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Connecticut Economic Digest: March 1998 issue
1997: The Year Of Titanic Job Growth | Connecticut's Gold Coast Is Shining | Housing Update | Connecticut Economy Shows Few Signs Of Faltering

1997: The Year Of Titanic Job Growth
by J. Charles Joo, Research Analyst

Granted, the magnitude of new jobs created in 1997 was not as large as the ones during the 1984-87 period of out of- control expansions. But Connecticut's employment did grow by 2.1 percent over 1996, making it the biggest yearly gain since 1987! The new 1997 benchmarked (see Annual Revisions on page 4 for explanation) annual average data showed an increase of 32,700 nonfarm jobs from the revised figure in 1996, the best gain we have seen in ten years. By December 1997, Connecticut recovered 77 percent of the total jobs lost during the 1989-92 recession, and is experiencing growth comparable to the national employment growth rate.

All Industries Gain Jobs

For the first time since 1984, employment in all major industry divisions rose last year. Good news finally came from the previously declining manufacturing and finance, insurance, and real estate (FIRE) divisions. The manufacturing manufacturing industry ended a 12 year streak of job losses by adding 1,400 workers in 1997. The growth in the chemicals, electronic equipment, and fabricated metal manufacturing industries cushioned the blows in the transportation equipment and industrial machinery manufacturing businesses. The FIRE division also turned around in 1997, after an eight year decline, with an increase of 1,000 jobs. Although the banking and life insurance sectors continued to face shrinking payrolls last year, yet another year of expansion in the fire, marine and casualty insurance companies more than offset the losses in the other sectors. The services industry division added 15,400 jobs over the year, with continued hiring in both the business and health services sectors. Construction firms employed an additional 4,300 workers last year, the biggest jump since 1987. The transportation and public utilities (TPU) industry grew further in 1997 as well, reaching the highest employment level seen in the last 15 years thanks to the rapid developments in the communications sector. As the economy picked up its pace, the wholesale and retail trade industries also benefited, enjoying 2,800 and 4,300 new jobs last year. The overall government sector continued to show strength, as the Indian Tribal governments' booming casinos outweighed the declines in federal and state government jobs.

Stamford Area Adds The Most Jobs

All but one (Danielson) of the ten labor market areas in Connecticut added more jobs last year. As the table above shows, the Stamford Labor Market Area (LMA) added 6,900 jobs in 1997, which was the largest gain among all the labor market areas (more on the Stamford area on pages 2-3). From 1989 to 1997, the New London Area added 6,600 (+5.1%) workers (mainly from the opening of Foxwoods and Sun casinos), while the Hartford LMA was still running at 56,000 jobs, or 8.6 percent below the 1989 employment level.

More Good News

There are some more inspiring statistics that point to a very robust economy last year. The newly benchmarked unemployment rate for 1997 dropped to 5.1 percent from 5.7 percent in 1996, as the number of unemployed persons fell by 11 percent. The last year Connecticut had a lower unemployment rate was in 1989, at 3.7 percent. The labor force in the State also rose again in 1997 to 1,723,300. Moreover, real personal income grew 4.7 percent last year, the largest increase since 1988. Since 1994, real income growth in Connecticut has taken off significantly, and even surpassed the nation's in the past two years.

Unsinkable Economy?

So what does the future hold for Connecticuts economy? Well, despite a drop in January, the State still has 38,700 more jobs than a year earlier. Consider also that, both housing permit and new automobile registration figures rebounded in 1997 after two years of decline. The number of initial claims for unemployment declined further, as the Hartford help wanted index rose once again last year. The State Labor Departments record of new business starts showed an increase, while the number of business terminations fell in 1997. All these trends appear to indicate that our economic Ship is not only heading in the right direction, but may add even more jobs this year. And even if a national iceberg looms ahead, our State's restructured and more diversified economy should not sink like it did last time. So full speed ahead, Connecticut!

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Connecticut's Gold Coast Is Shining
By Joseph Slepski, Research Analyst

The Stamford Labor Market Area is often referred to as the "Gold Coast." This nickname came about as a result of the proximity of the Area to the shoreline and also the fact that several wealthy executives who worked in Manhattan made lower Fairfield county their home. New York executives preferred life in Connecticut to that of New York for a variety of reasons. Among these were: less traffic and congestion, reliable rail transportation, lower housing costs, better schools and no state income tax. Many Area residents worked in New York, shopped in New York, ate in New York, read New York newspapers and watched and listened to New York radio and television stations. It was no wonder then that many were of the opinion that lower Fairfield County was "not really part of Connecticut." This relatively small Labor Market Area, which encompasses only eight towns and 327 square miles, was never really considered to follow the pattern set by the rest of the State. This assumption, however, was proved partially wrong during the last recession.

