By JOSEPH DE AVILA
Connecticut was the only
state to post negative economic growth in 2012, the latest indication of its
sluggish recovery from the recession and the financial crisis.
Connecticut's gross
domestic product shrank by 0.1%, the worst performance in the U.S., according
to a U.S. Bureau of Economic Analysis report released Thursday. Job losses in
financial services, the real-estate industry and federal, state and local
government were the big reasons why.
New Jersey and New York
both grew 1.3% and ranked 36th and 37th in the U.S. respectively. The rest of
the country grew more rapidly. The nation's GDP expanded by 2.5%.
"The Connecticut
economy is coming back inch by inch instead of yard by yard," said Don
Klepper-Smith, chief economist at DataCore Partners, an economic and
demographic research firm in New Haven, Conn. "The recovery has been
spotty at best."
Connecticut's Democratic
governor, Dannel Malloy, pointed to weakness in the European economy—an
important trading partner—as one reason why the state's economic performance
has been shaky. "We need to do better," he said. "I'll go with
the statistic that there is general agreement on—that we created 26,000
private-sector jobs in the last two years, the fastest two-year increase in
jobs since the 1990s."
Mr. Malloy has made
investing in technology and engineering one of the pillars of his
economic-development plan. The Legislature on Wednesday approved a $1.5 billion
plan for the University of Connecticut to expand its focus on science and
technology. The state also spent $291 million to lure genetics research
nonprofit Jackson Laboratory from Maine.
Those are long-term
projects that can't fix the state's short-term jobs slump. It has regained only
47% of the jobs it lost during the recession, the state labor department said.
The state's unemployment rate is 8%, compared with 7.5% for the U.S.
Connecticut's poor GDP growth
took some economists by surprise. "I wasn't expecting it to be so
bad," said Steven Lanza, an economist with the University of Connecticut.
That surprise stemmed
from Connecticut's high marks in 2011, when the Bureau of Economic Analysis
pegged its GDP growth at 2%, among the best in the U.S. On Thursday, the 2011
number was revised to -0.1%.
The weak performance from financial-services and real-estate firms shows the financial crisis and the collapse of the housing bubble continue to drag on Connecticut's economic performance, Mr. Lanza said.
The financial-activities
sector, which also includes real-estate jobs, fell by 2,200 between December
2011 and December 2012. Construction jobs fell by 1,800 during that same time.
Government layoffs also
have weighed down economic growth in Connecticut, the federal report said. Only
Florida, Wisconsin and Louisiana's governments shrank more. "One of the
things that Connecticut has done…is shrink the size of its government faster
than just about any other state," Mr. Malloy said.
The state shed 1,000
government jobs from December 2011 to December 2012.
Economists said the U.S.
has begun to experience a housing rebound that Connecticut has yet to join.
Median sales prices in Connecticut are still down 30% from the peak levels of
the housing boom, Mr. Lanza said.
"You don't have a
sustainable recovery until you have a housing recovery. And we don't have a
housing recovery here yet," said Peter Gioia, an economist with the Connecticut
Business and Industry Association in Hartford, Conn.
There were bright spots
in the BEA report for Connecticut. Durable-goods manufacturing and management
of companies—which typically reflects corporate headquarters—both posted gains
in 2012.
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