An Update on the Connecticut Economy Dr. Steven P. Lanza Executive Editor, The Connecticut Economy CREUES Commercial Real Estate Conference November 9, 2010

IS THE US ECONOMY WALLOWING IN RECESSION…. Current Recession Pre-1973 Recessions 1973 & Later Recessions Indexed GDP Peak = 100

…OR SIMPLY FACING AN UNEXCEPTIONAL REBOUND FOLLOWING AN EXTRAORDINARY DECLINE? Current Recession Pre-1973 Recessions 1973 & Later Recessions Indexed GDP Trough = 100

THIS “BIG CHILL” HAD A PREQUEL Quarters of Recovery Current Recession 2001 Recession GDP % Growth

RECESSION LEAVES A YAWNING OUTPUT GAP Average: 6.3% Trillions $2005

BUT LITTLE APPETITE FOR MORE STIMULUS Growth in Federal Deficit

CONSUMERS ARE UNLEASING SPENDING AS THEY REIN IN DEBT 2.4%/YR 3.9%/YR Retail Sales Debt Service as Percent of Income

HOUSING COULD SURPRISE TO THE UPSIDE + 2 Million -2.2 Million Housing Starts in Thousands, SAAR Average:

BUSINESSES MAY HAVE LITTLE CHOICE BUT TO HIRE +1.3%/YR +6.1%/YR -1.8%/YR in Q2 Worker Output per Hour +1.9%/YR in Q3

HARTFORD WEATHERS STORM COMPARATIVELY WELL U.S. Hartford Stamford Connecticut Nonfarm Jobs: Peak =100

FINANCE STILL SHAKY Hartford U.S. Stamford Connecticut Finance Jobs: Peak =100

MANUFACTURING ON SLIGHTLY FIRMER GROUND Hartford U.S. Stamford Connecticut

3% GDP 2% GDP STILL, A MURKY OUTLOOK FOR CONNECTICUT JOBS Thousands Scenario Trough/11 Growth 2% GDP 300 3% GDP 12,500 4% GDP 24,700 4% GDP

+27,000/YR +1,000/YR

CT Ranks #10 in self employment in :7 Ratio for CT 1:4 Ratio for US +4.7%/YR

1:5 Ratio CT 1:6 Ratio US

1:2 3:8 Litchfield + Fairfield Cos. State Population30% State Self-employed40%

CONNECTICUT HAS HIGH MANUFACTURING WAGES AND SALARIES Hourly Wage of Production Workers

1990s: self-employment jobs stabilized but earnings closed gap 2000s: self-employment jobs surged but earnings plateaued