Report: Conn. economy weaker than experts believed

HARTFORD, Conn. (AP) — Connecticut's economy is worse off than economists initially believed, choking off job creation and threatening the state's long-term fiscal health, a University of Connecticut study said.

In sometimes stark and dire terms, the report, "We did not know how bad it was: Connecticut's Great Recession: A steeper hill to climb," which was released Wednesday, said revised federal data show that Connecticut's economy was still shrinking as the rest of the United States was beginning to recover.

"We had known that it was fairly severe, but it was a surprise, the scale of the revision," said Fred Carstensen, director of the Connecticut Center of Economic Analysis at the University of Connecticut.

Revised data show Connecticut's economic output early this year was a little more than $200 billion, down 10 percent from an earlier estimate of more than $220 billion. In addition, months after the recession officially ended three years ago, Connecticut's economic output was about $190 million, not $205 million as originally believed.

The recession, which began in December 2007 and ended in June 2009, was the longest since World War II. The recovery that has followed has been among the weakest ever.

The unemployment rate in Connecticut reached 8.1 percent in May 2009 and climbed to a high of 9.4 percent in August 2010 where it remained until December of that year. It fell to 7.7 percent last April, the lowest in three years, but jumped to 8.1 percent in June and climbed still higher last month, to 8.5 percent.

The UConn report said Connecticut has fewer jobs now than in 1988, "a generation without job creation," it said. Combined with an aging population, the state faces threats to its long-term fiscal health as senior citizens depend on government services such as Medicare while tax revenue declines with millions gone from the labor force due to retirement or unemployment.

Another impact of the data before the revision is that state officials were unable to craft policies to combat the effects of high unemployment, Carstensen said. As an example, he said the Medicaid program for low-income patients drew more applications than the state could afford.

"The state got caught flat-footed," he said.

Connecticut became the first state in the country in 2010 to gain federal approval to expand Medicaid coverage to an estimated 45,000 low-income individuals, ages 19 to 64. The new program covered people previously enrolled in a limited state program, but the additional enrollment grew well beyond what state officials had anticipated.

More encouraging data show a stronger recovery measured by housing permits than neighboring states, the report said.

"Even so, the rising level of activity is still well below pre-recession totals and will not translate into sufficient employment gains to bring the state back to the levels of 2008," it said.

The study said a proposed research laboratory to be built at the University of Connecticut Health Center in Farmington will significantly boost jobs. Still, it projects Connecticut's economic output and employment will grow more modestly than earlier forecasts.

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