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State's Fate In Recession: It's Too Early To Tell |
| Tue December 2nd, 2008 |
By LYNN DOAN, KENNETH R. GOSSELIN and JANICE PODSADA
The Hartford Courant
Now that the national authority on U.S. recessions has declared what everyone already knew — yes, we're in one — the question in this state is: How does Connecticut stack up against the nation?
So far, economists say, the state has fared better than the nation as a whole. But that advantage might not last, and Connecticut's fate depends more on what happens across the United States as a whole than events within state lines.
Connecticut's housing downturn lagged the nation's by a year or more, and has been less severe — especially in how far home prices have fallen. The nation saw home prices peak in the middle of 2006, but that didn't happen in Connecticut until the last quarter of 2007.
And when it comes to job losses, the state is only beginning to feel the hard pangs of recession.
From January to March of this year, Connecticut followed the national pattern, shedding 6,800 jobs. Hiring in the state recovered strongly in the spring before turning downward again. In the nation as a whole, 2008 has seen declines in jobs every month.
The nation, we learned Monday from the National Bureau of Economic Research, entered a recession last December — based on a variety of measures, largely overall growth. All along, experts have warned that Connecticut won't escape the larger trend.
"We did a little better than the rest of the country for a while, and then we went down with the rest of the country," said Nicholas S. Perna, economic adviser for Webster Bank. "What does this mean? It means [the state's] going to be slower to come out of it."
It's difficult to peg exactly when Connecticut slipped into its own recession. According to UConn's Connecticut Center of Economic Analysis, the state's economy has been contracting since the end of the third quarter last year. Other economists say Connecticut has trailed the nation.
All agree that it doesn't really matter when the state joined the official downturn, or whether it happened at the same time. Since recessions are national by nature, "knowing when it started in Connecticut doesn't really give you a clear picture of when it's going to end," Perna said.
Don Klepper-Smith, chairman of the governor's economic advisory board, has predicted that Connecticut will lose a total of 60,000 to 80,000 jobs — about 4 percent of the total — by early 2010, when it will begin to recover. "The data is telling us we haven't bottomed out yet," Klepper-Smith said.
Connecticut, in any case, isn't expected to suffer a worse downturn than the nation as a whole. Anyone who lived here in the early '90s knows what that looks like. In that crisis, dubbed the Great Recession in Connecticut, the state lost 10 percent of its jobs and home prices fell for more than six straight years.
Nationally, this recession is already worse than any in a generation, as adults under 45 had seen only two of them — both mild — in their working lives until now. It's being compared with downturns in the '70s and early '80s, each of which lasted 16 months. The Great Depression opened with a 43-month recession in 1929-33, and the jobless rate hit 25 percent.
When state employment recovers, the housing market is sure to follow. Economists say the key to any housing rebound is job growth, as would-be home buyers gain the confidence to buy because they aren't worried about losing their jobs.
Though Connecticut is expected to see its job and housing markets worsen until 2010, economists are predicting that the U.S. economy will recover much earlier, in mid-2009.
Nationally, jobs peaked last December. So far this year, 1.2 million positions have disappeared. The jobless rate, now 6.5 percent, likely will climb to at least 8 percent next year.
In pegging December 2007 as the start of the recession, the National Bureau of Economic Research — a private, nonprofit group — said Monday that the last expansion lasted 73 months. The previous recession ran from March 2001 to November 2001.
Before March 2001, the nation had a record expansion of 120 months, or 10 full years.
One traditional measure of a recession is two consecutive quarters of declines in overall economic activity — the gross domestic product. But the NBER looks at many factors, including personal income, jobs, industrial production and wholesale and retail sales, to determine when recessions begin and end.
"They were obviously in no big hurry. I was worried they wouldn't actually do it until next year," Perna said Monday afternoon. "But that piece of news probably had zero impact on the stock market today."
The Dow Jones industrials plunged 679.95 points Monday, or 7.7 percent, to close at 8,149.
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