THE GREAT UNKNOWN: Uncertainty in business community drives negative numbers

Feb. 11--The New Haven-area economy ended 2016 on a down note, thanks to employment indicators that were a little weaker than expected.

The New Haven Register's economic scorecard for December had four of its eight economic indicators headed in a positive direction, while three were rated as negative and one as neutral.

Donald Klepper-Smith, chief economist and director of research for New Haven-based DataCore Partners as well as the scorecard's author, said indicators headed in a negative direction are indicative of uncertainty in the business community following the result of the November election.

Labor force, total employment number and housing starts declined in the New Haven area in December.

"There's clearly been an escalating 'crisis of confidence' in Connecticut's business community," Klepper-Smith said. "It's not going to turn around quickly. Research shows that both business confidence and consumer confidence don't turn on a dime, and it takes many years to rebuild thatonce it's lost."

It is especially hard for Connecticut businesses to be confident when they see that some of the state's marquee corporations have left the state or are considering doing so. General Electric relocated its headquarters to Boston in 2016, relocating 800 jobs in the process. Klepper-Smith said the departure of GE workers may have resulted in the loss of another 1,400 jobs at companies that did business with the company and its employees at the former Fairfield headquarters.

"These are high-paying jobs, too, with strong multipliers," he said. "Moreover, for every dollar spent in this part of manufacturing, there is another $1.06 spent elsewhere in Connecticut's economy. Therefore, the GE loss will have huge ripple effects as it works its way through the local economy."

Another shockwave could make its way through Connecticut's economy if reports that insurance giant Aetna is leaving Connecticut come to fruition. Klepper-Smith said Hartford's position as an insurance business center, combined with the city's fiscal woes, could have a long-term impact there.

"I think the New Haven area is in a better position because it has a broader employment base than Hartford," he said.

The exodus is not just limited to corporations, Klepper-Smith said. Connecticut is now losing 575 people per week to other states, due in part to what he called Connecticut's "mounting fiscal stress."

"I don't think we making an honest effort to work towards a fiscal solution and until we do, I think we're going to see the outward migration continue to increase," Klepper-Smith said. "You're cannibalizing you tax base."

On the positive side of the scorecard, unemployment, consumer prices, consumer confidence and home prices are the four indicators Klepper-Smith said are headed in positive direction.

Median sale price for existing homes in December was $220,000, an $18,000 increase from the same period in 2015.

Timothy Warren, chief executive officer of The Warren Group, said despite the nearly 9 percent run-up in home prices, the median is well below its 2007 peak. That resulted in stronger sales volumes, Warren said.

"Buyers took advantage of low prices and scooped up more homes than in any of the past nine years," he said.

Call Luther Turmelle at 203-680-9388.

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