Modest Economic Growth Seen in 2013 Amidst Competing Indicators

The Connecticut Economic Digest, assessing the prospects for the state’s economy in the new year, has unveiled a series of observations and analyses that suggest it may be a challenging twelve months, but not without the possibility of progress, and an overall prediction of “modest growth”.  The first issue of 2013 of the journal produced by the state Departments of Labor and Department of Community and Economic Development, notes a range of factors that could impact economic prospects, among them:

• Tourism: "Last year the state launched a multi-million-dollar, two-year marketing initiative to develop, foster and stimulate the state’s brand identity and bolster business and tourism. Tourism has a significant impact on the state’s economy, estimated by the University of Connecticut’s Center for Economic Analysis at $11.5 billion every year through total traveler and tourism revenue and $1.15 billion in state and local tax revenue. Travel and tourism creates more than 110,000 jobs throughout the state, or 6.5% of Connecticut’s total employment."
• Large businesses: "The state’s “First Five” and “Next Five” job initiatives have promised substantial growth in employment and capital investment in Connecticut. At year’s end, nine business deals had been announced as part of the ongoing expansion program, which leveraged $1.3 billion in private investment. Between the nine companies — Cigna, ESPN, NBC, Alexion Pharmaceuticals, CareCentrix, Sustainable Building Systems LLC, Deloitte, Bridgewater Associates, and Charter Communications — up to 4,748 jobs are expected to be created and 11,087 retained."
• Small Businesses: "The Small Business Express Program (EXP) provides loans and grants to Connecticut’s small businesses to spur job creation and growth and has seen vigorous activity since its inception. The state has assisted 435 companies with more than $60 million in loans and grants. With this much-needed capital, up to 1,523 jobs are expected to be created and 4,080 retained."
• Housing: "The state’s housing market languished in 2011. Residential permit data through September 2012, however,  had grown by 32.2% compared to the same period the previous year. New homes sales grew 5.7% in September, and housing starts 3.6% in October, the highest level in four years."

The Digest noted that “the Connecticut recession from March 2008 through February 2010 saw the loss of 117,500 jobs. Jobs regained numbered 30,700 (26.1%) since February 2010 when the recovery began through November 2012, including 1,900 in the year 2012 through November (0.12%) seasonally adjusted since the beginning of the year. The private sector has regained 42,000 (38.1%) of the 110,200 private jobs lost in that same recessionary period.”  It is forecast that Connecticut will gain about 5,600 jobs or 0.3% in 2013.

In addition, the Digest pointed out that “The state’s unemployment rate, after peaking at 9.4% for five consecutive months in 2010 and falling rather steadily to 7.7% in March and April 2012, jumped unexpectedly through last summer to 9.0% and declined to 8.8% in November.” The New England Economic Partnership forecasts Connecticut’s unemployment rate will be 7.7 % in 2013.

State's Small Business Program Targets Jobs, Economic Growth

When a survey of family owned businesses last year found almost two-thirds of respondents projecting sales and revenue growth in 2013, it appeared that optimism was on the upswing. This weeks’ news from Connecticut’s Department of Economic and Community Development (DECD) on the progress of the state’s Small Business Express Program, launched a year ago, may be a contributing factor. The Small Business Express Program (SBEP) supports the retention and growth of small business in Connecticut through a combination of loans and grants. SBEP incorporates a stream-lined process that provides financial assistance in the form of revolving loan funds, job creation incentives; and matching grants. The program is designed to provide small business with access to capital, support job creation, increase skill development and encourage private investment. SBEP loans and grants are intended to have a positive impact on the growth of the companies receiving the funds, and correspondingly on Connecticut’s overall economy.

Slightly more than 1,607 businesses with 100 or fewer employees applied for loans or matching grants in the program's first year, according to state officials. DECD approved just over half of the applications, and the program is currently helping about 500 small businesses retain 4,616 jobs and to create another 1,738.

The DECD authorized $67.2 million in financing to 494 companies through Dec. 31 -- $27.5 million in loans and $39.7 million in grants. It has already received $412,130 in principal and interest payments. State officials are reviewing applications from another 271 businesses, for an additional $38.3 million.

