HARTFORD, CT—Connecticut’s inability to employ its workforce at the same level as its neighboring New England states may be a blessing in disguise.
Eric Rosengren, president and CEO of Federal Reserve Bank of Boston, told business leaders that a lot of the New England labor market is “too tight,” which is pushing wages and prices up.
Massachusetts, Rhode Island, New Hampshire and Maine all have unemployment rates that are lower than Connecticut’s 4.7 percent unemployment rate.
“That makes it very hard to find the labor you need to expand,” Rosengren said.
He said businesses will have to figure out how to get people to move to those states when the market is that tight.
“That’s why we believe it is appropriate to begin raising rates,” Rosengren said.
He recently learned Boston area restaurants are having problems finding bakers. While he admittedly knows nothing about baking, Rosengren concluded that it’s “symptomatic of a labor market that’s beginning to get too tight.”
Ryan Sweet, director of real-time economics at Moody’s Analytics, said that means businesses may locate to Connecticut in order to find the talent they need to expand. He said it’s a “good thing” that Connecticut’s labor market isn’t as tight as the rest of New England.
Joe Brennan, president and CEO of the Connecticut Business and Industry Association, said he’s hearing more positive stories than he’s heard in a long time.
The aerospace and the shipbuilding industry are thriving, but Brennan said he’s beginning to hear about successes and growth in other businesses. Businesses are beginning to invest more in their talent or the machinery, he added.
The business community, which was hit with most of the 2015 tax increase, got aggressive in its response during the 2016 election cycle.
CBIA created an independent expenditure group last year that spent about $500,000 on 14 elections. Eleven of the 14 candidates it spent money on won their races.
Going forward the election results mean, “if they’re going to pass any legislation this year they’re really going to have to work together in a bipartisan way,” Brennan said.
He said the legislature is beginning to focus on what business groups have been focused on for quite awhile and that’s “economic competitiveness” and understand that the only “true way we’re going to get out of our fiscal problems is to grow our economy.”
He said 2017 is going to be an important year because it’s the first year where there’s greater balance between Democrats and Republicans. The Senate is evenly divided and Democrats hold a slim 78-72 majority over Republicans in the House.
Gov. Dannel P. Malloy, who also addressed business leaders at the Economic Summit sponsored by CBIA, the MetroHartford Alliance, and Webster Bank, said the governor and the legislature need to work together to resolve the problems “that have held so many folks back.”
He said the Small Business Express program created in October 2011 which gives small grants to small companies has assisted 1,600 firms. The manufacturing assistance program has helped 150 firms and helped preserve 34,000 jobs, according to Malloy.
But the governor, who never served in the legislature, admitted it can be tough to negotiate a budget deal that spends less and allows for a reduction of the state workforce.
“It doesn’t pay off in short-term popularity,” Malloy said. “I understand where I am in the polls.”
A poll last June showed Malloy had a 24 percent approval rating.
But Malloy said there’s a lot to be excited about in Connecticut and dismissed the naysayers who only highlight the state’s struggles.
“We need to live within our means,” Malloy said. “That means we’re going to have to make some hard decisions about what services we provide.”
He said he knows those who are on the other end of those spending cuts will complain and the newspapers will print those stories, but “you can’t have it both ways.”
“If we’re going to pay our obligations and size our obligations to the state that we are, then we’re going to have to make hard decisions,” Malloy said. “I’m prepared to do that.”
Malloy will release his budget in February.