In early 1989, there were 201,000 people who were working in the Stamford Area. The unemployment rate stood at 1.8 percent of the labor force. Over the next three years, however, 22,000 Area jobs were lost and the unemployment rate rose to five percent. Not only were residents losing jobs in Connecticut, but many State residents who worked in New York were also victims of corporate downsizing. With a median sale price of more than $400,000 for houses, it became very difficult for the Area to attract new residents. In 1991, the State of Connecticut instituted an income tax which removed one of the longest standing advantages which Connecticut had over New York. Nevertheless, the industry mix in the Stamford Area brought about a much faster recovery than the rest of the State. While other areas were heavily dependent on the manufacturing and construction industries, the Stamford Area had a very high concentration of finance, insurance and real estate firms. After an initial loss of just a few hundred jobs, 6,000 new jobs have been created in this industry sector in the past five years alone. Even with the hard economic times facing the rest of the State, large financial firms still saw the many benefits of relocating in Connecticut. Recognizing the advantages of this State and working closely with local and State officials, Swiss Bank started the ball rolling when it was announced in 1995 that this company would be relocating to Stamford. By January 1998 this company had moved 2,200 jobs into the Area. In 1997, National Westminster Bank announced that they will be moving their North American headquarters, along with 750 employees, to Stamford. Also during the past year, it was announced that Zurich Reinsurance had agreed to move into the Area with a net gain of close to 1,000 jobs. Initially this announcement was met with some protest over the fact that State tax credits were being used to facilitate the move. These protests, however, turned into roars of approval when Zurich Reinsurance invested ten million dollars in the City of Bridgeport. This city, which was ravaged by the recession, is using this money to build a stadium to house a professional baseball team that is expected to attract hundreds of thousands of people to the city.

In the last five years, over 23,000 jobs have returned to the Stamford Labor Market Area. Manufacturing employment has still not rebounded as 10,000 factory jobs have been lost. Construction, which fell by close to 2,000 jobs between 1990 and 1992, has recovered over half of those jobs. Employment in this industry is expected to continue to grow as more offices are renovated and new buildings built to house the relocating companies.

The increasing number of jobs in the Area has led to a boom in the transportation, communications and utilities industries. After suffering a loss of 1,400 jobs in the early nineties, 2,200 new jobs have been created in this sector, with most of these being in rail and bus transportation. The services industry is also faring well as 15,000 jobs have been created, with many of these being in either the business services or engineering and management services. The level of employment in the Stamford Area is now at the same level that it was back at its high point in 1989. As a result, the Area's unemployment rate has fallen to 2.9 percent of the labor force, the lowest in the State.

Through the recession and recovery, population has remained stable in the Area. The estimated 330,000 residents has not changed during the entire decade, but is expected to increase to more than 336,000 by the turn of the century as more jobs coming into Connecticut from New York will lead to more workers residing in the Stamford Area. One drawback to this could be housing costs. In 1996 the median sale price for a home in the area was $437,000. This high price tag could turn out to be a plus, though for upper Fairfield County. These workers might look to buying homes there where home prices are $200,000 lower. In any case, jobs are moving in and people are moving in and the "Gold Coast" looks very golden indeed.

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Housing Update
January Housing Permits Up 72.6%

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 737 new housing units in January 1998, a 72.6 percent increase compared to January of 1997 when 427 were authorized.

The Department further indicated that the 737 units permitted in January 1998 represent an increase of 18.5 percent from the 622 units permitted in December 1997.

"Last year, the housing sector posted the biggest permit increase in eight years," James Abromaitis said. "We are encouraged that the January 1998 numbers indicate strong growth continues."

Reports from municipal officials throughout the state indicate that Hartford County with 233.7 percent showed the greatest percentage increase in January compared to the same month a year ago. Fairfield County followed with a 54.2 percent increase.

Hartford County documented the largest number of new, authorized units in January with 297. Fairfield County followed with 165 units and New Haven County had 102 units. Suffield led all Connecticut communities with 100 units, followed by Manchester with 87, and Shelton with 19.

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Connecticut Economy Shows Few Signs Of Faltering

The Connecticut coincident and leading employment indexes support the consensus view that the Connecticut economy should continue to expand, at least through the end of the year.

The coincident index, a barometer of current employment activity, reversed its two-month decline and rebounded to its peak in the current expansion with the release of (preliminary) December data. The declines in the previous two months follow a two-year period of significant upward movement in the coincident index. Since December 1996, non-farm employment increased by over 36,000, or 2.3 percent, while total employment rose by almost 24,000, or 1.5 percent.

The leading index, a barometer of future employment activity, fell in December with the release of the (preliminary) December data after reaching its peak in the current expansion in the prior month (November). The December fall was largely a result of a seasonal increase in the initial claims for unemployment insurance from just over 14,000 in November to just over 22,000 in December.

Taking a longer view, nonfarm employment currently stands at 1,632,800 up from its previous trough of 1,520,100 in December 1992, but has not yet returned to its prior peak of 1,678,300 in February 1989. That is, the Connecticut economy is still just under 46,000 nonfarm jobs short of its peak employment in 1989. A similar story holds for the unemployment rate, which is calculated from total employment and the labor force. The current unemployment rate is 4.4 percent, down from the prior trough of 8.2 percent in February 1992, but not yet returned to its prior peak of 2.8 percent in April 1988.

In summary, the coincident employment index rose from 86.1 in December 1996 to 93.0 in December 1997. All four index components continue to point in a positive direction on a yearover- 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 88.2 in December 1996 to 88.8 in December 1997. Three index components sent positive signals on a year-over-year basis with a lower short-duration (less than 15 weeks) unemployment rate, lower initial claims for unemployment insurance, and a higher average workweek of manufacturing production workers. One index component sent a negative signal on a year-overyear basis with lower total housing permits. Finally, Hartford help-wanted advertising was unchanged on a year-over-year basis.

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