Nov. 23—The good news is that Connecticut hit a once-in-a-generation low in the unemployment rate in October.
The bad news is that the low unemployment rate of 3% last month, down two-tenths of a point from September, means employers are finding it harder to locate workers, possibly forcing them to raise wages and charge higher prices, resulting in inflation.
That's the analysis from Connecticut economists and business experts interviewed after the state Department of Labor released its monthly jobs report Monday, showing the unemployment rate hitting a low not seen since August 2001.
That was one month before the 9/11 terrorist attacks put a whammy on economic growth nationwide, compounded later that decade by the financial crisis and the Great Recession of 2007-09.
"The unemployment rate is very low by Connecticut standards," said Dustin Nord, director of the Connecticut Business and Industry Association Foundation for Economic Growth & Opportunity, in a phone interview Wednesday. "In a lot of ways, that's good."
It's good for workers seeking jobs, because it doesn't take long to find them, Nord and other analysts said.
But for employers it's harder and harder to fill jobs, which could affect the long-term growth prospects of the state as it puts a potential drag on the gross domestic product.
Working out of state
Also affecting the state, according to Fred Carstensen, director of the Connecticut Center for Economic Analysis at the University of Connecticut, is the growing number of residents working and paying taxes in other states such as New York, Rhode Island and Massachusetts. Among these, he said, are many local Pfizer Inc. scientists who were shifted to Cambridge, Mass., more than a decade ago and have decided to remain in the Groton area.
"They like the quality of life in Connecticut," Carstensen said in a phone interview Tuesday, but higher paying jobs are often found out of state. "Connecticut is shedding jobs. ... In the last four years the number of people working out of state has grown immensely."
In fact, Carstensen cited statistics showing that there was an increase of 22,000 jobs going out of state since January, and 4,000 just last month. He said the total number of residents working out of state is now about 250,000, far more than the number of those who work in Connecticut and live elsewhere.
"The reason the unemployment rate is so low is because Connecticut residents increasingly are working in Massachusetts, Rhode Island and New York, which have strong economies," Carstensen said. "Connecticut has a weak economy (with) very little job creation."
But Patrick Flaherty, director of research at the state Department of Labor, said Thursday he disagrees with Carstensen's analysis of the data. What Carstensen supposes is an increase in workers being employed out of state in Flaherty's mind is most likely a gathering tide of self-employed and gig workers that is also showing up in the high number of new business registrations in the state.
"We know the number of self employed is larger than before the pandemic," he said, though "not quite as dramatically as predicted 10 years ago."
Retirements, low pay
Flaherty added that one key reason for the state's low unemployment rate has been the number of people who held back on retirement during the COVID-19 pandemic but are deciding now is a good time with both house prices and the stock market at all-time highs.
"The pace of retirements has picked up a bit," he said. "People are feeling more confident about retiring."
The problem for people who stay in the labor market, as Carstensen sees it, is that Connecticut has been adding jobs in the lower rungs of compensation, including logistics, tourism and elder care, all paying on average less than $40,000 a year. And for that kind of pay, many Connecticut residents considering getting back in the workforce are being stymied by the high cost of child care and elder care, which makes it more attractive to stay home than go back to work.
"If jobs do not come with good salaries, how can you recruit people?" Carstensen asked.
But Steven Lanza, an economist at the University of Connecticut, noted that in spite of the issues involving the high cost of housing, the lack of child care options, a relatively old population and an inadequate transportation system, the state's economy has come roaring back after COVID-19.
"Real GDP growth in Connecticut has been exceptionally strong," he said in a phone interview Wednesday. "It's added to the demand for workers (and) brought down the unemployment rate across the board."
According to the latest labor statistics, job numbers in Connecticut have risen this year by an average of more than 1,300 a month. The state's labor force participation rate is currently at 64.1%, slightly higher than the national average.
Also helping labor numbers, Lanza said, is new technology that makes it quicker than ever to recruit and find talent and get them working in a field that matches their skills. He added that while manufacturing has been lagging in terms of job numbers, companies have been investing in technologies that have led to efficiencies that are boosting overall productivity in the sector.
Most new jobs in health care
One of the most startling statistics in the recent labor market report is that Connecticut over the past year added 8,300 payroll jobs, and 7,700 of those positions were in health care.
Still, in the aftermath of the pandemic , "People lost jobs and left the workforce. The state's slow to come back and never really recovered where we were," Lanza said.
This is one of the systemic issues with the Connecticut economy, too: With an older population, and not much in-migration from other states, how do you grow the labor force to a size that will accommodate the needs of businesses?
The CBIA analyst Nord estimated there are about 70,000 job openings in Connecticut currently, and only 57,000 people looking for work. And the gap between job openings and job seekers appears to be widening, he said.
These and other factors such as regulation costs, he said, often lead Connecticut business people considering expansion to choose sites in the Southwest or Midwest rather than here.
"In the long term, that's something we should be concerned about," Nord said.
Nord suggested this might require a more robust response from the state in terms of training Connecticut's workforce for today's job market. It also could mean the state needs to do a better job of recruiting workers from other states and encouraging more international migration to Connecticut, as is already occurring, he said.
Southeastern Connecticut boasts growth
Nord said some of the most promising developments in Connecticut's employment landscape have been occurring in southeastern Connecticut, especially at Electric Boat and with developments in the offshore wind industry and its new staging area at State Pier in New London. The region also has the advantage of hosting two major casinos, which absorb many workers with only high-school educations.
The Norwich-New London labor market in September, the latest period for which figures are available, showed an extremely low unemployment rate of 2.4%, the lowest it's been in years. That compares with the long-term average rate of about 5.5% for the region.
"Southeastern Connecticut is in the top five in terms of the concentration of nuclear engineers in the United States," Nord said. "People don't give southeastern Connecticut enough credit. ... It's a really dynamic and pretty populous area ... it's good to have a lot of smart, driven people all in one place."
It's also the one place in Connecticut where manufacturing is still the leading industry.
"In terms of job growth, manufacturing is almost the entire story," said Flaherty of the Labor Department, who lives in Coventry. "That makes our area different."
David Steuber, chief of staff and director of strategic initiatives at the state Department of Economic & Community Development, said Wednesday during an in-person interview in Norwich that he sees low unemployment as a net positive for workers in the state, though he acknowledged the difficulty for businesses and the need for more workforce development.
He added that he is unsure at this point about what effect of the new Trump administration's policies will have on the state economy as a whole.
"We're eager to hear about what the new administration is going to be prioritizing," Steuber said. "We will be trying to read the tea leaves."
l.howard@theday.com
