contributed to defense such as physical, biological, economic, sociological, and educational research and their testing laboratories (8731, 8732, and 8743). Notice that 1988 job levels under these SIC-defined-defense-related industries were almost cut in half by 2002.

However, in the last few years, the U.S. and consequently all of North America has updated its industrial classification system from the Standard Industrial Classification (SIC) to the North American Industry Classification System (NAICS). Many industries are not directly convertible from SIC to NAICS, so this baseline to some extent was altered. A new defense-related employment model probably should be determined, or a new emphasis at the job or occupational level will emerge, so these comparisons can continue. In the absence of an accepted standard, we made an effort to convert those defense sectors from SIC to NAICS in order to evaluate current defense-related employment trends in Connecticut. This was done by identifying NAICS sector codes that best aligned with the old SIC system despite changes to the coding system. The time series breaks were then evaluated to see how well they compared over the 1999-2002 period when both SIC and NAICS were being used. In this way we produced a time series that bridged the defense-related employment we had tracked under SIC to the new NAICS-based data that is currently available. The NAICS codes that were "crosswalked" from the SIC are as follows:

NAICS Conversion

As defense-related industries under NAICS, we came up with 32592 (Explosives Manufacturing), 33299 (All Other Fabricated Metal Product Manufacturing) where we found small arms and other ordnance and ammunition manufacturing, 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing), 3364 (Aerospace Products and Parts Manufacturing including Guided Missiles and Space Vehicle Manufacturing), 3366 (Ship and Boat Building), 336992 (Military Armored Vehicle, Tank, and Tank Component, and 54171 (Scientific Research and Development Services).

It should be noted that, in the conversion to NAICS, some employment identified under the SIC system may be distributed among many NAICS industries, as NAICS is a process-based classification system as opposed to a product-based system. For example, operations like research and development or headquarters often were split off to their own sector classifications.

Convergence of NAICS and SIC Private Defense-related Employment

Before NAICS was fully implemented and the statistical community was still using the SIC coding system, there was dual coding under both classification systems being performed and tracked for a few overlapping years. So, after SIC was fully discontinued and NAICS fully in use, the CTDOL Office of Research was able to compare and contrast the NAICS defense sector conversion to the now out-of-use SIC system. The differences in the coding systems mentioned earlier were assessed. Differences in coding for company headquarters designation and research and development operations, for example, could have caused major discrepancies in the general overall trend. That did not seem to be the case. While there are definitely some differences in aggregate levels, the trends seem to be comparable and by the last few months of dual coding comparability the levels appear to be coming together.


Connecticut's private defense-related employment, traditionally one of America's "Arsenals of Democracy," has been severely reduced since 1988 when employment levels measured close to 100,000. The private defense job level has been cut in half since the end of the Cold War. Productivity gains have been partly responsible for some of the job declines, but decreased defense expenditures after the Cold War undoubtedly accounts for the bulk of the job loss. Only a slight upturn resulted from the increased defense spending since 9/11. The job decline resumed after 2002 but started to even out by June 2004 and now measures roughly 48,600 private defense-related positions.

In some ways this level of defense jobs seems to be at almost a subsistence leveling or critical mass point that should be maintained. An economic initiative to sustain 50,000 private defense-related jobs in conjunction with maintaining 200,000 overall manufacturing jobs in the State could dovetail with each other nicely as almost 90 percent of defense-related employment is in manufacturing. The other 10 percent is employed in R&D, which also supports manufacturing and other spin-off developments for civilian use. The high-value jobs created, increased defense spending since 9/11, and the lack of direct low-cost competition from foreign companies for defense sector work because of security issues makes this sector critical for Connecticut's ability to have good paying jobs for its citizens, provide overall industrial diversification for the State, and provide security for our nation. No wonder Connecticut is fighting hard to keep the U.S. Submarine Base off the base closure list. This would help preserve the complimentary submarine building infrastructure of General Dynamic's Electric Boat Shipyard nearby in Groton. Maintaining Connecticut's capacity to produce is worth fighting for.

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Housing Update
Banner Year for Connecticut's Housing Sector

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) announced that Connecticut communities authorized 1,002 new housing units in December 2004, a 20.9 percent increase compared to December of 2003 when 829 units were authorized.

The Department further indicated that the 1,002 units permitted in December 2004 represent a 22.7 percent decrease from the 1,297 units permitted in November 2004. The year-to-date permits are up 19.8 percent, from 9,985 through December 2003, to 11,958 through December 2004.

“2004 was a remarkably strong year for Connecticut’s housing market,” said DECD Commissioner Abromaitis. “The 11,958 permit total for 2004 was the highest since 1989 and marked the fourth consecutive year of permit growth.”

Bristol led all municipalities with 149 units in December, followed by New London with 113 and Hartford with 35. For the year, Danbury led all cities and towns with 398 units authorized in 2004. From a county perspective, Fairfield County showed the largest growth (40.6 percent) on a year-to-date basis.

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Published by the Connecticut Department of Labor, Office of Research
Last Updated: February 2, 2005