Connecticut’s budget woes dampen consumer spending

The data in the New Haven Register’s June economic scorecard suggests a tale of two Connecticuts.

Seven of the eight economic indicators used in developing the scorecard for the New Haven area were headed in a positive direction in June. Only real disposable income, which remained essentially unchanged from June 2016, was given a negative ranking by Donald Klepper-Smith, chief economist and director of research for New Haven-based DataCore Partners and the author of the scorecard.

“Wages aren’t growing and that’s why we’re seeing the disposable income up only 0.1 percent,” Klepper-Smith said. “We need to see growth of 0.5 percent or more for it to be really meaningful.”

The other tale being told in June, about the state’s overall economy, is considerably more worrisome.

A survey released last week by InformCT, a public-private partnership that provides independent, non-partisan research, found that the state’s ongoing budget stalemate may be keeping consumers from spending.

The InformCT Consumer Confidence Survey, which covers the second quarter of 2017, found that 69 percent of respondents said state budget cuts would have some or a significant effect on their personal budgets. That represents a 13 percent increase from when the same question was asked during the first three months of this year.

The percentage of respondents expecting an impact on their personal budgets from state budget cuts grows as respondent incomes decrease, according to the data from the second-quarter survey. And since consumer spending is considered an important economic driver, any decrease in that type of activity is likely to have negative consequences for the state.

The survey was done by researchers from the Connecticut Economic Resource Center and Smith & Co. The survey of 505 state residents has a margin of error of 4 percent.

The consumer confidence numbers Klepper-Smith uses as a scorecard indicator come from the Conference Board and represent New England’s economy as a whole.

Klepper-Smith said the region’s 30.7 percent increase in consumer confidence in June compared to the same period a year ago is “an indicator of how people are feeling about the gains made by the stock market.” It a feeling, he said, that likely is shared by Connecticut investors as well as their counterparts in the region’s other states.

The three job market indicators — total employment, total labor force and the unemployment rate — for the New Haven area “indicate considerable and widespread economic strength over the past year,” KlepperSmith said.

Total employment in the New Haven Labor Market Area saw

The percentage of respondents expecting an impact on their personal budgets from state budget cuts grows as respondent incomes decrease, according to the data from the second-quarter survey.

the region add 4,000 jobs from June 2016 to the same period this year, a 1.4 percent increase, he said. The labor market area’s total labor force grew by 8,900 jobs during the same period, which represents a 2.7 percent increase.

And the unemployment rate for the New Haven area fell from 5.4 percent in June 2016 to 5.2 percent during the same period this year, KlepperSmith said.

“The employment numbers reflect a collective health in the labor market,” he said. KlepperSmith said the employment growth rate on the national level is at 1.6 percent.

“It’s a pretty good recipe for overall economic health,” he said of the gains made in the New Haven area economic indicators. “Consumers have made gains, there is wealth creation in the form of home appreciation and stock gains.”