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Connecticut Economic Digest: June 1998 issue
Export Growth Highest In Seven Years | Connecticut's Wage Rates Among The Highest In New England | Industry Clusters | Housing Update | 'New Era' Or 'Bubble': What's One To Think?

Export Growth Highest In Seven Years
By Mark R. Prisloe, Associate Economist

Connecticut's merchandise exports to foreign markets of $7.8 billion in 1997 increased by over $955 million, or 14 percent, from the year before. This represents the largest increase since a 16 percent gain in 1990. Connecticut's export growth was ahead of the 10.4 percent U.S growth rate for the same period, and ahead of export growth rates in neighboring states of New York, and Massachusetts. Connecticut's growth rate also exceededthat for New Hampshire, North Carolina, and Pennsylvania, and matched the growth rate for New Jersey among states in the Northeast.

The growth in exports is a strong indicator of the competitiveness of Connecticut companies and products in foreign markets. Among other recent indicators, this is one of the strongest signs of the overall health of Connecticut's economy. Connecticut's strong export growth also validates the DECD's International Strategic Action Plan and the effects of the Industry Cluster and International Division to increase firms' global competitiveness.

Export Trend

The trend in Connecticut's merchandise exports is presented in the chart below. As can be seen, the 1997 exports have reached their highest level since state-level export statistics have been available.

Data Source

The source of this information is the U.S. Department of Commerce, which releases the data quarterly based on data extracted from the Shippers Export Declaration document. However, under a unique contract with the Massachusetts Institute for Social and Economic Research (MISER), the U.S. data are refined and estimated by state. MISER is the only source of state export data available. No comparable state statistics on imports are available and no estimates of service exports by state are made. The data pre- sented in this report are for merchandise exports only and are based on the "Origin of Movement" rather than "Zip Code of Exporter" data series from MISER.

Export Industries

Connecticut's export growth in 1997 was driven by growth in the transportation equipment industry of 18.6 percent, industrial machinery of 26.9 percent, and instruments and related products of 21.8 percent. Other leading export industries were primary metals, up 72.3 percent; apparel and other textile products, up 110.9 percent; and rubber and miscellaneous plastics products, up 57.7 percent.

Export Countries

Connecticut exporters continued to diversify and expand their international markets. Canada continued to be Connecticut's top export market with an 11.6 percent increase over 1996. The United Kingdom and Japan were in second and third places. Exports to the United Kingdom were up 22.9 percent and exports to Japan were up 4.4 percent. Among the top ten export destinations, the single largest increase was for exports to the Republic of Korea, up 113.5 percent.

Export Jobs

In 1996 it was estimated that manufactured goods accounted for 240,000 jobs in the state, about 96,000 direct jobs, and an estimated 144,000 indirect jobs in banking, freight forwarding, communications and other services. The most recent estimate from the U.S. Bureau of Economic Analysis put Connecticut second only to Washington with 7.5 percent of total employment related to the export of manufactured products.

Export Assistance

The Department of Economic and Community Development has investigated ways to help businesses successfully take the first steps in overseas markets. The latest initiative is a free, one-stop information source provided through the Connecticut Economic Resource Center, Inc. (CERC), a private, non-profit organization that works with the DECD to support economic development efforts and to promote Connecticut as a business location. For more information and export assistance, call the Access International line at 1-800-392-2122.

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Connecticut's Wage Rates Among The Highest In New England
By Michael Polzella and Michael Zotos, Associate Research Analysts

The Connecticut Department of Labor, Office of Research, in conjunction with the U.S. Department of Labor, Bureau of Labor Statistics, conducts a yearly mail survey designed to produce estimates of employment and wage rates by occupation. The Occupational Employment Statistics (OES) program collects data on wage and salary workers in nonfarm establishments in order to produce estimates for over 750 occupations in over 400 industry classifications.

The 1996 survey round was the first year that the OES program began collecting wage rate data along with occupational employment data in every state in the nation. In addition, the program's three-year survey cycle was modified to collect data from all industries each year. Prior to 1996, data was collected from selected industries each year of the three-year survey cycle. Also new with the 1996 survey round is the collection of wages for nine areas in Connecticut. This information will be released shortly in a separate publication, and will contain additional occupations for each area when the second and third rounds have been completed.

Nationwide, approximately 400,000 establishments in private, public and non-profit sectors are represented. In Connecticut, the survey included over 7,000 businesses with a total employment of approximately 423,000. Survey results were based on a 77 percent response rate from the businesses contacted, covering 72 percent of the surveyed employment.

The estimates produced from the OES survey provide accurate and valuable wage information to job seekers, counselors, students, planners, economic developers and others. The data will help employers identify wage levels and trends by industry and occupation, adjust existing pay structures, evaluate future personnel needs and discover new labor and resource markets. The OES wage data can also be compared between metropolitan statistical areas (MSA), states and the nation. Occupational employment and wage estimates are especially useful for initiatives such as Jobs First, where Temporary Family Assistance (TFA) recipients are expected to move from TFA into employment within a short period of time. OES wage data, when combined with the Office of Research occupational projections, can identify entry-level occupations that require minimal skills, education, and experience, as well as forecast the number of these jobs for which workers will be needed in Connecticut.