Components of the program include:

• Small Business Express Revolving Loan Fund - Loans are available at a minimum of $10,000 to a maximum of $100,000 to assist small businesses with capital and operational needs.
• Small Business Job Creation Incentive Program - Deferred Loans are available at a minimum of $10,000 and a maximum of $250,000 to assist small businesses to spur growth. DECD may forgive all or part of loan based on the attainment of job creation goals.
• Small Business Creation Matching Grant Program - Grants are available at a minimum of $10,000 and a maximum of $100,000 to provide a dollar-for-dollar matching grant for specific job creation, capital investment and working capital goals.

The SBEP program assistance has leveraged approximately $40 million in private investment, according to DECD figures. Some participating business owners have noted that banks became more willing to lend once the business is accepted into the program.

Manufacturing Goes High Tech; Key Segment of CT Economy

Factory jobs in Connecticut slumped from 477,000 in 1969 – accounting for about one-third of total employment in the state – to just 174,000, about 10 percent of jobs statewide, in 2011, according to U.S. Bureau of Economic Analysis data. In the new issue of The Connecticut Economy however, UConn economist Steven Lanza issues a “report card” on manufacturing that presents the sector as among the most dynamic in the state’s economy, transformed by advanced technologies linked to research and development that are providing a catalyst for economic growth.  The analysis notes that during the past two years, Connecticut manufacturing employment has remained steady at about 165,000 workers.

The manufacturing sector contributed 20 percent of the growth in the state’s economic output in the decade ending in 2010, Lanza estimates, while boosting productivity – the value of manufactured goods per worker – by more than 50 percent from 1990 to 2007, with 35 percent fewer workers.

“Expanding output and falling employment [over that timeframe] combined to raise productivity per worker from $57,900 to $135,800, an impressive 134 percent increase,” Lanza says. Enhanced productivity, in turn, also led to higher wages: in 2011, Connecticut factory workers – who are now more likely to have a graduate degree and wear a suit or lab coat to work – earned an average salary of $76,900, or 26 percent above the state’s all-industry average of $61,100.

Connecticut’s manufacturing profile has also changed drastically; high-tech firms now produce more than 70 percent of the state’s output with computer/electronic products and chemicals accounting for more than 13 percent and 30 percent, respectively, of the total output in 2010.

Lanza also details how the state is now a leader in the aerospace and defense-related transportation equipment field – largely in the production of aircraft engines, helicopters, and nuclear submarines – totaling 23 percent of the state’s manufacturing output in 2010, compared with 20 percent in 1997.

Lanza is executive editor of The Connecticut Economy, a quarterly journal published by the University of Connecticut’s Department of Economics that offers data, forecasts, and substantive, data-driven analyses of current events, longer-term trends, and public policies affecting Connecticut’s economy.

Industry Growth and Enforcement: CT’s Twin Insurance Strategies

The Connecticut insurance sector plays a vital role in the global insurance landscape and the state's economy, according to a report from the Connecticut Insurance and Financial Services (IFS) Cluster and PwC US.  The report, released at the recent  2012 Insurance Market Forecast event in Hartford, highlighted the industry’s importance to the state, which was echoed in comments by the state Insurance Commissioner and Gov. Malloy. Commissioner Thomas Leonardi pointed out that “we regulate the 2^nd largest insurance industry in America,” noting that “if Connecticut were a stand-alone country, we would be one of the 10 largest insurance producing jurisdictions in the world.” You can’t ignore this industry without putting the state in great peril.”  Malloy said, stressing the need to both regulate the industry and view them as “partners” in job creation and economic development.

The 2012 Connecticut Insurance Market Report highlights the sector's rich history, current challenges and opportunities with analysis and findings from Connecticut IFS Cluster, PwC, and the Connecticut Economic Resource Center (CERC).

KEY STATS

According to the report, Connecticut ranks first nationally in insurance employment as a percentage of total state employment and the industry represents approximately 3 percent of the state's workforce, 6 percent of the state's payroll and 9 percent of the gross state product.  Full-time employment in the sector is said to be 50,242.

