(Updated 4:05 p.m.) The good news is the recession is over, the bad news is that the labor market and jobs aren’t going to rebound until the middle of next year, Gov. M. Jodi Rell’s Council of Economic Advisors told a roomful of lawmakers Thursday.

“Yes, we are done with the recession, but we continue to face the head winds and the aftereffects and will continue to do so into 2010,” Economist Donald Klepper-Smith of DataCore Partners told lawmakers.

When asked what the economic recovery will look like the council seemed to agree it would look like a “lazy V,” and not a “W” which would mean it would improve and then bottom out again.

“It’s going to be a long hard slog not matter what letter the economy is,” Steven Lanza, of the University of Connecticut said.

The state has lost 86,800 jobs since March 2008 and the council predicted that the state will probably lose a total of 100,000 jobs before the end of next year.

What’s worse is that 80 percent of the job loss is structural in nature, which means due to things like globalization, “a lot of these jobs aren’t coming back,” Klepper-Smith said.

Susan Coleman, an Ansley Professor of Finance at the University of Hartford , said the state has to worry about this because jobs drive consumption and she doesn’t see employers adding more jobs back in the near future. She said if you count the number of underemployed the unemployment rate is probably closer to 17 percent right now and wage and income levels are 5 percent below the level they were at just one year ago.

Lanza said this year the reduction in personal income contributed to the 15 percent decline in tax revenues.

He said the two year budget passed by the General Assembly assumes 5 percent revenue growth. He said in order for the state to be able to balance its budget in 2012 and 2013 tax revenues must increase 16 percent and 20 percent. He said that doesn’t take into account the $624 million deficit the state faces in the current year.

“Assuming even 5 percent revenue growth may be optimistic,” Lanza said.

Several legislators asked what could be done about comments they have heard about Connecticut being an expensive state to do business.

Connecticut will never be a low-cost state, and the challenge is to find a balance that continues to make it attractive to both businesses and workers, Lanza said. He said if the cost of doing business was the only concern then all the jobs would be in North Dakota. He said companies understand there’s benefits to locating where the highly skilled workers reside.

“We’re never going to be North Dakota,” Lanza said. “Increasingly as workers decide to live here businesses will follow.”

Peter Gioia, an economist with the Connecticut Business and Industry Association, said what employers want is predictability. They want to be confident the tax structure is not going to “yo-yo.” 

Majority Leader Denise Merrill, who attended Thursday’s meeting, said she didn’t think there were any surprises. However, she had hoped the economy would turn around a little quicker than it is.

“The whole country is in the same place,” Merrill said Friday afternoon. “There are 47 states that passed budgets only to find they have another deficit.”

Just back from a National Conference of State Legislators meeting in California Merrill said that state slashed education spending and required state workers to take three furlough days per month and the public still wasn’t happy.

While Connecticut seems to fall in the more in the middle of the pack when it comes to budget difficulties, these next few months are going to be tough for legislators as they reconvene in December to try and erase an estimated $624 million deficit.

It’s clear that whether you cut spending or raise taxes the public isn’t going to be happy, Merrill said.

What most concerns Merrill the most is 2012 because that’s when the states liabilities balloon and the Rainy Day fund and federal stimulus money are all gone. She said it’s frustrating to hear “we’re coming out of a recession, but we’re still losing jobs.”

Click here to read Thursday’s presentation.