Study: State Economic Recovery Could Fizzle

Swarthmore College
NBC Philadelphia

The economic recovery we’ve seen might not last, according to researchers at UConn.

The weak boost could sputter out, causing more job losses in the state, a study released on Thursday warns.

The state's unemployment rate has climbed steadily from 4.9 percent in December 2007, the start of the recession, to 8.8 percent in June. It peaked at 9 percent in April.

UConn researchers, in part, blame government and said there are no policy initiatives in place that are likely to drive a strong short-term recovery.

The possibility of significant cuts in government jobs to reduce an anticipated $3.4 billion state budget deficit in 2012 would likely would thwart any major recovery in employment, according to the Connecticut Economic Outlook issued by the Connecticut Center for Economic Analysis at the university.

Last week, the Federal Reserve said the pace of the recovery "has slowed in recent months" and downgraded its June outlook that the recovery was proceeding and the job market was improving.

"Dramatic revisions in federal economic data show that the Great Recession was significantly worse than previously thought," the report said. "Thus, Connecticut's economy probably has been weaker than previously recognized."

The UConn report criticized the state government -- which has a $19 billion spending plan for 2012 -- for failing to collect useful data that could help researchers analyze economic changes.

"Connecticut has poor administrative data, knows little about the dynamics of firm creation or disappearance and has not developed an integrated data system to track its general economic performance," the report said.

Fred Carstensen, director of the Connecticut Center for Economic Analysis, said the state's government pursues policies that are ineffective and waste taxpayer money.

Peter Gunther, a senior research fellow at the center and the author of the study, said some good news can be found in the otherwise grim economic outlook. Although Connecticut has not seen much job growth in 20 years, an analysis of job data suggests it has regained higher-wage jobs, such as nursing while lower-wage employment shrank.

Still, the number of high-pay occupations such as chief executive officers and lawyers has fallen, the report said.

The report cites continuing troubles in the housing industry, which led to the start of the recession.

In the first six months of 2010, Connecticut was the only state in the tri-state region including New York and New Jersey where the number of housing permits declined for the fifth successive year, the report said.

As researchers recommended in May, this study urges state officials to reclaim more than $1 billion in unused research and development tax credits to build and equip manufacturing, pharmaceutical, bioscience and research space to create high-wage jobs.

Gunther said Republican Gov. M. Jodi Rell and the Democratic-controlled General Assembly can avoid a new surge in job losses by taking back the tax credits.

"The potential is there for some imaginative fiscal policy that does not put a big onus on the state," he said.

The governor's office did not immediately respond to the Associated Press’ request for comment.

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