Connecticut Post (Sunday)
100,000 missing workers: The state’s struggle to regain jobs
Remember “the one percent?” It was the simplest phrase to sum up the most vexing problem ailing the Connecticut and U.S. economies, before the COVID-19 pandemic shifted attention in 2020 to horrific death tolls and the stories of survivors.
As COVID infection rates sink and a pill shows promise as an effective treatment, Connecticut’s seemingly incurable wealth gap — most likely made worse by coronavirus — is coming back into focus.
The issue as the state’s economy struggles to grow isn’t the gap itself so much as affordability for people on the lower-income side of the divide. Pandemic relief programs have started to dry up for people scraping by, even as a new influx of affluent people have moved into the state.
That migration, along with chaos jostling sectors such as housing, retail, commercial development and manufacturing, has highlighted three pressing questions for the Connecticut economy that may have reached a tipping point.
What is the path to convincing employers to add good-paying jobs here, whether in traditional workplaces or in home offices?
What will it take to bring back the roughly 100,000 Connecticut residents who were working two years ago but remain on the sidelines now?
And will the added jobs pay enough to trigger broader personal spending to help Main Street retail, restaurant and services businesses bounce back — and pay their own workers enough to live here?
For many of those earners, it is a story of financial survival in a state where the high cost of owning a home or renting leaves little cushion to sock away money for retirement, emergencies and life’s splurges.
That cost crisis, absent a magnet city to attract young professionals, has vexed the state for decades.
Through booms, collapses and the pandemic shutdown, Connecticut’s economy has failed to show longterm, sustained growth — leading to a cycle of weak job opportunities and budget shortfalls. It’s especially clear in Bridgeport, Hartford, New Haven and other cities with high property taxes, low average incomes and large Black and Hispanic populations who bear the brunt of an economy short on opportunities.
Now, after the pandemic, Connecticut shows signs of a sea change, breaking that cycle of languishing incomes and flat job gains. It’s a tenuous tide, however, with the core question — will people who have a choice want to live in Connecticut?
As attractive job opportunities dwindled in Connecticut, many people took jobs in information technology and other fast-growth sectors in New York and elsewhere, UConn economist Fred V. Carstensen points out, while they maintained residency in Connecticut.
“Now, many of those folks have lost their jobs and may decide to move out of state to find new jobs,” Carstensen said. “It points to a very difficult future as our population falls along with our tax revenues — an ugly trajectory absent major policy changes and investments.”
Missing: 100,000+ workers
Under the Coronavirus, Aid, Relief and Economic Security Act of 2020, the CARES Act, many Americans collected thousands of dollars in assistance — including an extra $600 in weekly unemployment assistance later pared to $300 — while small business owners got hefty cash payments.
For some who lost jobs and businesses, it was a crucial boost. For others who saw no lost income, it amounted to a welcome cash bonus from Uncle Sam.
Now all eyes turn to Connecticut’s private sector to pick up the momentum. The key questions there are which sectors will emerge as engines of growth, which the state desperately needs in order to keep alive the cycle of people wanting to live here, which leads to more job growth.
The state boasts some advantages even beyond the influx of people (mostly from New York), and of course, some steep challenges.
As of September, Connecticut employers had about 1,609,000 people on their payrolls as estimated by the Connecticut Department of Labor, based on surveys. That was 87,000 jobs short of the number two years before on the doorstep of the pandemic. The rate of unemployment has fallen but remains 2 percentage points above the national rate.
Because many people have stopped looking for work, Connecticut in September had about 164,000 fewer residents with jobs, compared with two years ago, according to the monthly survey of households. State officials suspect some of that gap is due to a quirk in the data — surveys are not a hard science.
But there’s no question the number of people living here and not working is way up in the pandemic — an increase at least in the neighborhood of 100,000.
‘Business is at home now’
David Lehman, commissioner of the state Department of Economic and Community Development, maintains that while Connecticut trails much of the nation in recovering jobs lost during the pandemic, it has fared comparatively well among other states in the Northeast and MidAtlantic regions.
But Connecticut did not keep pace with New York, Massachusetts, New Jersey and Rhode Island for economic growth in the second quarter of this year, according to the U.S. Bureau of Economic Analysis. Gross domestic product increased at a 5.9 percent annual rate from the prior three months, ranking Connecticut 29th nationally for growth.
And as of August, Connecticut ranked fourth from last nationally on a Federal Reserve “coincidental” index that assesses economic growth since 2007 as dictated by jobs, personal income and a few other factors. Only Alaska, West Virginia and Louisiana scored lower on the Fed index.
