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Connecticut Economic Digest: January 2002 issue
2002: A Year to Keep the Hope for a Stronger Economy | Identifying Turns in Connecticut's Economy | Occupation Profile: Carpenters | Industry Clusters | Housing Update

2002: A Year to Keep the Hope for a Stronger Economy
By Mark Prisloe, Senior Economist, DECD

Like a clean slate of still unbroken New Year's resolutions, the year 2002 offers renewed hope for a resumption of "New Economy" trends including a return to economic growth, increased output, and employment growth statewide and nationally. The National Bureau of Economic Research, a business cycle authority, announced in November that the U.S. had entered a recession in March 2001, ending a ten-year national economic expansion, the longest ever. It is believed Connecticut's economy also slumped into a recession in 2001, but most analysts expect the nation to recover as early as this year. Connecticut's economy would then also return to positive growth.

Historical Patterns

Based on historical patterns, the average length of a recession is eleven months. This suggests recovery could begin before the third quarter 2002. Yet there remain some serious reservations about whether the unprecedented nature of events since September 11th portend only an "average" recession. Nevertheless, substantial groundwork for economic stabilization has already been laid with a large dose of fiscal stimulus from federal tax cuts, resolution on state and federal spending packages, and the monetary stimulus of eleven interest rate cuts by the Federal Reserve Bank last year.

Sustained consumer confidence and the "rally-around-the-flag" resolve reflected in the last DECD business climate survey will also help. The index, which had fallen to 58.0 in the second quarter of 2001, and reached only 60.2 in the third quarter 2001, measured 69.0 in the business outlook for the fourth quarter. While cautioning upon its initial release that it may not reflect actual economic conditions, it does indicate a certain resolve or at least hope among businesses to maintain strong performance in the months ahead.

Risks and Hopes

Among negatives, consecutive year-end declines put nonfarm employment down 0.8 percent, the manufacturing production index down 6.4 percent, housing down 1.1 percent year-to-date, retail sales down 2.6 percent, business starts down 11.1 percent, state tax revenues down 3.8 percent, and New England consumer confidence down 39.0 percent. Such widespread trends seem likely to convince even the most optimistic analyst that we have not avoided recession. Yet, an October drop in the unemployment rate from 3.6 to 3.2 percent, continued strong hourly earnings up 3.4 percent, forecasted personal income up 3.0 percent, and merchandise exports up 11.7 percent are cause for hope.

Indeed, in November, the leading index of Connecticut employment, designed to forecast activity around ten months in the future, was itself "pointing to a possible recovery in the near future" [Digest, November 2001, p. 6]. The trend continued with the current release of the leading index when it rose narrowly to 111.3 for October 2001 from 111.1 for September 2001 (see page 6 of this issue).

A Wider Measure

A comprehensive statewide measure of total final output is the Gross State Product (GSP). It is a measure of the State's total final goods and services produced. On this the forecasts are mixed. The Connecticut Center for Economic Analysis (CCEA), in the Fall 2001 issue of The Connecticut Economy (Volume 9, Number 4), noted recent GSP trends and considered "optimistic" and "pessimistic" scenarios for 2002. In the optimistic scenario, Connecticut's GSP grows 2.7 percent in 2001 and a slower, but still positive, 1.5 percent in 2002. In the pessimistic scenario, Connecticut grows 2.2 percent in 2001 and declines 0.6 percent in 2002. The current Regional Economic Model, Inc. (REMI) control forecast puts Connecticut's GSP (after making an adjustment for inflation) at $155 billion in 2001 and $158 billion in 2002. The latest New England Economic Project (NEEP) forecast puts the GSP at $153 billion in 2001 and declining 0.7 percent to $152 billion in 2002.


As the tragic events of late 2001 unfolded, the widespread expectations were that the fourth quarter U.S. inflation-adjusted real Gross Domestic Product (GDP) would only confirm the recession. Two consecutive quarters of decline in real GDP is a traditional indicator, but not a defined criterion of recession. It was also the unanimous, if unfortunate, conclusion of all the NEEP forecasters in late October that each of the New England states including Connecticut had "tipped" into a "recession." Yet even among experts presenting before Connecticut's own Economic Conference Board last October 2, there seemed equal consensus that barring further terrorist developments and some "visible victory" in the fight against terrorism, recovery could come by mid-year 2002. Thus, with the resolve reflected by the President and the American people in recent months, 2002 is a year to keep the hope for a stronger economy.

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Identifying Turns in Connecticut's Economy

Preparatory activities and analyses have begun in the Department of Labor's Office of Research in preparation for the annual benchmark revision of Connecticut nonfarm employment estimates. Revisions to the currently published nonfarm employment series will replace the estimates from April 2000 through March 2001 and will be released in March of 2002. The benchmark revision process represents a once-a-year re-anchoring of sample-based employment estimates to full population counts which become available later through unemployment insurance (UI) tax reports filed by nearly all employers with the Department of Labor.

