1. Unemployment Spikes Upward
The year started as 2011 had ended, with Connecticut’s unemployment rate dropping nicely, at a level lower than the nation’s. Then in June, July and August we had the jobless summer, when the rate inexplicably shot upward and job creation stalled.
By the end of the year, the state’s economy had created basically zero jobs since the same months in 2011 — a stunning situation three years after the end of a recession. The November unemployment rate stood at 8.8 percent, with 175,000 people out of work and actively looking for jobs, compared with 7.7 percent for the nation.
Connecticut’s mix of industries is partly to blame, with defense cutbacks, a restructuring of the investment banks in Stamford, sluggish gambling at the casinos and an insurance industry treading water. Cutbacks in public employees also hurt, and Connecticut is more affected than most states by the threat of a fiscal cliff, which quelled hiring by defense contractors.
2. Amputation for The Stag
The Hartford Financial Services Group has long been the largest insurance employer in the state but it’s getting smaller since it announced March 21 it would sell off three divisions and stop selling annuities to individuals.
The moves followed intense pressure from the company’s largest shareholder, New York hedge fund billionaire John Paulson. In a Feb. 8 conference call with CEO Liam E. McGee, analysts heard Paulson pointedly demand that The Hartford spin off its property-casualty operations. Paulson followed with a campaign aimed at forcing McGee’s hand.
The sale of retirement services to MassMutual, individual life to Prudential Financial and Woodbury Financial Services to AIG along with the end of new annuity sales, was not the spinoff that Paulson wanted, but it had the effect of focusing the company on its property-casualty and mutual fund businesses.
The company had about 11,000 jobs in the region at the start of 2012. It’s still not clear how many jobs The Stag will have in central Connecticut when it all shakes out, and how many will be retained here by the three large buyers and a smaller company that bought a piece of the annuity business. Shares are trending upward after a mid-year slump.
3. No, They Don’t Have a Blimp
The $16 billion purchase of Goodrich Corp. by United Technologies Corp. led to a reshuffling of the state’s largest private employer, with the loss of Hamilton Sundstrand as a division.
UTC closed on the Goodrich sale in July, but even before that the Hartford-based company laid the groundwork to merge Windsor Locks-based Hamilton into a new division, UTC Aerospace, based in Charlotte, N.C.— where Goodrich had its headquarters. With few exceptions, the top 75 managers of Hamilton all moved to the new head office in the South.
UTC also sold off several businesses, including some Hamilton Sundstrand industrial units in the Midwest; Pratt & Whitney’s Rocketdyne rocket engine unit and Power Systems, which makes stationary power plants based on jet engines. Just this month, the company sold its South Windsor-based fuel cell division, to an Oregon fuel cell maker, leaving the fate of hundreds of local employees unclear.
UTC was rebuked by federal regulators in its attempted sale of a Goodrich business that includes a West Hartford factory with 500 employees, but that business must still be sold, under an antitrust ruling.
4. Fiscal Woes, Part 2
Gov. Dannel P. Malloy inherited a $3.5 billion hole in the state budget in 2011 and managed to fill it with tax increases, some slowing down of spending and a deal with state employees. Then in late 2012, the crisis emerged again, with a $400 million shortfall for the current fiscal year and, much worse, the prospect of $1 billion gaps in each of the next two years.
The reasons for the new crisis are higher-than-expected spending for Medicaid and lower-than-expected tax collections as the economy has slumped.
Working together with little fuss, Malloy and lawmakers erased the $400 million shortfall with across-the-board spending cuts and about $22 million in added revenue from power companies and businesses receiving tax credits.
But Malloy’s options for 2013-14 are limited, as he has little room politically to raise taxes, has little leverage for a new deal with state unions and may not have an improving economy coming. Look for some borrowing, a measure that should be a last resort but may be needed in 2013.
5. Lights…Camera…Front Street
It happened 14 years after it was first planned, but Hartford’s tortured commercial redevelopment project, Front Street, finally opened in 2012 with the Spotlight Theatres, a 4-screen movie house with a restaurant and bar in the lobby.
What’s more, the developers of Front Street have deals for a steak house and a 600-seat Infinity Music Hall, bringing live music to downtown.
Front Street was originally envisioned as a mixed-use development with traditional retail and 115 apartments. After investments totaling $62 million, mostly from taxpayers, the residential portion went by the wayside and stores gave way to restaurants and entertainment.
Now, a newly created development agency, the Capital Region Development Authority, is looking to invest $60 million in more apartments for Hartford and East Hartford — including, eventually, housing at Front Street.
