POTENTIAL PROBLEMS By Luther Turmelle

Flat job growth and trade war threats trouble area economy

The New Haven-area economy has performed better than the state as a whole for much of the past year, according to the eight indicators used in the New Haven Register’s Economic Scorecard.

But the February edition of the Scorecard has five of the indicators headed in a postive direction and three that economist Donald Klepper-Smith considers negatives. And unfortunately, two of the indicators Klepper-Smith rated as negtives — virtualy unchanged employment numbers for the area and a 1.4 percent decline in the labor force compared with February 2017 — have the potential to spill over into other parts of the local economy.

“We’re at critical point at this juncture,” said Klepper-Smith, author of the Scorecard as well as chief economist and director of research for New Haven-based DataCore Partners. “Manufacturers are such an important part of the state’s economy and I think there real concerns about the tarriffs being put in place and the possibility of a trade war.”

Statewide, Connecticut manufacturers employed 5,500 more people in Feberuary than they did during the same period in 2017, according to the Connecticut Department of Labor. If manufacturers fear the demand for their products might be hurt by a trade war with China or other countries, that employment growth engine could grind to a halt.

Even with the growth in the employment sector, the New Haven-area economy only saw a 0.1 percent increase in the number of people working.

“You really need to see job growth in excess of one percent,” Klepper-Smith said.

Combine flat employment levels and a declining workforce with the third negative economic indicator — a meager 0.3 percent gain in real disposable income — and you’ve got what KlepperSmith calls “some cracks in our economic foundation.”

“Consumers control two-thirds of the economy with their spending,”

“Manufacturers are such an important part of the state’s economy and I think there real concerns about the tarriffs being put in place and the possibility of a trade war.”

— Donald Klepper-Smith, chief economist and director of research for New Haven-based DataCore Partners

he said.

Two of the five economic indicators headed in a positive direction in February, according the Klepper-Smith, were housingrelated.

The median single-family home price was up by 6 percent, or $12,000. And the number of permits issued for new housing units in New Haven and 13 other area communities that are included in the Scorecard was at a level more than 10 times higher than in February 2017.

Normally, housing permit activity in February is limited, at best. But the number of units given permits in February 2018 was 301.

Part of the reason for such a dramatic increase is that there were 279 new units issued permits in New Haven alone. Milford city officials issued permits for another 14 new units.

Much of the permit activity in New Haven reflects growth in multi-family housing or apartments. While Klepper-Smith said it is a positive that flexible housing alternatives are being provided to those who either can’t afford a single-family home or find such a living arrangement doesn’t meet their needs, he questioned whether developers aren’t overestimating the demand for apartment living.

“In both life and economics, much of the pain comes from unmet expectations,” KlepperSmith said. “Are their (developers) expectations a little bit too lofty?”