Signaling a stall in Connecticut’s aggregate economic activity, the General Drift Indicator (GDI), slipped 0.1% between 2022-Q2 and 2022-Q3, from 96.3 to 96.2. The nonfarm job count, which increased by 0.9%, provided the sole positive contribution to the index.
The Connecticut Manufacturing Production Index (CMPI), a big leader of the GDI’s recent climb, abruptly lost its footing.
Facing headwinds from rising prices, income (less transfers) decreased slightly.
Overall, the GDI has risen 2.4% over the past year.
2023 Could Prove Challenging for Connecticut Jobs
Connecticut employers beefed up their payrolls by 14,600 workers in 2022-Q3 in a flurry of hiring that was nearly three times brisker than anticipated. That momentum should carry forward into 2022-Q4 with the state potentially adding another 4,000 jobs.
But Connecticut’s employment outlook is based both on recent trends in the state’s labor market and on prospects for U.S. growth. And challenges to growth abound: rising interest rates to tame inflation, residual Covid supply kinks, new commodity dislocations from Russia’s war on Ukraine.
What Is The GDI?
The General Drift Indicator (GDI) is a composite index of three coincident indicators of Connecticut economic activity: nonfarm jobs, real personal income less transfer payments, and the Connecticut Manufacturing Production Index (CMPI). It is constructed by averaging the movement of the individual components to smooth out the volatility of the individual series. The GDI is designed to provide a gauge of aggregate state economic activity and is indexed so that 2007 = 100.
If, as expected, the nation’s economy slows further in the new year, Connecticut’s jobs engine could shift into reverse. The likely in-state fallout of several thousand fewer jobs each quarter appears modest for now, but an outright U.S. recession could multiply the losses severalfold.
2 Follow-up Questions
CTNewsJunkie: The economy appears to be fragmented following the arrival of the pandemic. Parts of it appear to be working, and others appear to be struggling. What sectors are working in Connecticut, and what isn’t?
Dr. Lanza: Connecticut’s employment total remains below pre-pandemic levels, so overall we are still largely attempting to recover from the effects of Covid. But there are some notable sectoral shifts that have emerged. Arts and entertainment, food and accommodation, local government and retail trade were hardest hit and remain furthest below pre-pandemic job levels. (State government is still losing jobs.) Construction, wholesale trade and transportation, manufacturing, and professional and business services lost fewer jobs than average and have reclaimed them or nearly so. Generally speaking, jobs have shifted from lower-paying service sectors to higher-paying service and goods-producing sectors.
CTNewsJunkie: Supply chain issues continue to hamper sales and growth. How long do you think it will take before we get back to a pre-pandemic state of consumer convenience and if it’s easy to describe, why?
Dr. Lanza: According to one popular index produced by the New York Fed, supply chain pressures are well off their pandemic highs, but they remain elevated by historical standards owing at least in part to China’s zero Covid policy and Putin’s war on Ukraine. Add to that an unprecedented level of consumer liquidity and the result has been a 40-year high in inflation that has added another layer of frustration and unpredictability to economic conditions. These forces have developed over the course of months and years so it will take a similar amount of time for conditions to resolve themselves.
EDITOR’S NOTE: This piece, minus our two follow-up questions, has been published with permission from Dr. Steven P. Lanza in his periodic newsletter called The Green Sheet, Fall 2022 edition. All rights reserved.