Monthly Archives: August 2012

State Tax Collections Up $1.9 Billion in FY2012

by Categorized: Public finance Date:

The final report from the state Department of Revenue Services is in, and collections in the fiscal year that ended June 30 were up by $1.9 billion from the year before — a 14.9 percent hike.

Final CT Tax Collections 2012

An earlier version of this blog post said a huge jump of $2 billion looked like good news, since the tax increase was $1.5 billion, so it seemed that economic activity might have accounted for a nice bump-up.

Alas, on closer review the news is less than stellar. With refunds, largely from the income tax, total state taxes and fees came in at  $14.6 billion, up from $12.7 billion in fiscal 2011. Continue reading

Connecticut’s Rise in Inequality, and What It Means

by Categorized: Economy, Jobs, Politics, Poverty, Wealth Date:

Income inequality can be bad or not-so-bad.  If it means the richest people are making huge gobs of money while the rest of us are getting ahead nicely, that’s not so bad.

A new report from Connecticut Voices for Children shows that inequality is rising, and not in the good way.  From the recession through 2011, high and low earners alike are not doing very well, but — surprise, surprise — those at the top are doing much better than everyone else.

How much better? Since 2006, wages at the 90th percentile in Connecticut — the point where 90 percent of workers make less, and 10 percent make more — rose by 11 percent, adjusted for inflation. That level was $1,915 a week in 2011, based on a 40-hour week.

The median wage, where half earn more and half less, rose by just 2.4 percent, to $811 a week, and the 10th-percentile wage was flat at $361 a week, in 2011 dollars.

Happy Labor Day!  The picture is actually worse than that, since the wage data does not include capital gains pulled in at the top, and it does not pay attention to the rising unemployment rate, which — we think — affects low-end workers worse than high-end ones.

Furthermore, it does not account for the fact that, in Connecticut especially, high earners tend to marry each other, so family income is pulling apart even faster. Continue reading

Credit Isn’t The Problem, Business Is

by Categorized: Banking, Economy, Small Business Date:

Small business owners like to declare that they would succeed wildly if only they could get loans from banks, and bankers like to say they have billions to lend out if only they could find credit-worthy customers.

A survey released Wednesday by the Connecticut Business and Industry Association shows no great change in the equation, as 27 percent of business managers said credit is a problem for them — statistically unchanged over the last several quarters.

Only 25 percent sought financing in the second quarter of this year, down from 34 percent in the 2011 second quarter. That shows weakness in the economy and it’s a bigger concern than credit availability.

The survey, sponsored by Farmington Bank, was emailed to 1,950 businesses in July and 250 responded — three out of four with fewer than 50 employees.

State’s Permacession Takes Hold As UConn Forecasts Two More Lousy Years

by Categorized: Jobs Date:

It’s tough to get a break on economic news in a state where every piece of good news is matched by word of layoffs and sluggish job gains overall.  Now we find that even the recent past was worse than we thought, and that means, according to the latest UConn forecast, another two years of lousy gains.

The recession knocked nearly 9 percent off Connecticut’s overall economic output, and it bottomed out toward the end of 2009, not the spring of that year, according to U.S. Department of Labor revisions cited in a new forecast by the Connecticut Center for Economic Analysis at the University of Connecticut.

That’s dramatically worse than the 3 percent drop we thought we had seen — though, in reality, did anyone really think the decline from the end of 2007 to the middle of 2009 was in the low-single digits?

The old numbers matter, though, because they guide predictions, and CCEA now says Connecticut’s overall economic output will grow by 0.6 percent over the next 12 months, followed by a whopping gain of 1.3 percent — adjusted for inflation, which is predicted to be 1.3 percent.

This translates to lukewarm job gains of 10,000 to 20,000 over the next two years, according to CCEA, which is headed by economist Fred V. Carstensen.  The difference in those two numbers is based on the likely positive effects of big projects such as the expansion of the UConn Health Center and Jackson Labs, which Catstensen supported mightily, along with the Hartford-New Britain Busway, which is federal pork, but it’s our pork and we need it.

Connecticut’s vaunted finance, insurance and real estate sector, which accounts for about a third of all economic activity, showed a scary drop in the spring, CCEA reports — not flat, but actually down for the quarter. The good news is that other services, including health, are still rising.

Another bright spot in 2012 is the home construction market, which showed a gain of 33 percent in new permits in the first six months of this year compared with the same period in 2011.

But that’s a gain from an anemic year in which permits fell below 3,000, probably for the first time since the Spanish-American War.  In all, even the newly enlarged housing construction industry accounts for about $1 billion, which sounds big but it’s only one-half of 1 percent of the state’s economy.

By the middle of 2014, we’ll still be at least 65,000 jobs short of the total we had at the start of 2008, CCEA’s forecast shows.

“Closing this gap will require more than just job creation,” the report said. “It requires policies to recover the pride and the employability of persons who have suffered from long-term unemployment.”

The report cites two examples: The Mashantucket Pequots’ long and proud history of rehabilitating individuals drawn from the slums of New England,” and “Platform to Employment” in Stamford, a public-private effort that offers 5-week courses to “reorient” people whose unemployment benefits have run out.

