by Jennifer Swift
Aug 18, 2014
08:14 AM
Connecticut Politics

Gov. Malloy Touts Economic Progress, But Is It Enough to Win Re-Election?

Gov. Malloy Touts Economic Progress, But Is It Enough to Win Re-Election?

During his inauguration speech in 2011, Gov. Dannel P. Malloy vowed to grow Connecticut’s economy and create jobs.

Malloy took office in Connecticut on the heels of a crippling recession that had left millions across the country without work, evaporated billions of dollars in home equity and rocked consumer confidence in the economy. Unemployment in Connecticut on the night the new governor made his inaugural address was 9.3 percent, according to the state’s Department of Labor.

Malloy’s optimism was welcome; his promises seemed bold.

“We will put in place an economic development strategy that makes sense for the 21st-century economy, aggressively competing with other states and nations for lucrative biotech, nanotech, fuel cell technology and stem cell research jobs,” Malloy said during that inaugural address. “We will join Connecticut to the Energy Economy, attracting companies that reduce our dependency on fossil fuels. We will aggressively develop our three deepwater ports to spark commercial activity and decrease our reliance on heavy trucking and the congestion they bring to our highways.”

At first blush Malloy’s strategy seemed to work. Biotech and digital media firms moved to the state, often lured by tax breaks and state-backed loans.

The ports weren’t deepened, but the economic tide began to rise. The official unemployment rate had declined, although it remains higher than the surrounding states and the nation. According to the most recent estimate by the state Department of Labor, official unemployment in Connecticut is 6.6 percent, compared to the national unemployment rate of 6.2 percent.

During his most recent State of the State speech, Malloy didn’t declare victory in his battle to restart the Connecticut economy, but he noted the progress.

“Taken together, all of these positive changes have helped create more than 40,000 new private sector jobs and lower Connecticut’s unemployment rate by two percentage points in just three short years,” Malloy said.

Still, job growth has been slow. Connecticut has recovered fewer than two-thirds the jobs lost in the Great Recession. At the same time, median household incomes have steadily declined, and the percentage of work age adults participating in the labor force is at its lowest point in more than 30 years, according to the U.S. Bureau of Labor Statistics.

“It’s not that job growth stalled, it’s that job growth is slow,” says Peter Gioia, an economist with the Connecticut Business and Industry Association, the state’ largest business association.

Malloy’s much-heralded job recovery, which has averaged an addition of 14,000 private sector jobs per year, is not nearly enough to signal the return of a robust labor market.

The state Office of Fiscal Analysis is also projecting a $2.8 billion deficit in the next biennium. That looming deficit, debt and long-term pension liabilities make the state unattractive to investors, Gioia says.

Economists in addition to Gioia suggest that a truly healthy job market in Connecticut would create closer to 30,000 private sector jobs per year.

Connecticut’s declining unemployment rate masks deeper problems in the labor market. The state has ranked at the bottom—49th in 2012 and 46th in 2013—in percentage of long-term unemployed residents, according to the U.S. Bureau of Labor Statistics. Those who have left the labor market and given up on their job search are not counted in the official unemployment rate.

The state’s fickle and frustrating labor market—along with a $3.6 billion deficit—is something Malloy inherited. Malloy pushed through a $1.5 billion tax increase to stem the deficit, in addition to contract changes and other cuts, but job prospects continue to lag.

Malloy’s policies—a mix of tax breaks, state-backed loans, small business assistance programs and a tinge of fiscal austerity—have created jobs, but economists and labor analysts agree that there only is so much any governor can do to improve the fortunes of an economy.

“There are real limits of what a state can do,” says Steven Lanza, a University of Connecticut economist, and executive editor of The Connecticut Economy, a quarterly economics publication. “The fact of the matter is, our economy is embedded into a much bigger national and regional economy. We are largely at the mercy of outside forces. We all know if the U.S. has a recession, [Connecticut] is going to lose jobs.”
Incomes and wealth disparity have also continued to grow.

“We look more and more average, which is a decline for us because we are the richest state in the country,” says Wade Gibson, director of the Fiscal Policy Center at Connecticut Voices for Children. “We used to be somewhat equal in terms of income, but now we are among the most unequal. We used to have below-average unemployment and now we have higher-than-average unemployment.”

While the state’s manufacturing base has wilted over the past decades, the education and healthcare sector has seen explosive growth. Seemingly immune to recessions, that job sector has grown 81 percent since 1991.

At Malloy’s behest, the state has poured millions into tax breaks, loans and incentives to biotech firms, including almost $300 million in loans to lure Maine-based Jackson Laboratories to Connecticut. In return, the company must produce 300 jobs in 10 years.

In New Haven, the 100 College St. building under construction, which will be 14 stories and have 508,000 square feet of lab and office space, will be anchored by Alexion Pharmaceuticals’ global headquarters.

The $140 million building, is expected to bring some 350 workers to the city, and the state has approved a $51 million grant if it adds another 250 jobs by 2017.

Critics, argue that the incentives offered by Malloy aren’t worth the return in the number of jobs. Economists question how effective corporate tax incentives are in creating jobs.

As Malloy moves into the heated election season, he’s already begun to frame the state’s economy with himself as the captain, having righted the ship and set a course to prosperity.

While unemployment and job numbers may not be robust enough on their own, Malloy is asking for more time to lead. His new ads try to show that he’s done the best with the economic circumstances that existed when he took office. Republicans argue the state needs to be taken in a new direction.

“It hasn’t been easy, but we’re coming back,” one Malloy ad proclaims. Touting qualities like “strength” and “conviction,” the tagline sums up the incumbent’s take on the last four years with the buzzword of his campaign: “progress.”       

 

Gov. Malloy Touts Economic Progress, But Is It Enough to Win Re-Election?

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