Preliminary calculations indicate that Connecticut nonfarm employment (unadjusted) will be revised downward by approximately 7,000 to 13,000 jobs, or 0.4 percent to 0.7 percent. The total number of State jobs is close to 1.7 million. This is an early and rough benchmark revision assessment that could change as more UI tax records are received and processed. Ongoing administrative editing of the UI tax data remains as the most significant determinant of the extent of the final employment revisions. There are almost 110,000 worksites in Connecticut, with 3,500-4,000 included in the monthly payroll survey at estimation, so revisions are inevitable. Nevertheless, the monthly sample-based estimates are key to identifying important economic trends on a timely basis.

Connecticut's Employment Turns

The currently published employment series shows an abrupt flattening of the rate of employment growth starting July 2000. Actually, seasonally adjusted nonfarm employment for the State declined 1,900 positions from July 2000 (1,699,400 jobs) to December 2000 (1,697,500 jobs). Business services employment, which includes temporary help, computer services, and advertising, peaked in the fourth quarter. The first quarter of 2001 showed further job growth deceleration and second quarter employment was no better as a major healthcare strike confounded May data.

Job loss trends began to accelerate and become more apparent at the end of the second quarter of 2001. Rapid and preemptive interest rate reductions may have served to prop up economic activity levels through the second quarter, as slightly negative linear trends developed in advance of the increased job cuts that began after June 2001. Connecticut has posted seasonally adjusted job losses every month since June 2001 for a total decline of 18,100 jobs between June and November 2001. Some of the worst job losses do appear to be over at this point, however. The warmer than usual weather is helping.

The September 11th events, which may be viewed as acts of economic warfare, have in some ways added a clearer view to the State's employment backdrop. Much of the discussion regarding the State's economy has been focused on the 9-11 events and subsequent economic uncertainty, or the third quarter 2001 employment drops, to identify slackening trends for the State. What has been undetectable to date is that the current nonfarm employment series already points to the Connecticut employment cycle peaking in the fourth quarter of 2000. We used peak-trough analysis tools created by the U.S. Bureau of Labor Statistics to identify employment cycles and phases according to criteria similar to National Bureau of Economic Research (NBER) methods. Using these peak-trough analysis tools, the current nonfarm job estimates show an employment peak late in the fourth quarter of 2000 if not earlier, and this is expected to be confirmed following the annual benchmark revisions. In addition, production worker weekly hours, also from the payroll survey, peaked in the fourth quarter of 2000.

Under this peak-trough criterion, a full cycle (peak to trough or trough to peak) must be fifteen months long and phases must be an expansion or contraction of at least five months. These definitions (15 and 5 months) plainly allow for the establishment of trends to prevent calling a one-month drop in employment a change in direction. The almost linear or slightly downward trend in employment in Connecticut after July 2000 qualifies, with a full contracting phase (ending the trough to peak cycle) being established five or so months later in the fourth quarter of 2000. The events of 9-11 may have more firmly established these downward trends, as some of the earlier data may have been inconclusive to establish a turning point in the cycle. The recent action by the NBER to set the onset of the national recession, based predominantly on U.S. nonfarm employment trends, as March 2001, would still preserve Connecticut's distinction of leading the nation into downturns.

It is interesting to note that using these criteria to look back to 1992's employment trough, one can see the employment low point was reached sometime immediately after Hurricane Andrew hit in August 1992. Connecticut's employment recovery was slow after Hurricane Andrew, but it appears to have been a turning or bottoming point when predictions at the time continued to be negative. Hurricane Andrew was the largest insurance claim event prior to September 11, 2001.

Connecticut's High Employment Correlation with the Nation

It is evident that Connecticut has diversified its employment base in the last decade and is less exposed to specific industry downturns. In fact, statistics show Connecticut has a very strong correlation coefficient with the nation in terms of nonfarm employment (there is a correlation above +0.95 over 120 observations - ten years, where +1.00 is a perfect correlation). A strong positive correlation is more a measure of association (strength) of relationship between variables, and not causation. In other words, if the nation were going into a recession, then most likely Connecticut would also go into recession as an outcome of the strength of this association.

It would also be unrealistic to think that other states did not also restructure their economies over the last decade, which provides ongoing competition. However, it is good information to know that Connecticut has already been in an employment downturn for potentially more than a year at this point. Further, knowing that average periods of diminishing economic activity usually range from 8 to 16 months may indicate a potential for recovery in the foreseeable future, baring an unusually severe winter, a prolonged strike, or another terrorist shock.

Conventional wisdom has been ingrained into economic analysis while virtually unpredictable conditions have existed over the last few years. So, fully buying into conventional analysis can at times do more detriment than good. Assorted economic activity indexes have contributed to the lack of clarity in this downturn, because separate indicators like housing and income have held up so well, masking turning points. Nonfarm employment data, even with its revisions, provides a broad, timely and relatively reliable coincident assessment of Connecticut economic trends and turning points in State economic cycles.

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Occupation Profile: Carpenters
By Erin C. Wilkins, Research Analyst, DOL


Occupations requiring moderate to long-term training or experience represent 19 percent of new jobs expected to be created in Connecticut through 2008. Carpentry boasts the highest number of average annual openings for occupations that require long-term on-the-job training.