 

 

 

 

 

 

 

 

CT Unemployment Rate Leaps To 8.5 Percent Even As Employers Add Jobs

by Categorized: Economy, Jobs Date:

Connecticut’s jobless rate jumped an astounding 4 ticks to 8.5 percent in July, even as employers added 5,100 jobs, an impossibly odd pairing of data.

Is it good news or bad news? The two figures are based on two different surveys, and the 5,100 jobs gained puts Connecticut on track for a decent year, with 9,700 added positions so far in 2012.

But it’s hard to put a happy face on an unemployment rate that has now leaped ahead of the national rate of 8.3 percent — especially since the state’s rate has now climbed for three straight months, from a post-recession low of 7.7 percent in April.

After the state Department of Labor reported the numbers, the agency took the extraordinary step of holding a conference call with research director Andy Condon to explain the basic fact — both things didn’t happen.

The issue is that the job-creation data is based on a survey of about 6,000 employers, while the unemployment rate is based on a larger survey of households.

It often happens that the household survey shows a rise in the number of people working, but also a rise in the number of people not working. In that case, the unemployment rate can rise even as companies hire, as people flood into the work force.

But in Thursday’s report, the number of people who say they’re working is down by a whopping 15,000, even as employers added more than 5,000 positions.

It’s possible that employers in other states, chiefly New York, have eliminated the jobs of Connecticut residents.  It’s also possible that a large number of people who had been self-employed  and thus not part of the workplace survey — are now reporting that they’re not working.

But there’s no evidence that those trends are happening, so the best explanation, Condon said, is simply a discrepancy in the surveys  both of which are known to be way off on any given month.

“We’re left with little else to look at based on the differences between these two,” Condon said. “Sometimes you don’t get the right answer and you have to wait until you do get the right answer.”

Gov. Dannel P. Malloy issued a statement immediately, saying he believes the household survey is wrong.

To buy into the household survey number you’d have to believe that Connecticut lost 503 jobs every day during the month of July, and there’s just no evidence to suggest that happened.  Unemployment claims have drifted upward, but not at a rate that justifies the household survey number.”

Italics were Malloy’s.  And he lost little time making the point that he’s working as hard as he can, as evidenced by the fact that his deal with Bridgewater Associates Wednesday promises to add 1,200 high-paying jobs.

Connecticut, like the rest of the nation, has seen job gains generally stagnate in 2012 after a promising 2011.  The state’s unemployment rate fell from 8.9 percent to 8 percent in the last six months of 2011, then fell to 7.7 percent in March before rising again.

 

 

 

News Flash: Work Is Not Vacation

by Categorized: Economy, Jobs Date:

In the crush of press releases, this one jumped out in my inbox Wednesday since it seemed to be fresh from the Onion.

But it’s no joke. Apparently it’s news to someone: “Three-Quarters of Americans Stressed By Something At Work.”

Well then. What about the other one-quarter who are stress-free?

The report from a research group and a for-profit college goes on to say that money woes are the largest source of stress, that women are more stressed about pay than men, that last year only 21 percent were stress-free on the job and that working in a career that’s not of your choosing can be stressful.

Oh, and Everest College can help with all this, through its vocational programs.

Here’s the question:  What’s so bad about stress at work? The great baseball manager Sparky Anderson was asked before a Detroit Tigers World Series game whether his players were feeling pressure.

“With what we’re paying them, they damn well better be feeling the pressure!”

Of course, the rest of us who don’t make Major League Baseball salaries fell pressure too, and stress as well.  Ask the 160,000 out-of-work Connecticut residents what they think.

Or take this advice from this week’s Onion:  “Study: Pretending Everything’s Okay Works.”

 

 

Lousy Night For Labor Leaders At The Polls

by Categorized: Politics Date:

Democrats Chris Donovan and Leo Canty figured to win their races Tuesday, in part because their histories as labor leaders gave them on-the-ground support from fellow unionists.

Instead, it was a tough night for both.

State House Speaker Donovan fell badly to Elizabeth Esty in the race for the nomination in the 5th U.S. House district.  That was a surprise to a lot of close watchers despite a  scandal and indictments that would have killed other campaigns — as labor leaders for the most part stuck by Donovan, a former SEIU organizer.

(Donovan Tuesday night with his wife, Elaine)

Canty was also expected to win easily in a primary for the reconfigured 5th state House district,  or so his supporters thought. But the longtime American Federation of Teachers and AFL-CIO leader, a stalwart at the state Capitol, trailed by one vote in unofficial results, to political newcomer Brandon McGee of Hartford.

Canty, who’s also the Windsor Democratic town chairman, is among the hardest working guys in politics. He knocked on doors for months, bicycled through the district and appeared with former Sen. Chris Dodd.

(Canty, right, with Matt O’Connor at the 2011 state employees’ negotiations)

Canty, at least, was gracious in the heat of a dead-heat race, my Courant colleague Steven Goode reports.  Donovan, inexcusably, didn’t so much as mention Esty in a non-concession speech — which ought to doom any hope he has for running under the Working Families banner.