Insurance also impacts other sectors of the state's economy.  The report says that one new job in the insurance industry adds an additional 1.46 jobs to the Connecticut economy; an increase of $1 in insurance labor income puts an additional $0.78 into state commerce; and every year the insurance industry purchases an average of $2 billion in goods and services from other industries in Connecticut.

"The inaugural Insurance Market Forecast is the showcase effort of that collaboration and will serve as a valuable guidepost as we expand our efforts to attract businesses and talent to our state," said James Bedard, IFS Chairman and Chief Financial Officer/Chief Operating Officer for UnitedHealthcare's Northeast Region.  [CT-N video of event.]

Looking forward, the report emphasizes that competing globally, investing in education, retaining and developing human capital, and government-led economic development initiatives are essential to maintaining the state's leadership position in the industry and growing its economy.  To drive that future growth, the report identifies the five key megatrends – social, technological, environmental, economic and political – that will influence the world's insurance industry, explaining their implications, and offering ideas and actions for embracing them.

A year ago, Gov. Malloy’s office noted that there are more than 65,000 people who work in the insurance industry in Connecticut, described as being down by almost 25% over the past 20 years.  The report compares employment by state, highlighting the top nine:  California (179,936); Texas (163,690); New York (144,077); Florida (134,393); Illinois (112,408); Pennsylvania (110,484); Ohio (108,492); New Jersey (81,119); Connecticut (61,583).

CONSUMER INTEREST

The State Department of Insurance, even as it promotes development of the insurance industry, also goes to bat for consumers.  In the third quarter of 2012, the Department’s Consumer Affairs Unit (CAU) fielded more than 1,500 complaints and inquiries and helped policyholders recoup nearly $1.2 million. During that same period, the Market Conduct division levied more than $1.1 million in fines against carriers and returned that money to the state General Fund. The fines resulted from a variety of violations and settlements ranging from untimely claim payments to improper licensing.  Since January 1, the Department has recovered more than $6.3 million for policyholders and state taxpayers.

The majority of the funds recovered for policyholders stemmed from complaints over health, accident, homeowners and life and annuities policies. The Department calculates its consumer recoveries based on what the policyholder received as a result of the Department’s intervention. The inquiries and complaints also help the Department identify industry trends that may adversely affect consumers. This data also helps determine topics for consumer education and as tools to help the Department monitor the industry. The Market Conduct enforcement actions are posted on the Insurance Department’s web site at www.ct.gov/cid

Adding Women to Corporate Boards Makes Financial Errors Less Likely

Two years ago, Calvert Asset Management Company, Inc. and the Connecticut Retirement Plans and Trust Funds (CRPTF) announced the successful resolution of their joint shareholder proposal on board diversity filed with Netflix, the world's largest subscription entertainment service. The announcement came as the company named its first female director, Ann Mathers, an entertainment industry veteran who joined the Netflix Board on July 1 of that year.  On behalf of the CRPTF, Connecticut Treasurer Denise L. Nappier has spearheaded Connecticut's initiative to increase the participation of women and minorities as members of Boards of Directors of corporations in which the $24 billion pension fund invests.

New data developed by a team of researchers at the University of Wisconsin-Milwaukee suggests that Nappier got it right, at least in one critical aspect of business.  Companies whose directors include one or more women are 38% less likely to have to restate their financial-performance figures to correct errors than firms with all-male boards, says the team led by Lawrence J. Abbott of the University of Wisconsin-Milwaukee.

Gender diversity may make a board more open to viewpoints that oppose the CEO's and may encourage a more deliberative and collaborative decision-making process, according to the research, published in the American Accounting Association journal Accounting Horizons.

Treasurer Nappier has filed numerous shareholder resolutions on corporate board diversity, in accordance with the State of Connecticut's investment policy and the recognition that companies and firms that demonstrate a commitment to diversity are more likely to succeed in an increasingly global marketplace.

