Employment may be up a hair from where it was last year at this time, but it’s down on a seasonally-adjusted basis for a second quarter in a row, according to economist Steven Lanza.
“The only breaks Connecticut’s economy seems to catch these days are bad ones,” Lanza wrote in the latest edition of The Connecticut Economy released Wednesday.
The state gained 30,000 jobs since the recession ended, but maintaining those gains over the next few months may prove to be a daunting task.
Connecticut’s unemployment rate rose to 9 percent in August, up from 8.5 percent in July. That’s the largest monthly increase in the rate since 1976, when current methodology was established.
Since then it seems to have leveled off some. The state went from hemorrhaging 4,000 jobs between April and June to shedding about 1,700 between July and September.
But nothing will have a bigger impact on unemployment than an improving national economy.
The U.S. economy needs to start growing again if Connecticut expects to gain jobs, Lanza said.
But it’s not going to be easy. The “consensus among economists calls for another lull in growth until the second half of 2013. And an even worse obstacle is the fiscal abyss that could lie between here and there,” Lanza wrote.
Economists generally believe the U.S. economy will resume 2.7 percent growth by the end of next year, but four dozen economists surveyed by the Wall Street Journal believe it will be at a rate of 2 percent or less.
“Growth at the average forecasted rate would push quarterly Connecticut job gains to 3,000 by 2013-Q4, but only 7,500 in total over the period,” Lanza wrote. “The problem is that with momentum building so slowly Connecticut’s economy will struggle to post more than nominal job gains in the intervening quarters.”
The more pessimistic outlook assumes that Congress will go over the “fiscal cliff.”
The nonpartisan Congressional Budget Office estimated that going over the cliff would slash six points off first quarter growth next year and more than four points off the second, plus one point off the third.
“The consequences for Connecticut employment would be disastrous,” Lanza opined.
The state could lose as many as 20,000 jobs before growth returned in 2014, with losses peaking at 5,000 in the second quarter of 2013. And that’s before the possible defense-related job cuts that may be triggered by sequestration, Lanza wrote.
If the optimists in the Wall Street Journal survey prevail, Connecticut could expect to see an earlier return to job growth.
“That’s not a particularly remarkable performance, but it sure beats cliff diving,” Lanza wrote.
State budget experts have found that economic output in Connecticut fell 9.3 percent since its peak in 2007. At that rate in 2008, they estimated it would take Connecticut’s economy 6.5 years, or until 2014, to regain its pre-recession level of output.
Two years ago, the state budget estimated that unemployment would be about 5.8 percent. The latest projection for 2014 is 7.4 percent.
Click here to read more about their projections.