New Jersey, like Connecticut a land of small cities with large numbers of commuters and businesses with ties to Manhattan, ranked 11 slots higher on the index over that span, while Massachusetts — with a magnet city and a booming biosciences sector — ranked 13th overall to lead all Northeast states.
“I think getting to full employment and where we need to be — that is going to be more challenging, and that’s going to be based on other factors beyond the pandemic,” Lehman said in a recent discussion with members of the General Assembly.
Gov. Ned Lamont is attempting to reinvigorate Connecticut’s historic appeal with a renewed commitment to workplace and societal equity — while chipping away at a mountain of state debt and future obligations to give employers the confidence the state can hold taxes in check. Republicans say the state needs to do more to hold down costs, even if that means doing without some government programs designed to bolster the economy.
Speaking in early October at a press conference for East Hartford homes to get access to fiber optic broadband, Lamont cited Connecticut’s new opportunities in the current workfrom-home era.
“You got to understand, business is at home now — business is folks who are telecommuting,” Lamont said. “But it only works if nobody is left behind.”
Raising children — and companies
Why are those missing tens of thousands of workers staying on the sidelines? Among many reasons, child care — made worse in the pandemic — and the lack of a strong start-up economy creating highpaying hometown jobs.
“Jumping right back into the work force right now might be concerning — especially if we are talking about single parents,” said Dante Bartolomeo, commissioner of the state Department of Labor.
“I have a friend who’s got a 10-year-old,” Bartolomeo added. “If she had an opportunity to not be working right now she wouldn’t, because she never knows when her child is going to be quarantined and sent home for a couple weeks. During the pandemic she was allowed to remotework — now she’s not.”
Rachel Toussaint, a makeup artist in Danbury who does work for weddings, photo shoots, commercials and as a personal consultant, described the trade-offs for working parents in a recent interview with Connecticut Voices for Children, as part of the advocacy group’s “State of Working Connecticut” report.
“It’s always, ‘Oh my gosh, how am I going to make this happen?’” Toussaint told Connecticut Voices for Children. “Do I say yes to the job, and then figure it out later? Or do I have to say, ‘Hold please, let me see if I can get child care’ — and then maybe lose the job? It’s a lot of emotional, mental work.”
Pandemic stimulus dollars well into the hundreds of millions will fund child care in Connecticut over the next couple of years. It remains to be seen whether state and federal programs will pick up that slack, as debates continue in Hartford and Washington, D.C.
Matt McCooe runs the
Connecticut Innovations venture fund, the state’s quasi-public startup investment arm. His goal: grooming a new generation of entrepreneurs who are determined to add jobs where they live. As one example, he cites the databackup firm Datto in Norwalk, whose founder Austin McChord grew up in Newtown.
More than ever today, McCooe says, Connecticut Innovations is getting pitches from women with great ideas that could become the foundations for companies.
“Whereas they were underrepresented before, I think we finally are indexing closer to 50-50 which is great,” McCooe said. “Hopefully this is part of a new wave of great companies in Connecticut.”
900,000 households under $50K
As of mid-October, there were more full-time job openings in Connecticut than people drawing unemployment compensation — on the raw numbers alone, a job for everyone.
But many of those jobs offer only subsistence-level pay, despite the best employment market since the early 2000s nationally as businesses scramble to fill positions with people who can do the work.
Large numbers of employers are dangling onetime cash bonuses as hiring perks, which is enticing but sometimes comes instead of higher base pay that can help workers maintain a better standard of living in the long term.
Of more than 44,000 full-time openings listed in Connecticut last week on Indeed, just 7,500 offered more than $75,000 a year. That contrasts with about 31,000 offering less than $50,000 in annual pay.
Connecticut’s minimum wage for most jobs rose to $13 an hour in August, with a legislative mandate of $15 an hour by June 2023 — in alignment with many blue states as southern states and many others remain mired at the federal level of $7.25.
Connecticut is still the envy of most states nationally by one measure: an estimated median household income of $81,848 as of the second quarter of 2021 according to the Federal Reserve. That’s a 2.1 percent increase from a year earlier.
But that median, where half of households earn more and half earn less, doesn’t buy a good lifestyle for Connecticut families. An online “living wage” calculator maintained by the Massachusetts Institute of Technology calculates that a Connecticut family of four requires two working adults each making about $22.50 an hour to make ends meet.
