Despite the economic uncertainty, Connecticut’s state budget is still in the black, according to state Comptroller Natalie Braswell. In her monthly letter, Braswell certified a nearly $445 million surplus, which puts the state on track to end the fiscal year with a $2.3 billion budget surplus.
“Though uncertainty and recurrent concerns remain on the national level, Connecticut’s financial standing is stable and well prepared for the future,” Braswell said. “The labor market remains incredibly strong for job seekers, and recent efforts to save on long-term costs and grow the Rainy Day Fund will guard against budgetary impacts from factors outside of our control. However, high costs for essentials like food and housing continue, as families wrestle with persistent inflation.”
A recent report by the federal Bureau of Economic Analysis found Connecticut’s economy contracted by 4.7%, after three quarters of growth.
The bureau, an office of the U.S. Department of Commerce, identified Connecticut’s finance and insurance industry as the leading factor in the state’s GDP loss in the second quarter of this year. The report also ranked last in the nation Connecticut’s 2.2% growth in personal income.
In a Monday phone interview, David Lehman, the state commissioner of economic and community development, said the quarterly reports were volatile snapshots that are routinely subject to significant revisions.
Braswell said falling gas prices have provided taxpayers a much-needed reprieve, though inflation persists in other key areas, including food and basic necessities. She said the job market also remains tight.
Connecticut added 2,900 jobs in August, the eighth consecutive month of gains. The private sector is nearing a full recovery of the jobs lost during the onset of the pandemic, but only 50.8% of public sector jobs have returned.
At the same time, the U.S. has recovered 100% of the jobs lost during the Covid-19 recession and Connecticut has recovered 88%.
Overall, Connecticut has recovered 87.9% of the 289,400 nonfarm jobs lost in March and April 2020 due to the COVID-19 lockdown. The private sector has recovered 91.2% of jobs lost while the public sector has only recovered 50.8%.
In Connecticut, there were 113,000 job openings in July and 71,200 people actively looking for work. If every unemployed person got a job, there would still be 41,800 open jobs.
Meanwhile, the Federal Reserve continues to raise rates to fight inflation. It has raised interest rates five times by a total of 3 percentage points to make borrowing money more expensive and hopefully bring inflation down to their 2% long-run target. Due to the unprecedented speed and strength in increasing in rates, some economists believe that the Federal Reserve has acted too aggressively all but guaranteeing a recession. Whether accurate or not, this month’s inflation reports have caused greater economic uncertainty as the Federal Reserve attempts to tame inflation.