June 11, 2012 | last updated June 11, 2012 12:26 pm

Casinos, Pfizer deepened Southeast CT's recession

Photo / Mohegan Sun
Photo / Mohegan Sun
Mohegan Sun, located in Uncasville, is owned and operated by the Mohegan Tribe.

Months in Recession/Recovery

Recession Recession Recession Recovery

Peak Trough Length (mo.) Length (mo)

U.S. Jan 2008 Feb 2010 25 25

Connecticut Mar 2008 Feb 2010 23 25

Brg-Stm LMA Mar 2008 Feb 2010 23 25

Danbury LMA Dec 2007 Jan 2010 25 26

Hartford LMA Mar 2008 Feb 2010 23 25

Nw Hav LMA Mar 2008 Feb 2010 23 25

NL-Nor LMA May 2008 Dec 2011 43 3

Waterb LMA Dec 2006 Feb 2010 38 25

The economic slowdown hit Southeast Connecticut later and longer — because of the region's overreliance on casinos, pharmaceuticals and submarines — leaving less time for recovery and greater chance for a double-dip recession, labor data shows.

The New London-Norwich region first slipped into recession in May 2008 — three months after the rest of the state — and emerged in December, according to the Connecticut Department of Labor.

That means the region was in recession almost twice as long as the rest of the state.

The recession in Connecticut lasted 23 months and ended in February 2010. While the rest of the state is more than two years into the economic recovery, Southeast Connecticut just emerged six months ago.

The region's extended recession came because its major industries and employers were impacted by the economic slowdown later and still are struggling to adjust, said Alissa DeJonge, director of research for the Connecticut Economic Resource Center.

Four employers make up the majority of jobs in the Southeast: resort casinos Mohegan Sun in Uncasville and Foxwoods in Mashantucket, drug maker Pfizer in Groton and New London, and submarine manufacturer Electric Boat in Groton.

"Every town in the region depends on the major employers," said Ned Hammond, the economic development coordinator in New London. "Whenever one of those employers has a reduction in workforce, it affects the entire region."

The Norwich-New London labor market encompasses 20 towns and a labor force of 135,959, according to the state Department of Labor. During its 43-month recession, the region lost 12,300 jobs.

And things haven't gotten better recently.

In April, the Norwich-New London labor market lost another 1,200 jobs, and is down 5,500 jobs since April 2011. The region's unemployment rate is 8.2 percent, above Connecticut's statewide 7.7 percent jobless rate.

One of the biggest factors pushing the New London-Norwich unemployment rate higher in recent years is the significant cutbacks made by pharmaceutical giant Pfizer.

Pfizer has been slashing jobs nationally and in Connecticut for years, as the company goes through a major restructuring following its 2009 acquisition of Wyeth Pharmaceuticals and the patent expiration of its blockbuster cholesterol drug Lipitor.

The big blow for Connecticut came in early 2011, when the company announced it would lay off 25 percent of its workforce, or 1,100 people, in Groton and New London over an 18-month period.

The layoffs, which are still ongoing, are expected to be completed this summer, reducing the company's headcount in Groton and New London to about 3,500 employees.

Some of those cuts have included well paid research and development jobs that have been outsourced to other states, including nearby Cambridge, Mass.

Pfizer officials said that despite the layoffs Groton will still be the company's largest R&D hub, but will serve as more of a support center for research rather than drug discovery.

"Our scientists and other experienced drug development professionals there play a critical role in advancing our portfolio, " said Pfizer spokeswoman Lauren Starr.

Foxwoods and Mohegan Sun have laid off more than 1,000 of their casino workers since the recession began.

As the economic downturn began, Foxwoods undertook a major expansion of its resort resulting in the MGM Grand at Foxwoods tower and saddling the casino with more than $2 billion in debt. Mohegan halted work on its Project Horizon expansion in 2008 — impacting the construction industry — keeping the size of its debt in check but leaving the resort without a second hotel to attract guests.

Since opening in 1996, Mohegan never laid off any of its employees; but in 2010, the company announced more than 400 layoffs, although that ended up with a net of 275 job losses.

"We held out as long as we could, because we wanted to keep our team together," said Jeffrey Hartmann, president and chief executive of Mohegan Sun. "The impact of the recession was so much that we couldn't hold back any longer."

Officials from Foxwoods declined to comment for this story.

The outlook for the Connecticut casino industry remains uncertain as more casinos come online in Massachusetts and New York, eroding the customer pool. Revenue from slot machines at both casinos has decreased about 5 percent from last year and 24 percent from their highs in the previous decade.

"The casinos have not stabilized exactly," said Deborah Donovan, director of economic development and marketing for the Southeast Connecticut Enterprise Region.

Despite the issues, Hartmann said Mohegan Sun will maintain its status in Southeast Connecticut, continuing to thrive and be an economic force. "We have the best product on the East Coast," Hartmann said. "We will have the premier destination … There will be nothing like Mohegan Sun on the East Coast."

Electric Boat in Groton decided to move 3,600 employees into the old Pfizer complex now that the pharmaceutical maker is downsizing its Connecticut workforce. But, even with some stability in submarine manufacturing, Electric Boat still relies on the federal government's defense spending, which will decrease in the coming years.

"Electric Boat is definitely feeling the effect of the defense budget downsizing," DeJonge said.

DeJonge said Southeast Connecticut will continue to see huge swings in its economy as long as it remains so strongly reliant on casinos, pharmaceuticals and submarines, unlike the rest of the state were the industry mix is more diverse.

"When one of these industries is struggling, it really impacts the region dramatically," DeJonge said. "Unfortunately, they are seeing all their industries down at once."

Of course, even though the recession in the state ended more than two years ago, the economic recovery hasn't been very robust, said Andrew Condon, the director of the Office of Research at the state labor department.

Only 30 percent of the 117,000 jobs lost in Connecticut during the recession have been recovered, and the unemployment rate remains elevated at 7.7 percent, although it is down significantly from its peak rate of over 9 percent.

And that comes with a better industry mix than Southeast Connecticut.

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