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Jobs Blues Are Returning to Connecticut

Connecticut’s jobs outlook looks ominous, despite the most recent, very positive report of 6,500 jobs gained in July coupled with a big decline in the unemployment rate from 4.0% to 3.7%.

The job gains are highly likely to reverse very soon. Today, ADP reported that national private sector job growth in August fell to half its level in July, presaging a significantly weaker national number for August to be reported this Friday by the U.S. Bureau of Labor Statistics (BLS)  and a poor August number for Connecticut in the next state-by-state report from BLS in mid-September.

Even before today, there were warning signs nationally and for Connecticut. Connecticut’s workforce shrank by 2,100 in July, the first monthly decline in 2022. Connecticut was not alone. The labor force shrank in twenty-three other states.

Yet, Connecticut is almost alone from a long-term perspective. The state’s labor force has been stagnant for more than three decades. Since September 1991, the state labor force has grown only 3.8%, or about 70,000 from 1.83 million to 1.90 million. That’s average annual growth of just 0.1%.

During this time, the national labor force grew 37%, or by 41 million workers from 126 million to 164 million.

Today, the U.S. and Connecticut are at an inflection point. It is likely to be downhill from July for which (BLS) reported the good news that nonfarm payroll employment increased in 20 states, was essentially unchanged in 28 and decreased in only 2, and the unemployment rate fell in 14 states, was unchanged in 33 and increased in only 3.

Despite July’s good macro jobs statistics, Connecticut’s more detailed statistics included worrisome signs. Connecticut’s July job gains were disproportionately in the government sector, which accounted for 3,900 of the 6,500 new jobs. This sector represents only 14% of employment, so it could not continue to deliver 60% of the overall job gains.

Moreover, the press release from CT Department of Labor announcing these statistics pointed out that local governments accounted for the entire 3,900-job increase, “likely due to federal COVID funding that allows them to run summer programs.” Soon, summer jobs will disappear.

Likely, there are more than 3,900 new local government jobs that have been funded with one-time federal assistance. Why? Because the 3,900 job increase in the government sector in July is a net increase. It is the portion of the increase over and above job growth needed to offset continuing job losses resulting from a tidal wave of state employee retirements.

According to the State Comptroller, over 3,500 state employees have retired over the last four months, including 1,423 in July that were recorded officially in August. The ten-year average for yearly retirements is 2,130.

The 1,423 in state job losses should appear in the next jobs report in mid-September.

Turning to the private sector, there is bad news behind the good news here too. Construction jobs accounted for 1,500 of the 2,600 in job gains in July.

Historically, rising interest rates slam housing construction and construction employment. All signs point to a recurrence of this pattern in the immediate future. Nationally, housing permits are down 10% already since April.  

Yet, the Federal Reserve’s interest rate hikes have barely had time to have impact. Of the 2.25% in Fed increases so far this year, 0.75% hit in mid-July and another 0.75% hit only in mid-June. After another couple of months, the construction sector is almost certain to falter.

Don’t be fooled by the rosy news about employment in July. More significantly, don’t worry just about the looming deterioration in Connecticut’s jobs outlook.

In this election year, voters should focus upon the continuing long-term stagnation in Connecticut’s workforce and economy.

For 30 years, Democrats have controlled state government. They are responsible for the state’s stagnation. Two Republican governors during this stretch faced Democrat legislative majorities – in several years, veto-proof majorities. They were powerless to implement change.

Governor Lamont is campaigning on a claim that he has reduced taxes by $600 million. That is a disingenuous claim. He and Democrats in the legislature have adopted temporary election-focused tax cuts, including $150 million from the temporary suspension of the gas tax that expires in November, just days after the election. $125 million comes in the form of “a temporary child tax rebate.”

Meanwhile, next January 1st, the latest new permanent tax will take effect, the highway use tax for large trucks with expected annual revenue of $90 million. This comes on top of the recent 23% increase in the diesel fuel tax.

Voters should realize that there will be no job growth – or growth in the state economy – until taxes are reduced. And, until there’s job and economic growth, more taxes are inevitable. After 30 years of Democrat control, it is time for a change.


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