But Connecticut Still Outperforming the National Economy
Governor M. Jodi Rell today met with members of her Council of Economic Advisors to discuss the status of Connecticut’s economy, the national outlook and its implications for Connecticut and the state budget. Also attending the meeting was Department of Economic and Community Development Commissioner Joan McDonald.
The economists told Governor Rell that they believe the country entered a recession in December, although the National Bureau of Economic Research has not yet made it “official.” The Governor’s advisors are basing that determination on declining consumer confidence, the loss of non-farm jobs both nationally and in Connecticut, the continued slump in the housing market and persistent credit market concerns.
“Connecticut is still outperforming the national economy and we have 9,400 more people employed than last year at this time,” Governor Rell said. “We have learned the painful lessons of previous recessions and diversified our employment base, our exports are one of the few economic sectors that benefit from the relatively weak U.S. dollar and our housing market is not as overextended as it was during the recession of 1989-1992.
“The economists’ message to me was clear: fiscal discipline must be our primary focus,” the Governor said. “Every expenditure we make now must be justified twice: Is it the right choice for our current needs? And does it position us to benefit when this recession has passed and we are ready to make the most of an upturn in the economy?
“Every day, Connecticut families are struggling to make ends meet,” Governor Rell said. “They are forced to choose between filling their car with gas and a night at the movies with their children. They stop at the grocery store and see a gallon of milk cost $4.25 or more – even more than a gallon of gas, at least for the time being. Every day the price of staple foods – eggs, bread, fruits and vegetables – increases beyond their ability to keep up. They are hurting, they are frustrated and many of them are understandably uneasy. Our job is to ease as much of that concern as we can by keeping a tight rein on spending and making sure our economy is as healthy as we can make it.”
Energy prices were cited as the primary factor driving the nation into recession.The economists also said that consumer confidence in New England is down 38 percent since last year and that national consumer confidence is at its lowest point in 26 years.The elderly are being particularly hard hit by the current economic climate due to low interest rates on savings, social security payments that are tied to the Consumer Price Index and high energy and fuel costs that take a disproportionate part of their income.
“Like Connecticut homeowners and businesses, state government is struggling to deal with the spiral of endless energy prices increases,” Governor Rell said. “Everything from heating and air conditioning for state buildings, prisons and hospitals to gasoline for state police cruisers and snowplows has to be paid for. This steady drain on the budget is siphoning away money that might otherwise go to much-needed programs and services.”
The Governor’s advisors also warned of potential weakness in state tax revenues, especially the income tax, which is heavily affected by the performance of Wall Street and the boom-and-bust cycle of the financial services industry. Consolidations, layoffs, mergers and other fallout from the credit market crunch is likely to be reflected in lower personal income, real estate and conveyance tax revenues, the advisors said.
“In terms of state budgeting, the message from the advisors was ‘do no harm,’” Governor Rell said. “They recognize that to maximize our economic position for the future, we cannot spend anything above what is absolutely necessary right now.”
