Was Connecticut’s economy prepared for the lockdown?
Connecticut’s economy was barely prepared to withstand the pandemicinduced lockdowns of 2020. The impact on jobs, wealth, population and state government finances was severe, leaving Connecticut dangerously exposed to greater economic pain when the next crisis occurs.
How prepared was Connecticut to deal with the pandemic and ensuing lockdowns? What was the impact of those restrictions throughout 2020? Is Connecticut’s economy more, or less prepared to deal with some future crisis?
Heading into the crisis, Connecticut’s economy was in a weakened state. In November 2019, Connecticut’s unemployment rate stood at 3.8 percent, a little higher than the national rate of 3.5 percent.
Moreover, the state’s government finances were atrocious. According to the Pew Charitable Trust, in 2018 Connecticut ranked third from the bottom on funding government pensions, with only Kentucky, New Jersey and Illinois lower. The amount of unfunded liabilities for pensions is about $35 billion, more than 10 times the state’s rainy day fund. Connecticut remains a wealthy state, with sufficient resources to face the next crisis. Sadly, that wealth reserve has frayed significantly. One measure: The increase in housing prices in Connecticut during the five years ending in the third quarter of 2020 ranks fourth from the bottom. Much of this lackluster performance was driven by outward migration of Connecticut residents: U.S. Census data shows that Connecticut was one of only three states to lose population over the period 2010-18. (The other two were Illinois and West Virginia.) Connecticut headed into the pandemic armed with government finances and attractiveness to new residents resembling states historically dependent on a dying — and dirty — industry, coal mining.
How did Connecticut’s economy perform, once the pandemic hit? Badly.
While the national unemployment rate increased from 3.5 percent to 6.7 percent (November 2019 to November 2020), Connecticut’s rate more than doubled, going from 3.8 percent to 8.2 percent. One hundred thousand were thrown into dependency on unemployment checks, resulting in a 434
Unemployment is historically high, businesses remain restricted and government financial resources constrained.
percent dollar increase from September 2019 to September 2020. Small businesses, the core of any functioning economy, were devastated. In a Christmastime article, the Wall Street Journal reported that “one in three small businesses have closed their doors in Connecticut since the beginning of the coronavirus pandemic.”
In perhaps the most depressing result, during spring 2020, the Connecticut Food Bank experienced a 44 percent increase in demand combined with a 60 percent reduction in corporate food donations.
To deal with a once-acentury phenomenon, unemployment checks went out and food banks stepped up, leaving Connecticut’s economy and government finances highly stressed. Unemployment is historically high, businesses remain restricted and government financial resources to deal with the next crisis are frighteningly constrained. Those 100,000 unexpected monthly unemployment checks represented a massive unbudgeted expense.
Gov. Ned Lamont has steadfastly resisted tapping into the state’s record-level $3 billion rainy day fund. One could argue that a pandemic defines a “rainy day,” and that we should spend that money right now to ease the stress on the hungry and unemployed. One would be wrong. The real “rainy day” will come when all those unfunded government liabilities come due.