Dan Haar: CT economy at No. 17 in 2022 despite slow finish; state regains No. 1 in income

Dan Haar: CT economy at No. 17 in 2022 despite slow finish; state regains No. 1 in income

Connecticut ended 2022 at the No. 17 position among states in overall economic growth despite a lagging fourth quarter, new federal data show. 

And in a point of pride, Connecticut regained its longtime lead in per-capita income in 2022 after falling to No. 2 behind Massachusetts in 2021, for the first time in three decades. Our lead in 2022 totaled a razor-thin $27 over our northern neighbor, obviously a rounding error but a win nonetheless. 

The report from the U.S. Bureau of Economic Analysis shows an up-and-down pattern in both overall growth and income gains from quarter to quarter, adding up to 2.4 percent economic growth for all of 2022.  And when we string together three years of reports, we see a clear direction of pandemic-era recovery from the state’s bottom-of-the-pack status in the previous dozen years, since before the 2008-09 recession. 

“Let’s hope this trajectory is sustainable,” UConn economist Fred V. Carstensen said, commenting on Connecticut’s increases over the last three years.

“We’re heading in the right direction,” said Chris DiPentima, CEO of the Connecticut Business and Industry Association — though he, like Carstensen, pointed to warning signs in both policy and economic trends. “We can’t say ‘Job done.'”

For the last three months of 2022, Connecticut’s economy showed an anemic 0.1 percent annual rate of growth, No. 46 among states, compared with 2.6 percent growth in the nation as a whole, according to Friday’s report, which is preliminary and could be revised sharply this summer. Income growth also lagged, at an annual rate of 4.7 percent compared with 7.6 percent in the nation, for a No. 41 finish in the quarter. 

But that’s largely statistical noise. In category after category of income and overall activity, we see outlier numbers that even out for the full year. Any one quarter of data is basically useless for a big picture.

For the full year 2022, Connecticut’s 2.4 percent “real” gain in economic growth — meaning it’s adjusted for inflation — beat the nation’s 2.1 percent and landed us at No. 17 among states. In actual totals, Connecticut’s economy bounced up to $322 billion for 2022, up from $298 billion in 2021. 

And, Carstensen calculated, that finally pushes Connecticut back to the level we were at in 2007, before the Great Recession and the state’s lost decade, when we shrank as the rest of the nation zoomed ahead. “That’s a big hooray,” he said. “Thank the Lord.” 

Engines of growth

Now we just have to keep it going. In income, the state logged a 2.6 percent boost for the full year, better than the nation’s 2.4 percent, for a No. 27 finish. That was enough to push per-capita income to $84,972 and back into the top spot as Massachusetts income lagged. The U.S. average was $65,423 in 2022. 

Strong sectors for the full year, the BEA report shows, included business and technical services, health care, management and administrative work, information technology, food and lodging, arts and entertainment, wholesale trade, manufacturing and, oddly, finance and insurance. Finance is way up as a driver of growth but jobs in finance are sharply down in separate Department of Labor reports — so let me know if you can figure that out.

Close proximity to New York seems to have helped Connecticut last year as the Empire State surged to No. 8 in the nation, up 3.2 percent from 2021. 

Weak sectors in 2022 included construction, retail, transportation, utilities, real estate and state and local government. 

As for engines of growth, we have reason to be cautiously optimistic. There’s some evidence that many, perhaps most of the jobs the state’s economy is creating are low paying. But we’re also seeing Yale and UConn spin off more companies and we’re seeing gains at high-end employers including Electric Boat, Yale (which is expanding its engineering school); and ASML, the maker of equipment for the semiconductor industry in Wilton.

Connecticut has struggled to fill open jobs. Despite the threat of recession and a scary rise of layoffs in the tech sector, the state has about 90,000 job  openings, DiPentima said — not much lower than we had a year ago. The gain in output for the year is a credit to businesses, he said. 

“They continue to do things to produce output despite not being able to find workers,” DiPentima said. “Obviously they are embracing productivity increases.”  He added that other reports show Connecticut employers are keeping their workers longer than firms in other states.

Policy debates rage on

Underlying all of this is the ongoing effort by the Federal Reserve to rein in inflation by raising a key interest rate, which could choke off growth. In a speech at Housatonic Community College in Bridgeport Friday afternoon, John C. Williams, president of the Federal Reserve Bank of New York, said he expects inflation to fall to 3.25 percent by the end of this year with modest growth an a slight rise in unemployment. 

He did not tip his hand on further rate hikes, my colleague Alex Soule reports. I’m firmly in the camp that says the Fed has gone far enough.

CBIA rails against what it calls anti-business measures in the state legislature, which Dipentima warns could hurt growth. Bills advancing include a minimum of 80 hours a year in paid sick time for employees at many companies; elimination of the lower minimum wage for restaurant workers who receive tips (they are assured of the minimum with or without tips under current law); tighter rules on workers’ schedule changes; elimination of noncompete clauses; and unemployment pay for striking workers. 

All of those measures hurt small businesses, DiPentima argues, at a time when the state’s economy appears to be turning around. Of course, the argument cuts both ways. Workers and labor unions see companies doing very well and in some cases failing to pass along the gains to staff.  Advocates for these measures say they will help the economy by lifting up workers. 

“If companies were more reasonable in how they treated workers, we wouldn’t be seeing all these bills,” Carstensen said.

Clearly the key on labor and tax policy is balance, a middle path.  Whatever we’re doing, it’s working better since the pandemic than in the decade before, Friday’s report confirms. 

“A couple of years back if we were to say we’d be 17th in the nation in overall growth,” DiPentima said, “We would not believe that we would be at that level.”

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