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Connecticut Economic Digest: November 1997 issue
The Transformation Of The Waterbury Area | Computer Services Industry Expanding At A Pentium Speed | Housing Update | Coincident index continues its upward momentum

The Transformation Of The Waterbury Area
By Joseph Slepski, Research Analyst

Long considered as having a manufacturing driven economy, the Waterbury area began to undergo some major changes during the eighties. It was during that decade that long established companies such as Century Brass, Scovill, Timex and the Anaconda American Company either greatly reduced their workforce or shut their doors completely leaving thousands of workers jobless. Even though this was devastating to the local economy, the area still was able to hold its own during the mid to later eighties. Construction, retail trade and the service industry were thriving. Area residents were still able to shop at modern malls and shopping centers such as the Naugatuck Valley Mall and the Colonial Plaza; people could take in a minor league baseball game at Municipal Stadium; and due to employee stock options many manufacturing firms were able to remain in production. In 1989, almost 88,000 jobs existed in the Waterbury Labor Market Area, with one-third of these being in the manufacturing industries.

Point Of No Return

The recession of the early nineties would be devastating for the area and the "Brass City" in particular. Between 1989 and 1992, approximately 10,000 area jobs were lost, with half of these being manufacturing jobs. Last ditch efforts to save the old factories failed, leaving employees not only without a job but also minus the money that they personally invested in many of these businesses to help keep them afloat. It was also during this time that declining business led many downtown and suburban retail merchants to shut their doors, which in turn led to the neglect of many of these properties. Mall and shopping center operators were in such desperate straits that in order to entice merchants, leases were on a month-to-month basis. Despite these efforts, empty stores were still the norm. After years of disrepair, the Eastern League pulled their baseball team out of Waterbury. The area had major problems. The sites where the old factories stood were virtually useless to developers because of the astronomical environmental clean-up costs. In 1992, the area unemployment rate reached 10.9 percent, while in the city of Waterbury, the rate would top out at 12.3 percent of the labor force. People were also leaving the area. By 1994, close to 2,000 fewer people were residing in the Waterbury area than in 1989. An even more somber statistic, however, occurred in the city of Waterbury where the population decreased by 4,000 during this five year period. Making matters worse were a municipal corruption scandal that engulfed the city of Waterbury, and the shutting down of local train service.

The Transformation

When it seemed that the area had reached the point of no return, the economy began to turn around, helped by efforts involving both the private and public sectors. Waterbury-based Centerbank began the new show of faith by acquiring North Carolina- based First Union Bank. This initially led to layoffs in a financial industry that had already lost 600 employees, but in the past two years alone 500 new jobs have been created. Within the past year, strong volunteerism has enabled the Naugatuck Railroad to resume operations on a limited basis. If successful, this long abandoned route of transportation will be expanded. Government employment has regained almost all of the 600 jobs lost earlier in the decade, as jobs have increased at Naugatuck Valley Community- Technical College and at the Waterbury-based branch of the University of Connecticut. A new courthouse is being built on the site of the former Anaconda American building and a new office building is under construction for the Department of Public Works. In addition to being a source of hundreds of construction jobs in the area, these state projects, which carry a $52 million price tag, will provide future jobs in state government. As a result of financing by the city of Waterbury and the state of Connecticut, two million dollars were committed to the renovation of Waterbury's Municipal Stadium. The end result of this effort was the birth of the Waterbury Spirit professional baseball team in the Northeast League. At the end of their first season of operation, over 30,000 fans had come through the gates to watch baseball.

The single biggest happening in the Waterbury area, however, occurred at the 90 acre site that formerly housed the Scovill Manufacturing Company. Facing a costly environmental cleanup, the city of Waterbury along with the state of Connecticut and the United States Environmental Protection Agency jointly financed this operation. It was at this point that General Growth Corporation proposed building a major shopping mall at this site, strategically located off Interstate 84. The Brass Mill Center Mall which opened in September 1997 has more than 2,500 employees working at 150 stores which include national retailers and restaurants such as Old Navy, J.C. Penney, Ruby Tuesday, Toys R Us, Littman Jewelers and Bertucci's along with a 12-screen Hoyts Cinema. This explosion in retailing has also led to the construction of the Brass Mill Commons Shopping Plaza, which means additional stores and jobs.

Brighter Future Ahead

Even without the mall, the Waterbury area has been rebounding. More than half of the jobs lost during the recession were already regained by June 1997, including 1,000 new construction jobs and 1,000 new wholesale and retail trade positions. The service industry actually expanded during the recession and employment in the sector has grown by 3,000 during this decade. The unemployment rate in August 1997, has gone down to 5.2 percent in the area and 6.4 percent in the city of Waterbury, a far cry from the double-digit rates of just a few years ago. Also promising is the fact that people are coming back to live in the area. In the last two years, 1,000 people have returned to the city of Waterbury and an additional 1,000 are projected to reside in this city by the turn of the century. Population in the Labor Market Area has also increased by 4,000 during the last two years, with an additional 8,000 projected to live in the area by the year 2000. The jobs are back, the people are back and the economy is back. The start of the twenty-first century looks very promising indeed for the Waterbury area.