Restatements are necessitated by serious misrepresentations, whether through error or fraud, in corporate financial reports. A woman's presence on a board, the researchers found, does more on behalf of financial integrity than such tried-and-true measures as requiring the board's audit committee to consist entirely of independent directors, one of them with financial expertise, and mandating that it meet at least four times annually. The study finds those measures in combination to reduce the likelihood of restatements by about 20%, about half the effect achieved by having a woman director.

As the findings point out, “Gender diversity can potentially affect the outcome by generating more questioning of the status quo, greater acknowledgment and legitimization of opposition and third-party viewpoints (including those of the audit committee, auditor, or internal audit director) and a slower, more deliberative and collaborative decision-making process...heightening the monitoring effectiveness that may [otherwise] be diminished by groupthink."

The study's findings involved a comparison of companies that had to issue financial restatements with a control group of similar firms with no such reporting problem. The restatement sample consisted of 540 firms in total, with each of the restating firms matched with a control company on the basis of market capitalization, industry, and the ranking of the firm that performed its auditing.

Nappier, inducted into the Connecticut Women’s Hall of Fame in 2011, has served as State Treasurer since 1999, having previously served as Treasurer of the City of Hartford.  She is the first African-American woman to serve as a State Treasurer in the nation’s history.

Tale of Two Lists: Influential Leaders in Greater Hartford

‘Tis the season of making a list and checking it twice. Which will probably be the strategy employed by Hartford magazine next year, after enduring considerable criticism for omitting Latinos from their list and feature article on the “50 Most Influential” individuals in the Greater Hartford region - a prominent, lengthy and well-photographed December edition cover story.

Now, Latinos United for Professional Advancement (LUPA) has issued its list of the 50 most Influential Latinos in the region – a list not only impressive for who’s included, but for the numerous talented and highly placed Latinos who didn’t make the list, an indication of the growing breadth of leadership in the region by individuals of Hispanic heritage.  It is the first such list to be issued by the relatively new organization, aimed at bringing together and advancing the Latino professional community.

At least Hartford magazine will have a place to start when they consider candidates for next year’s cover story.

Yes, such lists are incredibly subjective.  But as LUPA points out, their list “was developed to demonstrate the significant roles Latinos play in the capital region and the influence they have on many facets” of life in the region and the state.  “The Latino population in Hartford is more than 45 percent, according to the U.S. Census Bureau, and in Connecticut the total population growth from 2000-2010 was 168,532 with Latinos comprising 158,764 of that population growth.”

See the LUPA list and the Hartford magazine list.  All good and worthy people, who are making significant contributions to the region.   That's 100 names, no overlap.

Concerns raised by ctlatinonews and others regarding the Hartford magazine list will, one would expect, result next year in other names “making their first appearance, new faces on the Greater Hartford scene that we expect to see more of in years to come,” to quote, in a slightly different context, the Hartford magazine list preamble.

Virtual Technology Drives New Collaboration to Respond to Achievement Gap Challenges

A persistent academic achievement gap, determination to advance an effective response and the emergence of a cutting-edge technology are driving a new collaboration that is aiming to improve education opportunities for students in underserved communities and strengthen connections among students, teachers, parents, and the community. The first steps of the initiative – which brings a leadership donation by the Travelers Foundation together with the just-formed Connecticut Technology and Education Collaborative (CTEC) and the Hartford Public Library – will lay the groundwork for the introduction of “desktop virtualization” technology to support education for Hartford students.

The Travelers Foundation is providing no-longer-needed computers and financial support to CTEC, which includes The Walker Group, Connecticut Center for Advanced Technology (CCAT), GreenShare Technology and SpaceFitters. The CTEC initiative marks the first time that such an effort has been undertaken in Connecticut - designed specifically to bring an evolving cutting-edge technology to K-12 students in the state.  A pilot project launched by CTEC began earlier this year in Windham schools.

The donation by the Travelers Foundation will support repurposing and installing the computers at a number of Hartford Public Library locations. In turn, they will be designated for student use and connected to the Hartford Public School network. This will give HPS students after school access to the applications and files they’ve used during the school day from reconfigured PC’s that operate better than new ones.  Access to their classwork offers the students the means to spend additional time reviewing material, working on assignments, and reinforcing lessons.

