The healthy gain of 6,400 jobs in May, reported Thursday by the state Department of Labor, is proof that the state is on the right track, Gov. Dannel P. Malloy asserted, as we all knew he would.
“Because of our efforts, Connecticut’s economy is growing, job numbers are steadily improving, and employment is reaching heights that it hasn’t in decades,” Malloy said in a written release a half-hour after the report came out.
The 26,100 new positions created in the past year (Malloy’s numbers were off by 200 from the Labor Department’s) represents the best sustained job growth since the late 1990s. Malloy took note that the unemployment rate, at 6 percent, is at its lowest level since 2008 — though he didn’t mention in the release that it’s still above the national rate.
And Malloy crowed about the state’s labor force — the combined total of people working and actively looking for work — as the largest it’s been since 1976. That means the jobless ranks are falling even as more people look to re-enter the fray.
Malloy is right about jobs and unemployment but Connecticut still has some big, long-term worries that aren’t going away. Wage growth is weak and that means the jobs we’re adding aren’t all great ones.
And we have a nasty perception about the state’s business climate growing nationwide, which isn’t entirely justified but contains some truth.
So in light of all this, which is the real Dan Malloy? The one who stands accused of caving in to business and leaving starving children on the streets — or the one who is driving business out with high taxes so he can maintain a cushy welfare state?
As he fights Democrats and Republicans on two fronts in a state budget we thought was adopted June 3, only to have the guv call for a do-over, Malloy can win support for his moderate path if he can show the state’s economy is on track.
On Thursday afternoon, he visited Vineyard Vines, a preppy clothing purveyor in his hometown of Stamford, which sewed up a $6 million, low-interest state loan last year to lease a new office, all of it forgivable if the company adds 200 jobs. That’s a perfect example of Connecticut’s policy of custom-tailored economic development: You keep or add jobs, we help you with loans or tax abatements.
Vineyard Vines, we presume, is in the corporate camp that says, sure, Connecticut is a high-cost place to be, but it’s working just fine for us. GE and Aetna, far more important players than the haberdasher known for its pinks and purples, were in that camp as well until they threatened to pull some operations out of the state amid rising taxes.
So we need to have a balancing act, just as the state’s economy is itself a balancing act.
Today’s job-creation number, which is preliminary and subject to big revisions, gives Connecticut a year-over-year increase of 1.6 percent. That’s slower than the nation’s 2.2 percent, but it’s very good for Connecticut because we’re not a fast-growth state.
Now let’s look at median household income, another pillar in the broad tableau of how we’re doing. The latest reliable data we have is for 2013, in which Connecticut apparently had a heady, one-year jump of 4 percent even after adjusting for inflation, to $67,781. That compared with a gain of just one-third of 1 percent gain for the nation, to $52,000.
There’s a high margin for error in median household income and we won’t know about 2014 until September, but over the 10 years from 2003 to 2013, bad years for the typical family, Connecticut fell far less than the nation as a whole.
On the down side, 2014 was a horrible year of overall economic growth for Connecticut, 0.6 percent compared with 2.2 percent for the nation, and that’s the third big-picture pillar. Total income growth in Connecticut also trailed the nation last year, 3 percent compared with 3.9 percent, though we’re still safely the richest state in that measure.
Looking at where the jobs are, we see that manufacturing and finance, two bellwether sectors for economic strength, have trailed Connecticut’s overall job gains over the past 12 months. That has led to slow overall wage gains in Connecticut, according to actual payroll data: 2.7 percent in 2014, compared with 3.5 percent for the nation.
The steadily growing health services sector is likely to stumble as hospitals cut operations. Hartford HealthCare’s bombshell announcement Wednesday — that it’s laying off 400 people this month — is, the parent of Hartford Hospital said, a result of Malloy’s higher taxes and declining per-patient Medicaid reimbursement rates.
The hospitals, like all groups in the line of fire, are making the argument that state taxes and service cuts aimed at them are hurting the economy. There may be no way to make the hospitals whole, and they certainly don’t have the political muscle, but clearly they’re not bluffing.
Sadly, there are no good answers to be had, only bad choices. Whatever we can say about the state of the state’s economy, tax revenues aren’t keeping up with state government costs. And if we sharply cut government to keep taxes flat, that will hurt the economy in the short term just as surely as layoffs at Hartford Hospital.
That’s why Malloy spokesman Devon Puglia was able to respond to the hospital announcement by saying, hey, we all have to cut back a little. Something is not right if the governor’s office is saying that at a time when job growth is solid and income gains are holding up.
We can’t agree on what’s not right and that’s partly because we’re having the wrong argument. Attention both sides: The issue isn’t private business vs. government. It is investing in productive capacity vs. wasting money — and government does not have a lock on waste.
To the economy, a government-backed research job, or environmental inspection job, is the same as a similar job backed by, say, United Technologies Corp. Both bring in outside money if they’re effective, and both stimulate spending in the state.
The problem is that the state can only prod companies to invest locally by spending taxpayer money to make the state a more inviting place, or by keeping tax increases down. And since we have a crisis now, and can’t borrow money or wait for long-term benefits to kick in, we need to make the state government more efficient.
That’s why, as Malloy says Connecticut’s economy is on track, he pushes for a cut in government services spending across the board by 1.5 percent compared with the cost of doing things the same way.
Republicans say the cut is too small but they’re hard-pressed to come up with doable ways to increase it. Democrats on the left say the cuts are immoral and hurt the state’s economic foundation. They have no way to pay for them other than increasing taxes on wealthy residents, which we’ve already done.
As the numbers clearly show, both sides are right, and both sides are wrong, so a middle path is the only option.