Does either of these outcomes say anything about the waning power of unions at the polls?  Maybe not, as there were plenty of other factors at work.  But it’s worth noting. And on the bright side for former labor leaders, Edwin Vargas, a retired teacher and onetime president of the Hartford Federation of Teachers, won his primary against Rep. Hector Robles, the former cop facing fraud charges.

 

 

 

 

 

 

 

Inflation Still Tame But Debate Lives On

by Categorized: Economy Date:

Heading into the conventions, Obama doesn’t have jobs and unemployment in his favor and it remains to be seen whether gas prices rise or fall before Election Day, but Wednesday’s release of the Consumer Price Index will show tame inflation.

That’s not necessarily good in the long run, as it signals a flat economy. But for now it means the Fed can and should do more to prod growth, and just the prospect of more cash in the spigot can help the psychology of prosperity.  Among hard-chargers at the Fed, Eric Rosengren, president of the Boston Fed and a frequent visitor to Hartford, has for years been a leading voice for more Fed action.

Here’s a good site for understanding the consumer inflation data.

Also worth reading is Mara Lee’s January 2012 interview with Boston Fed Chief Eric S. Rosengren.

CT’s Share Of The Doomsday Federal Spending Scenario

by Categorized: Jobs Date:

As Jan. 2 approaches, no one seems to think Congress will go through with the $1.2 trillion in automatic spending cuts triggered by the Budget Control Act of 2011.

That includes about $500 billion in defense cuts, which the pentagon argues would be irresponsible.

But if it does happen, Connecticut would lose 36,230 jobs over the next two years, according to a recent report prepared for the Aerospace Industries Association.  That places Connecticut No. 8 on the list of states affected by the  proposed defense cuts.

That number seems high, considering it’s more than the entire Connecticut workforces of Pratt & Whitney, Sikorsky, Electric Boat and UTC Aerospace Systems combined.  And of course, AIA  — whose chairman this year is Pratt President David Hess — has a huge stake in stopping the cuts.

But the numbers include direct job losses as well as the spillover effects across the economy, and they get the point across that the automatic cuts — known as sequestration — are a doomsday scenario.

On Wednesday, Hess led a rally of about 200 employees at a Pratt facility in Jupiter, Fla., a state that would lose 41,905  jobs from the defense cuts, according to the report.

The slightly brighter news is that the non-defense cuts would largely spare Connecticut, leading to “only” 5,712 job losses.

Nationwide, the defense cuts would lead to 1.1 million job losses and the non-defense cuts, 1.05 million, according the  report by Stephen S. Fuller, professor and director of the Center of Regional Analysis at
George Mason University in Virginia.

 

As Jepsen Investigates Libor Scandal, Don’t Look For Any Refunds

by Categorized: Banking, Public finance Date:

Attorney General George Jepsen is among a handful of chief state lawyers investigating possible misconduct by banks in the interest rate manipulation scandal — but don’t look for a refund anytime soon if you think you were wronged.

That’s because Jepsen’s inquiry, in tandem with his New York counterpart, is “looking at any possible harm to state agencies, municipalities, school districts and not-for-profit entities,” said Jepsen spokeswoman Jaclyn Falkowski.

The scandal erupted in late June when banking regulators levied a $450 million fine against Barclay’s plc, Britain’s second largest bank, on charges that Barclay’s manipulated the London Interbank Offered Rate, known as the Libor.

Since then, several of the world’s largest banks have fallen under investigation, according to news reports, including UBS, which has big operations in Stamford. And, Bloomberg news reports, at least three other state Attorneys General, in Florida, Maryland and Massachusetts, are also looking into the mess.

Libor, set by a British agency, is basically the average interest rate that giant banks report as the rate at which they are able to borrow from each other in short-term transfers made to meet regulations over how much money they must have on hand.  If banks report false numbers, they’re manipulating the rate.

The trouble with finding victims, and the reason individuals are unlikely to ever see compensation in this scandal, is that higher or lower interest rates across the economy help and hurt borrowers and lenders in infinite ways.

The attorneys general are not giving details about what they’re examining, but Bloomberg News points out that some states and municipalities have been hurt by falling interest rates, if they have to pay large penalties for so-called swaps, which are agreements enabling them to control the effects of variable-rate debt.

“The city of Baltimore and the New Britain Firefighters’ and Police Benefit Fund in Connecticut consolidated and amended a complaint against Citigroup Inc., Credit Suisse AG, Bank of America Corp. and other banks alleging they artificially suppressed Libor,” Bloomberg reported, citing court documents.

Jepsen’s office “has been working jointly over the last several months with New York Attorney General Eric Schneiderman on an investigation into alleged anticompetitive conduct related to potential rigging and manipulation of benchmark interest rates,” Falkowski said in a prepared statement — meaning they’ve been at it since before the Barclay’s fine was announced.

On the question of whether consumer fraud will be targeted as part of the scandal, Falkowski said: “While we’re not ruling out that consumers may be victims, the investigation is in its early stages and it would be inappropriate to comment at this time.”