The state’s economy edged up slightly from 40th to 39th place during 2017, but it remains one of the last states still coming out of the great recession, according to the state Department of Labor.
The DOL report, issued last week, found that Colorado had the best overall economy in 2017, the most recently available data, while Alaska scored at the bottom.
Connecticut’s rating of 128.7 was its best score in seven years, but still below the U.S. value of 139.1, according to the report. The report examined each state and Washington, D.C. using quarterly census employment and wages program, annual average unemployment rates from local statisticts. The indexes provide a measure of economic strength of each state that can be compared and ranked.
Researchers looked at four indicators;The number of total covered business establishments, the total covered employment, real covered wages and the unemployment rate.
Over the last 10 years, all 50 states and DC showed positive SEI growth. Connecticut’s overall score has increased by 28.7 percent since 2010, below the national overage of 39 percent. Among the nine Northeast states, Connecticut only outscored Pennsylvania.
Rhode Island’s economy improved the most since 2010. All in all, fewer than half of the states turned around faster than the national average from 2010 to 2017.
“Based on the SEI calculations, most states fared better over the year, and have contributed to a continued modest national economic growth since 2010,” the report concluded. “However, given the nature of the business cycles, the probability of another national recession rises with each passing month. So it remains to be seen what this or next year will bring for the states and the nation.”
Some econmists predicting a contraction in late 2019 or early 2020, saying interest rate hikes have already had some impact.
Housing permit activity in Connecticut last month was down by 40.5 percent from September 2017, according to the Department of Economic and Community Development. Permits for new houses fell from 407 in September 2017 to just 242, issued across 104 municipalities, this year.
The combination of massive tax cuts coupled with dramatic expansion of federal expansion and $1 trillion deficit is likely to significantly contract the economy, said Fred Carstensen, an economics professor and policy advisor at the University of Connecticut.
“Then toward 2020 the stimulous effects begin to contract significantly,” Carstensen said. “The federal reserve is comitted to three or four interest rate increases. Something in that dynamic is going to trigger a contraction.”
Despite some improvement in 2015, the state’s economy has been shrinking every year except for 2015. Job growth has been driven by lower paying industries, as well as surge of about 40,000 who now work outside of Connecitcut, and the state loses that income revenue, Carstensen said.
“Connecticut’s recovery has been in jobs but not the economy,” he said. “Massachusetts index was much better, Rhode Island and New York has fully recovered. How is it that given our location, we are surrounded by states that have done so much better?”
Rhode Island’s recovery was helped in part by marketing itself to Boston firms as a lower cost location with a strong information technology infrastructure.
The next governor and the General Assembly need to do more than simply cut spending, Carstensen said, to improve the state’s economy, Castensen said, including helping more companies utilize stranded tax credits that tie tax breaks to capital and buildings rather than jobs. The credits were part of the cornerstone for a 15-year commitment from United Technologies Corp.
The universities need to develop more, and the state can help by seeking more federal funds to help them collaborate with aerospace, bio-medicine, and information technology firms.
It’s been a bi-partisan failure to not recognized how poorly the state has performed, he said.
“We started to go off the track in the 1990s, with legacy industries,” he said. “We failed to make adjustments in the internet age. We are easily 20 years behind where other areas are. The land of steady habits is a condemnation. That’s the new challenge for the new governor.”