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Computer Services Industry Expanding At A Pentium Speed
by J. Charles Joo, Research Analyst

The computer services industry in Connecticut has been growing rapidly since the start of this decade. From 1990 to 1996, this dynamic and everexpanding industry's employment grew by 82 percent, adding almost 9,000 jobs. Workers in that industry also were paid well, with an annual average salary of $60,555 in 1996, considerably higher than the $36,590 average for all nonfarm workers. In each of the last six years, the computer services industry has been adding jobs in both the nation and Connecticut.

Connecticut's job growth rate was above the nation's during 1991 and 1992. Even though 1991 was the worst year of the latest recession in the State, the computer industry countered the trend with an almost 10 percent job growth that year. U.S. employment then grew faster during 1993 and 1994, but the State came back stronger in 1995 and 1996. Overall, between 1990 and 1996, Connecticut's computer services industry employment grew 82 percent, much faster than the nation's 58 percent growth.

The computer services industry is a small but rapidly increasing part of the services sector. Its employment made up 2.6 percent of total services sector employment in 1990, but it grew to 4.2 percent in 1996 to a workforce almost 20,000. The extent of growth in both employment and wages in the computer services industry is uncanny. Between 1990 and 1996, Connecticut lost almost 55,000 jobs, or 3.4 percent, while experiencing a 26.3 percent increase in wages (during which time inflation grew 16.6%). The total services sector, on the other hand, gained 14.8 percent in jobs and 25.8 percent in wages. During that same period, the computer services industry experienced a whopping 82.1 percent rise in jobs, and an explosive 43.7 percent growth in wages.

Looking at the components of the computer services industry, the largest number of new jobs since 1990 occurred in the other computer related services sector (+4,700, +225%). This sector's growth reflects the great increase in the number of computer consultants and data base developers. Computer programming services came in second in most jobs created (+2,370, +131%). However, computer rental and leasing (-16%), and computer maintenance (-24%) businesses actually shrank as the sharply declining cost of computers enabled more and more consumers to buy rather than lease or fix. Employees in these industries had the highest wage rate, though, close to $100,000 a year. The fastest growth in wages since 1990 transpired in other computer related services category (+50%), while the weakest growth was in computer maintenance (+9%). Data preparation and processing industry workers were paid the lowest annual wage of $34,542 in 1996, which was still above the total services industry average of $32,300.

Computer services is a relatively young industry that has experienced rapid growth in employment and wages in the last six years. As computers are increasingly relied on by individuals and businesses, the demand for computer services should continue to be high. The Connecticut Labor Department projects this industry's employment to grow by 19 percent by 2005, faster than the total services and the all industries' rates of 14 and 9 percent, respectively.

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Housing Update
September: housing permits increase

Commissioner James F. Abromaitis of the Connecticut Department of Economic and Community Development announced that Connecticut communities authorized 740 new housing units in September 1997, a 3.2 percent increase compared to September of 1996 when 717 were authorized.

The Department further indicated that the 740 units permitted in September 1997 represent a decrease of 6.6 percent from the 792 units permitted in August 1997. The year-to-date permits are up 23.7 percent, however, from 5,672 through September 1996, to 7,019 through September 1997.

"The 23 percent rise in permits from last year suggests that the housing sector continues to enjoy significant strength," Commissioner Abromaitis said, "Connecticut's economy is strong and growing and we will certainly conclude 1997 with the largest percentage increase in permits in recent years."

Reports from municipal officials throughout the state indicate that Middlesex County with 67.4 percent showed the greatest percentage increase in September compared to the same month a year ago. Fairfield County followed with a 44.2 percent increase.

Fairfield County documented the largest number of new, authorized units in September with 173. Hartford County followed with 161 units and New Haven County had 130 units. Danbury led all Connecticut communities with 25 units, followed by Hartford with 23, and Stamford with 20.

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Coincident index continues its upward momentum

The Connecticut coincident and leading employment indexes continue an upward pattern begun about one-and-ahalf- years ago. The coincident index, a barometer of current employment activity, exhibits healthy growth compared to the earlier part of the current recovery. The most recent observation represents another new peak in the current expansion. The recent upward movement in the coincident index now matches more closely its movements in prior recoveries, unlike the first part of the current expansion.

The leading index, a barometer of future employment activity, continues to move up and down, although overall it maintains a modest upward trend. The leading index also reached its peak in the current expansion with the release of the (preliminary) August data. As mentioned last month, we continue to monitor carefully the leading index as any sustained downward movement in this index may signal the next downturn in the Connecticut economy.

As noted previously on these pages, the recovery of the Connecticut economy relies on the strength of the national recovery. Connecticut's recovery from the last recession lagged behind the national recovery for several years. More recently, Connecticut's recovery has gained much more strength. Can this continue? Some economy watchers argue that the U.S. economy has entered a "new era" - low unemployment, low inflation, low interest rates, and healthy corporate profits. These new-era optimists foresee a bright economic future. The Federal Reserve, however, keeps close watch for any sign of inflation. If and when such a sign emerges, the Federal Reserve will apply the monetary brakes and the Connecticut economy may go into a skid.

In summary, the coincident employment index rose from 85.8 in August 1996 to 92.7 in August 1997. 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 88.6 in August 1996 to 90.0 in August 1997. Four index components sent positive signals on a year-over-year basis with a lower short-duration (less than 15 weeks) unemployment rate, higher total housing permits, lower initial claims for unemployment insurance, and higher Hartford help-wanted advertising. Finally, the fifth component of the index, the average workweek of manufacturing production workers, sent a negative signal as it fell on 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