What Do They Do?

Carpenters cut, fit, and assemble wood and other materials in the construction of buildings, highways, bridges, docks, industrial plants, boats, decks, and many other structures. While working on these projects, tasks may include framing walls and partitions, putting in doors and windows, building stairs, laying hardwood floors, installing kitchen cabinets, and finishing work. Some carpenters may find their work specialized in one or two activities while others will be expected to perform a wide variety of tasks. The ability to read blueprints and comply with local building codes is an important part of most carpentry projects. Outside the construction industry, carpenters perform a variety of installation and maintenance work: install doors and windows, repair furniture, move or install machinery. Carpentry is a physical job that uses power tools and often involves outdoor work.


Nationally, nearly four out of five carpenters work for contractors who build, remodel, or repair buildings and other structures. Most of the remainder work for manufacturing firms, government agencies, wholesale and retail establishments, or schools. Carpenters' duties vary by employer, with builders increasingly using specialty trade contractors who, in turn, hire carpenters to specialize in one or two activities. Carpenters can experience periods of unemployment because of the cyclical nature of the construction industry. Some carpenters alternate between working for a contractor and working on their own as a contractor on small jobs. Nearly one-third of carpenters are self-employed.

Education & Training

Apprenticeships, informal on-the-job training, and vocational education programs are used to prepare persons for the carpentry occupation. Apprenticeship programs are recommended by most employers and are generally three to four years in length, depending upon a student's skill and knowledge. Along with hands-on training, apprenticeship classes include first aid, safety, blueprint reading, freehand sketching and mathematics. While some on-the-job training will give specialized training, broad-based training enables workers to find work in commercial, residential, remodeling, and repair construction, enabling them to find work during cyclical periods of unemployment. High school education is desirable, especially with courses in general mathematics, mechanical drawing, carpentry, and industrial technology. Manual dexterity, eye-hand coordination, physical fitness and a good sense of balance are important. In order to advance to supervisory positions, workers must be able to accurately estimate the amount and cost of labor and materials to finish a project.


The national average annual wage for carpenters was $35,100 in 2000. Connecticut's average annual wage was $37,855, with the Stamford LMA holding the highest average at $43,380 (Table 1). The average entry-level wage for carpenters was $28,145 in Connecticut; the middle 50 percent earned $31,395 - $43,982. Since carpenters are involved in the entire construction process, they often have opportunities to advance to supervisory positions.

Employment Outlook

Carpentry is the largest construction trade in the United States, with 1.1 million jobs in 1998. In Connecticut, there were 10,818 carpenters employed in 1998, and jobs are projected to grow 7.7 percent by 2008. Annually, 83 new positions will be created. While this number is relatively small, carpentry will need to replace 290 workers annually, for a total of 373 annual openings (See table 2). Since there are no strict requirements for entry-level work, the turnover is high as many people who enter the occupation decide the work is not for them.

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Industry Clusters
CT Scores Straight A's on National Economic Development Report Card

Paced by the Bioscience and the High-technology clusters, Connecticut was honored as a top state for overall excellence in economic development in the newly released 2001 Corporation for Enterprise Development (CFED) Development Report Card for the States. Along with Colorado, Massachusetts, Washington and Minnesota, Connecticut earned straight A's. Moreover, Connecticut was ranked first in diversity of industry, and second in several other key areas.

The report grades each state in three main areas: Performance, Business Vitality and Development Capacity, using 70 measures for evaluation. Among its key findings, CFED says there is a very strong relationship between states that have a high presence in technologyintensive firms and states with high scores overall. Connecticut's score improved over last year's when the state received a B in Business Vitality and A's in the other two broad indexes.

Connecticut's greatest improvement was in the category of Business Vitality. This encompasses competitiveness of existing businesses, entrepreneurial energy and structural diversity - the variety of its economic base. Connecticut is first nationally in diversified industrial mix, what the report calls "traded sector strength." In another measure used to determine Business Vitality, the CFED says of Connecticut, "[The] State's export base is superb, providing a solid engine of growth for the state..."

For more information on CFED and their report card, visit

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Housing Update
Year-To-Date Permits Down 1.1 Percent

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development (DECD) announced that Connecticut communities authorized 706 new housing units in November 2001, an 18.2 percent decrease compared to November of 2000 when 863 units were authorized.

The Department further indicated that the 706 units permitted in November 2001 represent a decrease of 13.9 percent from the 820 units permitted in October 2001. The year-to-date permits are down by 1.1 percent, from 8,713 through November 2000, to 8,618 through November 2001.

Vernon led all Connecticut communities with 32 units, followed by Danbury with 31 and Trumbull with 24 units. The New Haven Labor Market Area recorded the biggest reduction in authorized units in November (-132), an almost 70 percent decrease compared to a year ago. From a county perspective, comparing year-to-date data, Windham, Hartford, Fairfield and Litchfield counties surpassed last year's levels while the remaining four counties trailed last year's performance.

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