The technology enabling these donated computers to perform so well is known as desktop virtualization, which shifts the more intensive processing from the computer itself to a specialized server running in a secure data center in East Hartford, part of a previously established and underutilized state network that was developed to advance educational purposes.

The desktop virtualization technology enables students and faculty to access their school network from anywhere, anytime, using any type of device. It is a transformational technology in education, giving students a new way to access technology and opening up extended learning options for disadvantaged schools and communities.

“Virtual desktops hold tremendous potential for enabling under-served students to gain access to school technology," commented Tony Budrecki, Virtualization Services Director at The Walker Group in Farmington. “Our repurposing of legacy machines donated by Travelers into high performance systems wouldn’t have been possible just a few years ago. It’s a great example of creative philanthropy helping to solve a big societal problem.”

The Connecticut Technology and Education Collaborative is made up of Connecticut-based for-profit and non-profit organizations. The group’s goal is to help level the playing field for access to high-quality, affordable technology in school and from home, through creative public-private collaboration.  The initiative also offers the potential of cost-saving benefits to local schools, as computer network capacity is used more efficiently.

Economic Impact of Arts & Culture in Hartford Region Gains Notice

When the MetroHartford Alliance and the Greater Hartford Arts Council brought business and arts leaders together at the Bushnell Center for the Performing Arts this week, it was the numbers that carried the day, touting the business benefits of the arts and culture industry.  The national study focused on regions across the country using data developed by Americans for the Arts.  In the Greater Hartford region, 123 local arts institutions participated, with more than 800 audience surveys. The top ten stand-out facts about the annual economic impact of arts and culture in the Greater Hartford area, which was defined as Hartford County and Tolland County:

1. Total Arts and Culture Industry expenditures in the Greater Hartford area:  $230.4 million
2. Full time equivalent jobs supported: 6,879
3. Revenue generated to local government: $5,184,000
4. Revenue generated to state government:  $16,244,000
5. Spending by Arts & Heritage Organizations;  $148,242,871
6. Event-Related Spending(total)excluding the cost of admission:  $82,005,472
7. Average Spending per person: $20.35 ($17.50 from residents of the region; $30.02 from those who reside outside the region)
8. Total Attendance:  4,028,850  (3,110,272 from within the region; 918.578 from outside the region)
9. Estimated aggregate value of volunteer hours:  $7,506,865 (7,258 volunteers donated a total of 351,445 hours to nonprofit arts and culture organizations).
10. Greater Hartford’s arts and cultural community ranks in the top 10% of metro areas across North America.

The findings also noted that of those surveyed:

• 48% of those attending a cultural event, and who live in the Greater Hartford area, would have traveled to a different community in order to attend a similar cultural experience.
• 60% of those who live outside the immediate region said the same.

The report concluded, therefore, that if the money wasn’t being spent in Hartford, it would be spent elsewhere.  The report’s overall  bottom line:  arts and culture is “an industry that supports jobs, generates government revenue, and is a cornerstone of tourism.”

The national study included 182 regions include 139 individual cities and counties, 31 multi-city regions, 10 states, and two arts districts and represent all 50 states and the District of Columbia.  Greater Hartford was one of the cities that participated in the survey, which was conducted using 2010 data.

The study results were announced at the MetroHartford Alliance's November Rising Star Breakfast, which  featured Randy I. Cohen, Vice President of Research and Policy for Americans for the Arts, and a local panel that included Catherine Smith, commission of the Connecticut Department of Economic & Community Development; Thomas E. Deller, director of Hartford’s development services and Michael Stotts, managing director of Hartford Stage. The event was sponsored by The Phoenix Companies, Inc. and included remarks from Cathy Malloy, executive director of the Greater Hartford Arts Council.

Coastal Residents Tuned to Radio When Storm Hit; Ratings Soar

The arrival and immediate aftermath of Hurricane Sandy last month brought not only destructive weather, but the return of an old fashioned medium to temporary prominence.  While those with power looked to television, cable news channels, the internet and social media for information, those whose electricity had disappeared, particularly those in the hardest-hit areas, turned to radio. The New York Times is reporting that data from Arbitron, the radio ratings service, indicates that from 7 p.m. to midnight on Oct. 29, when the storm made landfall in the region, an average of just more than a million people in the New York metropolitan area were listening to the radio during any 15-minute period.