6. SEC Inches Closer To Cohen
Billionaire Steven A. Cohen’s Stamford hedge fund, SAC Capital, has come under fire before for insider trading. But in late November, charges against a former SAC trader, Matthew Martoma, set a path that could implicate Cohen himself.
Cohen, a Wall Street legend and noted modern and contemporary art collector, has not been charged or accused of wrongdoing in the indictment of Martoma and in a civil case against SAC. Three former SAC traders have previously pleaded guilty to insider trading and Cohen was not charged in those cases, either.
But the indictment against Martoma, on charges he traded on tips from a scientist helping to oversee a drug trial, refer to Cohen’s involvement as “hedge fund owner,” according to numerous reports. Prosecutors said was the most lucrative insider tip ever — netting gains or avoiding losses totaling $276 million. And it’s widely believed that prosecutors will use pressure on Martoma and others to smoke out any knowledge Cohen might have had of improper trading.
If that happens, Cohen would easily eclipse Raj Rajaratnam as the highest-profile insider trading defendant.
7. A Larger NU Weathers A Storm
The last thing Northeast Utilities and its Connecticut Light & Power unit wanted was another eventful year. But it was inevitable as NU merged with Boston-based NSTAR in April, and it was sealed with Sandy, exactly a year after the freak October snowstorm.
This time around, CL&P performed better when it came to communicating with town officials and the public, and in clearing roads faster. Still, despite massive preparation efforts that brought well over 2,000 linemen and tree workers on the job, it still took the company a week to restore power — not much less than the debacle of 2011. The lesson: When a storm knocks out power to half a million customers, there’s no quick fix.
There’s also no avoiding layoffs after a mega-merger, and a less-than-thought-out remark by company officials earlier this year, that the company could probably shed the necessary jobs by attrition, came back to haunt NU when it proved false. NU has not said how many people it has laid off but it reduced about 300 Connecticut jobs in all.
8. Everyone Gets a Piece of the Action
Malloy’s economic development engine cranked in 2012 on several fronts. As the year started, there were four companies in the “First Five” program that offers aid packages to any employers adding at least 200 jobs and investing at least $25 million. But one firm, TicketNetwork, dropped out in February after some bad behavior by its founder and CEO at an Oscar-night party.
That was unfortunate since the firm was well ahead of its promised growth targets. But by the end of the year, the Malloy economic development machine had nine firms in the renamed “Next Five” program, including Alexion Pharmaceuticals, which promises to be the linchpin in a massive downtown New Haven redevelopment project.
Separately, Malloy launched an “Innovation Ecosystem” with $5 million for tech hubs in Stamford, New Haven, Hartford and Storrs. The Small Business Express program zoomed ahead with tens of millions of dollars for community businesses, and the state’s revamped technology investment arm got new leadership. The film tax credit program had by far its biggest year ever.
Malloy will face heightened pressure in 2013 if all this spending doesn’t lead to a jobs turnaround.
9. Nursing A Grudge
Connecticut’s nastiest labor dispute of 2011 got even worse in 2012, as the HealthBridge nursing home lockout grew into a strike that continues. HealthBridge, the New Jersey-based operator of six unionized nursing homes in Connecticut, enacted cuts in health coverage and retirement benefits as talks failed. That led to a strike in July at all six homes, during which HealthBridge received state approval to close one of them, Wethersfield Health Care Center.
In a rare move, the Hartford office of the National Labor Relations Board sought an immediate restoration of the previous benefits and a return to work for 600 striking members of District 1199 of the Service Employees International Union — even before the long NLRB process played out. A federal judge in Hartford agreed, but on Dec, 18, a federal appeals court halted the restoration order — temporarily, at least.
The battle continues into its third calendar year with no end in sight.
10. For Him, The Bells Toll
Matt Bevin was awakened in the wee hours over Memorial Day weekend with news that his factory in East Hampton, Bevin Brothers, was in flames. It’s one of several companies the Louisville, Ky. entrepreneur owns, but it’s the one with his name on it, and 182 years of history starting with his great-great-great-grandfather.
And Bevin Bell, as the company is known, was the last surviving bell-maker in the town that once had dozens, giving it the nickname, Belltown USA.
After three days and nights, Bevin declared he would rebuild — a move that may or may not make economic sense, but would save a couple of dozen jobs. He did just that, in an abandoned factory space a few hundred yards away. He returned to production in October, making a ringing statement about Yankee manufacturing that reverberated worldwide for the customers of Bevin’s famous bells.