Connecticut’s Great Depression May Be Over
(Bloomberg Opinion) -- Big news! Going by third-quarter state gross domestic product data that were just released, Connecticut’s economy is on track to grow more than 2 percent in 2018! That’s … not much. But it’s better growth than the state has seen in more than a decade.
Another way of looking at the GDP data is that the state’s economy is now 9.7 percent smaller in real terms than it was at its peak in the first quarter of 2008.
U.S. real GDP grew 19.1 percent over that same period. The only other states that experienced GDP declines were Louisiana (0.2 percent), Mississippi (2.1 percent) and Wyoming (5.5 percent).
Wyoming is the country’s leading coal producer, and the past decade has of course been awful for the coal industry. What’s Connecticut’s excuse? If you live there, you know the litany: high taxes, a troubled state employee pension system, tough times for a formerly strong financial sector, extreme economic inequality, an aging population, and a lack of big cities (which corporations and affluent people have been gravitating to lately).
GDP isn’t the only indicator that’s down. Connecticut is one of just three states estimated by the Census Bureau to have lost population since 2010 (the other two are Illinois and West Virginia), and one of just three with fewer nonfarm payroll jobs as of December than at the start of the last recession in January 2008 (the other two are West Virginia and Wyoming).
Despite all this, Connecticut is still the richest state in the country, with a per capita personal income of $74,076 as of the third quarter of last year. So that’s something it has going for it. There are also at least modest signs that its long depression is finally ending. One is GDP growth; another is job growth:
The state seemed to be sliding back into no-growth mode in 2016 and 2017, but 2018 saw the biggest annual employment gain since 2006. Average weekly earnings were also up 7.6 percent from December to December, compared with 5.3 percent nationwide. The construction industry accounted for about half the year’s job gains, and health care and restaurants were also big, but there were also significant gains in smaller, high-wage sectors such as aerospace manufacturing and financial investments.
Looking forward through 2026, the Bureau of Labor Statistics and the Connecticut Department of Labor have projected continued healthy job gains for the state, with health care leading the way but the manufacturing and professional, scientific and technical services sectors also expected to add more than 10,000 jobs each. The financial sector’s gains are expected to be only half that, but after big job losses over past decades, that would still be a big turnaround.
Who will do these jobs? Well, that’s an interesting question. Connecticut’s ranks of 65-plussers are growing, going from 14.2 percent of the population in 2010 to 16.8 percent in 2017. Its ranks of kids aren’t. Connecticut’s ratio of births to population is fourth-lowest among the states, and as a result its under-18 population has plummeted from 29.4 percent of the total in 2010 to just 20.7 percent in 2017. There is one demographic bright spot, though: After sharp declines in the 1990s and 2000s, Connecticut’s young-adult population has been growing.
I’ve included numbers for nearby states and the U.S. to add context. A big driver of these shifts has been generational, as baby boomers aged out of the 25-34 range in the 1990s and millennials have aged into it over the past decade. Connecticut’s recent growth in the age cohort has still trailed the national growth rate by a lot, and those of neighboring Massachusetts and New York by even more. But it did beat New Jersey!
One is tempted to surmise from anecdotal evidence that most of these new Connecticut young adults live in Stamford, which has in recent years sprouted whole neighborhoods of apartment buildings catering to young professionals. This is not backed up by the available Census Bureau numbers, which don’t show gains in Stamford’s 25-34 population since 2010 — but that’s survey data with pretty big margins of error and the city’s overall population is up an estimated 6.7 percent since 2010.
A big attraction of Stamford is that it’s less than an hour by train from midtown Manhattan. Overall, the percentage of Connecticut workers who commute to jobs out of state rose from 5.9 percent in 2010 to 7.3 percent in 2017. Most of that can be chalked up to the state’s weak economy, but it may also be relevant that (largely as a result of that weak economy) house prices in Connecticut have barely budged since the housing bust, while in neighboring states they’ve risen a lot.
These are indexes showing the change in house prices since 1990, not the prices themselves. But while those house prices remain pretty high in New York-neighboring Fairfield County (2018 median: $451,500), in the rest of the states’ counties, median prices are near or below the national median of $261,600. Connecticut’s long depression has left it with housing that’s actually kind of affordable.
These price measures do leave out Connecticut’s property taxes, which are the nation’s highest. The state’s pension burdens and relatively high cost of government will continue to threaten its recovery, and I really don’t know how this will all pan out. But at least things are looking up, which they haven’t in a while.
Wedged as it is between a gigantic metropolis and a very big one, Connecticut thrived during the post-World War II decades as first people and then jobs migrated from cities to suburbs. The urban revival of recent years has to some extent reversed that flow and thus posed big challenges for Connecticut and similarly situated New Jersey. But Connecticut does have a bunch of compact old downtowns that offer urban density and diversity on a smaller, cheaper scale than Boston or New York. Among the five Connecticut cities with more than 100,000 inhabitants, Stamford has been by far the most successful at capitalizing on these traits. New Haven, the home of Yale University, has seen a lot of new development, too, but it still has financial troubles and a poverty rate of 25.6 percent (the U.S. rate is 12.3 percent). The other three — Bridgeport, Hartford and Waterbury — also have poverty rates above 20 percent, and Hartford had to be bailed out by the state last year to avert bankruptcy. There are signs of improvement, though. According to the Town Economic Indexes maintained by the Connecticut Department of Labor, Hartford, New Haven and Stamford have all outperformed the state as a whole since 2010, and while Bridgeport and Waterbury fell a bit short, they still beat the leafy suburbs of Greenwich and Westport. If Connecticut is going to have an economic future, it might be kinda sorta urban.
The three states with even lower ratios are New Hampshire, Vermont and Maine. Measured by births per woman aged 15 through 44, Connecticut scores slightly higher.
Nationwide, suburbs have been growing faster than cities in recent years, but the opposite has been true in the big metropolitan areas of the Northeast.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Justin Fox is a Bloomberg Opinion columnist covering business. He was the editorial director of Harvard Business Review and wrote for Time, Fortune and American Banker. He is the author of “The Myth of the Rational Market.”
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