If the housing market continues to slow and interest rates rise, a state economist predicts job growth in Connecticut will slow this year and in 2015.
The state departments of Labor and Economic and Community Development said in a report Monday that the state added 19,000 jobs between the end of 2009 and late 2011. That accelerated to nearly 31,000 between late 2011 and the end of 2013. But the forecast says job growth will slow to fewer than 20,000 new jobs from the end of 2013 to late 2015.
“Given the pick-up in U.S. job growth in April, the U.S. economy may very well bounce back in the second quarter from the harsh winter,” Daniel Kennedy, a senior economist, wrote in the monthly report.
But looking at Unemployment Insurance tax data, there’s also the chance that growth will return to a slower pace in the third and fourth quarters, “tempering growth for 2014.”
“Further, the forecast assumes that the slowdown in housing, which began in the summer of 2013, will continue, given rising interest rates, no active fiscal policy on the horizon, and especially given that 2014 is an election year,” Kennedy added. “Therefore, the baseline forecast for Connecticut employment over the eight-quarter 2013Q4-2015Q4 period projects a slowing of Connecticut job growth over the forecast horizon.”
About 45 percent of the employment growth or about 8,795 new jobs will come from the education, healthcare, and social assistance industry sector, according to the report. The leisure and hospitality sector will see the second largest growth with an additional 5,056 jobs over the same period.
The two major sectors projected to make significant subtractions from Connecticut’s job growth between the fourth quarter of 2013 and the fourth quarter of 2015 are Financial Services, which is expected to lose 2,165 jobs, and the Goods Producing sector, which is expected to lose 1,336 jobs over that same period.
There is a chance the the second quarter results for 2014 could bounce back from “weather-depressed economic activity.” But there’s also the chance that the third and fourth quarters could return to slower growth.
“If the housing market gets a ‘second wind’ then growth could be stronger than expected in the last quarter of 2014,” Kennedy wrote.
He said the biggest risk to the economy remains the expiration of the Federal transportation bill. Congress has until September to act.
“This could potentially be a big hit to the economy,” Kennedy wrote. “And this is an election year, both nationally and at the state level, implying even more political deadlock, which does not bode well for economic policy.”
Connecticut’s unemployment rate was 6.9 percent in April. The numbers for May have not been released.