A Friday report from economists at the University of Connecticut paints a dire economic picture for Connecticut, suggesting that it may take a decade for the state to recover from the COVID-19 pandemic.
“It looks bad. Even an optimistic scenario argues recovery will be slow and painful; a more realistic assessment sees Connecticut struggling to recover in employment, real output, personal income, and state revenues out past 2030,” economists Fred Carstensen and Peter Gunther write in the long-term forecast report from UConn’s Connecticut Center of Economic Analysis.
The state’s economy was still struggling to rebound from the Great Recession and was trailing its previous employment peaks when the pandemic hit. In April, Connecticut saw a “deep plunge” in 277,000 job losses. The report says Connecticut is now poorly positioned to grow high-wage jobs because it “disconnected from the modern data-driven” economy even as the finance and insurance industries have become “increasingly IT intensive.” Before the pandemic Connecticut was already seeing high-paying jobs be replaced with low-paying ones.
“You can regain jobs even as your economy is shrinking. There was a progressive migration of the high-skill, high-wage jobs out of Connecticut and in-migration of low-skill, low-wage jobs,” he said. “As we added jobs we were going backwards.”
Meanwhile, the COVID-19 situation remains troubling. The virus is expected to kill one in every 1,000 Americans before the end of the year and leave 1.5 million survivors with permanent damage, according to the report.
“Of all those who recover 20% to 30%, it now seems, will have ongoing disabilities and chronic conditions. To state the obvious, the dead do not work” and people with disabilities may be less productive, the economists wrote.
The report calls for strengthening the state’s IT infrastructure and investing in data centers. The economists also recommend redeveloping Sikorsky Airport in Stratford, utilizing the state’s deep water ports, and moving to greener electricity generation methods like solar and offshore wind generation farms.
The economists acknowledge that pandemic-related shutdowns and disruptions have led to significant losses but they pose that the result could be, “… the best of times. It is now clear there will be no V-shaped recovery, as early modelling of the COVID-19 economy suggested. Recovery is going to be long, arduous, and uneven.”
Gov. Ned Lamont was more cautiously optimistic about the state’s economic situation during a news briefing Thursday evening. This week, the state revised its tax revenue figures upward by $454 million, shrinking the state’s projected budget deficit to $1.2 billion. Lamont said the improvement was driven in part by tax collections from the rebounding stock market and people moving into the state.
Meanwhile, according to the Labor Department, the state has recovered 60% of the jobs it lost during the plunge in March and April. Lamont said the state has seen “relative good news” when it comes to the economy.
“Take nothing for granted,” he said Thursday. “We’ll see where the trend goes going forward but it’s good news for us if we can keep it going, keep our economy going and we can only keep our economy going if we keep COVID in check.”
COVID-19 cases are steadily rising in Connecticut and elsewhere. As of Thursday, the state had 19 of its 169 towns in the “red alert” zone of more than 15 positive cases per 100,000 residents.
In their report, the economists said that impact of the virus may be prolonged as a result of fears associated with a potential vaccine.
“There is great confidence in the medical community that we will get an effective vaccine, but its politicization has significantly reduced willingness of Americans to take the vaccine, possibly extending yet further the impacts of COVID-19,” they wrote.