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December 21, 2018

Don Klepper-Smith: CT economic-development strategy outdated

Don Klepper-Smith

Don Klepper-Smith

Chief Economist and Director of Research, DataCore Partners LLC

Revised data show that Connecticut ranked 50th in real GDP growth in 2017, last in the nation, down 1.1 percent, and the state still has the lowest job-recovery rate since the Great Recession in New England at 90.4 percent.

The state's economy has now added 107,700 jobs since the worst of the Great Recession and is not likely to see full job recovery until mid-to-late 2019.

Bottom line: This “economic stagnation” is likely to continue as long as we adhere to state economic-development policies that are predicated on outdated, anachronistic economic fundamentals that were prevalent in the 1950s and 1960s.

Between 2007 and 2017, the U.S. economy as measured by real GDP has risen 15.5 percent. During this same period, new revised data shows that the Connecticut economy has declined 9.2 percent.

In my opinion, the reasons as to “why” Connecticut has lagged in economic terms is a function of declining business confidence, rising out-migration, a lack of fiscal discipline at the state and local level, and misguided economic-development policies.

Today, massive structural change has reshaped our economic landscape, and current state economic-development policies have failed to keep up. The Laffer Curve shows that further tax increases in Connecticut will only exacerbate our economic problems. The only path to economic revitalization is one that reins in wages and benefits for state workers, while aggressively promoting manufacturing growth.

We're now losing a net of about 428 people per week to other states because of the lack of fiscal discipline at the state and local levels. And with seniors earning little to nothing on savings, and the aging of Baby Boomers now becoming more apparent, the mounting fiscal stress is already baked into the pie.

Return to HBJ's 2019 economic forecast landing page

What’s your 2019 economic outlook for Connecticut? Little to no growth
How many jobs will Connecticut add? 2,000-5,000
What will Connecticut’s unemployment rate be at the end of 2019?4.5%-5%
What type of GDP growth will Connecticut see in 2019? Less than 1%
Which industry will add the most jobs? Health care & education
Which industry will lose the most jobs?Information 

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