That is an astonishing 70 percent increase from the same period the week before. Besides the five boroughs of New York City, the metropolitan market includes five counties in New York, nine in New Jersey and part of one in Connecticut.

The audience increase was astronomical in the pummeled coastal areas. In Connecticut, Stamford and Norwalk had a 367 percent increase during that period; in New Jersey, that figure was up 247 percent in Monmouth County, and up 195 percent in Middlesex, Somerset and Union counties. These numbers increased even though some stations, like WNYC and WINS, lost their AM frequencies (although they continued to broadcast on FM.)

In some cases, as in past major storms, local stations without regular news staffs aired the audio of local television stations that were on the air with non-stop storm coverage.  For those with an abiding affinity for radio, the storm has become the preeminent recent example of the power of radio to provide critical information and reach large numbers of people in an emergency situation.  Some broadcast officials continue to urge the Federal Communications Commission to take action to encourage cell phones to have an FM radio receiver installed, harkening back to the generation for whom transistor radios were as ubiquitous as today’s cellphones.

Family Owned Businesses May Spur State's Economic Recovery

A hint of optimism goes a long way.  At least that’s the hope of Connecticut’s small businesses heading into 2013.  A new survey has found almost two-thirds of respondents project sales and revenue growth next year, which, if realized, could be just the boost the state’s economy needs. That growth is increasingly coming from beyond the state’s borders, the survey found.  While 47% of family businesses surveyed identify Connecticut sales as their greatest source of growth, 42% trace the majority of their revenue to other U.S. states, and 11% to international sales. This represents a significant shift from as recently as 2009, when 59% said Connecticut was their largest customer base and only 2% reported international sales as their greatest source of revenue.

The 2012 Survey of Connecticut Businesses, produced by the Connecticut Business & Industry Association and the University of New Haven’s Center for Family Business, highlights the challenges, concerns, and growth prospects a critical sector of the state’s economy.  Almost half of the businesses surveyed said their workforces will remain stable, while 43% plan on hiring new employees in 2013. In addition, many said they anticipated making significant investments in equipment, IT systems, facilities, and training.

Industries represented in the survey included manufacturing, services, retailing, construction, finance, insurance, real estate, wholesale trade, transportation, communications, and utility services.  Many cited the high cost of doing business in Connecticut as the single greatest obstacle to growth.  A lack of skilled workers, particularly in computer/IT knowledge, engineering and mechanical skills, and management and leadership also were noted as ongoing concerns.

Employment looks brighter in 2013: in addition to 43% of family busi­nesses planing  on hiring new employees in 2013 (compared to 30% in 2012), nearly half (48%) expect no change in their company size in 2013. Only 9% expect a decrease in their workforce in 2013, compared with 13% in 2012.The survey questionnaire was emailed to top executives at 3,000 family companies in August 2012. There were 580 responses, for a response rate of 19.3%, and a +/- 4.15% margin of error.

The average tenure for employees at Connecticut’s family businesses is 20.2 years for family members and 12.7 years for non-family members—both substantially higher than the national average for employees overall (4.6 years as of January 2012, according to the Bureau of Labor Statistics).

Family businesses are vital to their communities and to the economy. The survey found that more than three-quarters of family business owners (77%) consider it important or very im­portant that they leave a positive, lasting legacy, and 53% intend to pass their business on to the next generation.

Overall, family businesses comprise 80%−90% of all businesses in North America, contributing 64% of the nation’s gross domestic product (GDP), employing 62% of the U.S. workforce, and outperforming non-family firms on measures such as operating return on assets.

The 2012 Survey of Connecticut Businesses is part of CBIA’s Family Business Program, an initiative designed to support and grow the state’s thousands of family businesses.  Sponsored by CohnReznick, First Niagara Bank, and Reid and Riege PC, the program features forums and networking opportunities where business leaders can discuss solutions to issues ranging from family governance to succession planning.