The 1996 survey found the five highest paying occupations in Connecticut overall to be: Dentists, $50.96; Podiatrists, $42.19; Lawyers, $36.74; Health Assessment & Treatment Teachers- Postsecondary, $35.87; and, Chiropractors, $34.82. The results showed the five lowest paying occupations in Connecticut to be: Waiters & Waitresses, $5.80; Cooks-Fast Food, $5.99; Baggage Porters & Bellhops, $6.07; Ushers, Lobby Attendants & Ticket Takers, $6.17; and, Amusement & Recreation Attendants, $6.25.

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Industry Clusters
"Cluster Bill" Passes Both Houses

In the waning hours of the 1998 session the General Assembly on May 5th unanimously approved legislation launching Connecticut's industry cluster initiative. Only fifteen months earlier, the first cluster meetings were convened, accompanied by enthusiasm as well as questions about the ultimate outcome of such an ambitious program. These questions were answered convincingly.

The 130 business and education leaders who comprised the industry cluster Advisory Boards presented key recommendations to Governor Rowland in the report "Partnership for Growth." Praised as one of "the most significant economic strategies in the last 50 years," the recommendations received strong bipartisan support.

Enacted recommendations were: $3 million to fund cluster "activation" and related activities; $20 million in re-authorized Connecticut Innovations' (CII's) bond funds for creation of laboratory and incubator space; expansion of the 15-year carryforward period for the 20 percent research and experimentation/ incremental tax credit for all taxpayers (previously limited to biotech companies); a full 6 percent R&D tax credit for all companies with $100 million or less in revenues; $4 million in Manufacturing Assistance Act budget for cluster activities; and an increase from $1 to $3 million for CONN/STEP to create a world-class manufacturing resource center.

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Housing Update
April Housing Permits Down 10.4%

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development today announced that Connecticut communities authorized 928 new housing units in April 1998, a 10.4 percent decrease compared to April of 1997 when 1,036 were authorized.ommissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development today announced that Connecticut communities authorized 928 new housing units in April 1998, a 10.4 percent decrease compared to April of 1997 when 1,036 were authorized.

The Department further indicated that the 928 units permitted in April 1998 represent an increase of 24.2 percent from the 747 units permitted in March 1998. The year-to-date permits are up 5.7 percent, from 2,894 through April 1997, to 3,059 through April1998.

"The year over year increase of 5.7 percent indicates that longterm growth in the housing sector continues to be sustained," James F. Abromaitis said.

Reports from municipal officials throughout the state indicate that Windham County with 54.2 percent showed the greatest percentage increase in April compared to the same month a year ago. Middlesex County followed with a 47.1 percent increase.

Hartford County documented the largest number of new, authorized units in April with 206. New Haven County followed with 197 units and Fairfield County had 193 units. North Haven led all Connecticut communities with 46 units, followed by Wallingford with 27, and Shelton with 26.

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'New Era' Or 'Bubble': What's One To Think?

We pause this month to offer some comments on macroeconomic issues at the national level, a topic that is currently receiving much discussion in the popular and financial press. As we have stated before in this space, the future of the Connecticut economy depends critically on the future of the national economy.

The Economist (April 18th-24th 1998) kicked off significant debate arguing that the U.S. economy was a "bubble" about to burst. The Economist cited three trends to bolster their thesis - inflation in asset prices, merger activity verging on mania, and rapid (M3) money growth. The policy lesson? The Fed must raise interest rates now to pop the bubble before "speculative excesses" get worse. Connecticut will be quite sensitive to any such move by the Fed since a good portion of our income growth over the last several years can be traced to capital gains. An increase in interest rates cannot be a good sign for Connecticut, nor for the nation.

The bubble view counters the "what-me-worry" attitude of those arguing that the U.S. has entered a "new era." This view argues that the significant pain of the recent restructuring in the U.S. and Connecticut economies has paved the way for continued healthy growth with low inflation and interest rates. No need exists, in this view, for the Fed to intervene and raise interest rates.

We do not believe that the business cycle has been repealed. The business cycle may be an entirely new animal, but it remains as a foe. Nor do we believe that a stock market correction will cause a collapse in the economy. The recent restructuring has positioned the U.S. and Connecticut economies to better weather future downturns. Nevertheless, future moves, or lack thereof, by the Fed will fundamentally affect the future of the national and Connecticut economies.

Returning to more local issues, the Connecticut coincident and leading employment indexes both fell somewhat with the release of (preliminary) March data, after reaching new peaks in the last two months. Nevertheless, each index is still up on a year-over-year basis.

In summary, the coincident employment index rose from 87.3 in March 1997 to 94.2 in March 1998. All four index components continue to point in a positive direction on a year-over-year basis with higher nonfarm employment, higher total employment, a lower insured unemployment rate, and a lower total unemployment rate.

The leading employment index rose from 89.8 in March 1997 to 90.7 in March 1998. Three index components sent positive signals on a year-over-year basis with a lower short-duration (less than 15 weeks) unemployment rate, a higher average workweek of manufacturing production workers, and higher Hartford help-wanted advertising. The other two components sent negative signals on a year-over-year basis with higher initial claims for unemployment insurance and lower total housing permits.

Source: Connecticut Center for Economic Analysis, University of Connecticut. Developed by Pami Dua [(203) 461-6644, Stamford Campus (on leave)] and Stephen M. Miller [(860) 486-3853, Storrs Campus]. Kathryn E. Parr [(860) 486-0485, Storrs Campus] provided research support.

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