That works out to about $47,000 a year for each if they get pad vacations — or $94,000 in yearly income.
On the year-end W2 forms for many workers, however, earnings fall well short of that median. For the 2018 tax year, the Internal Revenue Service counted about 908,000 tax returns from workers and households whose adjusted gross income checked in at under $50,000.
While many of those households combine earnings from two adults — or dodge reporting money they earn in the “underground economy” — the IRS numbers nevertheless suggest a deep struggle.
It leaves little wiggle room for people looking for houses and apartments. The U.S. Department of Housing and Urban Development calculates “fair rent” — homes or apartments at the 40th percentile of any region’s housing stock — at about $1,800 a month for a three-bedroom unit in the Bridgeport-New Haven corridor. Stamford’s fair rent figure tops $2,400 for that size pad.
After federal dollars, Connecticut’s biggest gain in the pandemic was the influx of people relocating from New York City where the cost of living is even higher, as employers switched over to remote work and people reassessed the importance of extra space contributing to quality of life, whether indoors or out.
Lehman, the DECD commissioner, described the hybrid-remote working era as one of the biggest opportunities before Connecticut today.
“If someone worked in Midtown Manhattan previously, they never felt like they could move to a Fairfield or a Trumbull,” Lehman said. “That Trumbull opportunity is there now, and we’re seeing it in the numbers. We saw it in 2020 and we are seeing it continue in 2021.”
But that economic benefit arrived with an accompanying challenge — a squeeze on many who were on the cusp of buying prior to the pandemic, only to see prices race up out of their reach.
Between 2005 and 2021, Connecticut had the sharpest decline in home ownership rates, dropping 8.4 percentage points to 66.1 percent according to U.S. Census Bureau estimates. Among eastern states, that trailed only Virginia’s 8.7 percentage point decline.
Home sales were up another 11 percent in the first nine months of this year compared with the same period in 2020, as 40,700 properties were sold to new owners according to a preliminary count this week by Berkshire Hathaway HomeServices New England Properties. Now thre are signs that house sales boom might be slowing.
The market is in a “slightly lower gear” today from the frenetic pandemic patterns between the spring of 2020 and 2021, in the words of Joan Carty, CEO of the Housing Development Fund based in Stamford. That’s a welcome development for first-time buyers.
“We’ve actually seen a pickup in the number of people who are able to close on transactions and purchase homes,” Carty said. “Any properties that are on the market now are on for a little longer than they had been — they’re not just being snapped up willynilly by cash-only buyers.”
Some believe that jobs will return eventually back to New York City and other urban centers, despite the possibility that new variants of COVID-19 could make vaccines and treatments an ongoing challenge in containing the virus. Others think that satellite offices in the suburbs will become the norm, giving workers greater flexibility in choosing where to live.
New York’s ripple effect on the Connecticut economy has been profound, dating back to the 1849 completion of a rail link between New Haven and Manhattan, through the 1980s as financiers and consultants came pelting out of the city to the Greenwich-Westport corridor. That included the hedge funds that minted many of the multi-millionaires and billionaires making up “the one percent” in Connecticut.
New York has long been a source of people moving to Connecticut. Even as the state lost an average of 20,000 residents per year to other states in the five years ending in 2018, about 6,500 people a year moved from the Empire State to Connecticut.
But Connecticut learned the hard way as well that those ultra-high earners can live anywhere, with New York City and Florida having lured many away for permanent residency.
Defense manufacturing remains a bulwark, with the trio of giant contractors Pratt & Whitney, Sikorsky and Electric Boat. The submarine ramp-up has made EB a growth engine, a clear bright spot in the southeastern part of the state. Notably, all three of those defense and aerospace contractors report to corporate headquarters in other states.
And while the state has major academic research centers in Yale and the University of Connecticut, it has yet to see a surge of startups emerge from those think tanks as in Boston, the Silicon Valley in California or Austin, Texas.
In life sciences, for example, Yale researchers have created companies in recent years such as Alexion Pharmaceuticals and Arvinas, which have in some cases achieved huge valuations as they develop potential treatments for cancer and rare diseases. And thousands of people still work at Pfizer in Groton — but the state has never had more than a small handful of large employers in the sector.
“I do think investments in innovation and the knowledge economy .... is going to drive population growth and ultimately economic growth,” Lehman said in an October interview with Hearst Connecticut. “That’s going to enable the jobs we need to have that living wage here in Connecticut for much of our population.”