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Book of Lists 2018

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DECEMBER 26, 2017 • HARTFORD BUSINESS JOURNAL | 13 Patrick J. Flaherty Assistant Director of Research, Connecticut Department of Labor Farhad Rassekh Economics Professor, University of Hartford Don Klepper-Smith Chief Economist and Director of Research, DataCore Partners LLC; Economic Advisor to Farmington Bank U.S. economic outlook stable; CT's stagnant U.S. economic data suggests that the modest eco- nomic recovery is likely to continue through at least the end of 2017 and possibly lon- ger. The odds of a full-blown domestic recession over the next 12 to 18 months are low. However, the outlook for 2018 is clouded with uncertainty, but will be a function of: proposed tax cuts, emerging trade policies and possibly a new wave of protectionism, and proposed rollbacks of federal government regulations, which hopefully will seek to spur new business investment. With political gridlock in Washington and reduced odds for another fiscal stimulus package, or an infra- structure bill, chances are that monetary policy will continue to err on the side of caution, meaning a more tempered rise in short-term rates from the Federal Reserve. The Connecticut economy will see little to no growth in 2018. The good news is that Connecticut finally has a budget that was passed with bipartisan support. In ad- dition to avoiding income and sales tax increases, this budget includes an improved spending cap, a strong cap on borrowing, new rules on required votes for union contracts and changes to binding arbitration. Mounting fiscal problems have finally prompted policymakers to take a hard look at the structural problems underlying the state's economy. This is a big first step in Connecticut's path to fiscal discipline. However, there's clearly been an escalating crisis of confidence in Connecticut's business community that's been long ignored, and it's not going to turn around quickly. Slow private-sector growth, contracting gov't jobs will continue in 2018 Since the end of the Great Reces- sion, Connecticut has experienced slow private-sec- tor job growth and a contracting gov- ernment sector. These trends will continue in 2018. Declining enrollment (due to demographics) and a tight fiscal situation will constrain the education sec- tor while the aging population will continue to drive demand for health care. Declines in retail employment are being at least partially offset by growth in the warehousing sector. The manufacturing sector is hiring due to demand from the defense industry and to replace retiring workers. Finance, which continued to contract in the first years after the end of the Great Recession, has been expanding over the past year. Connecticut fi- nance employment will continue to grow if the positive trends in the national financial markets continue in 2018. State's high costs will continue to drag economy The econom- ic outlook for Connecticut in 2018 appears to be moderately weak, just as it has been in the last several years. The state's reputation for high taxes and as an expensive place to live and work discourages businesses and people from moving in while motivating those who are already in the state — especially the elderly and young professionals — to move out. This is the reason Connecticut is losing population. The real estate sector has been relatively stagnant over the last 10 years, and in many areas, housing prices have declined. State economic policies are largely re- sponsible for the grim economic outlook. Without the right set of policies, the performance of Connecticut's economy will likely remain below the national average in 2018. Federal economic policies also affect the state's economy, but here, the impact is both positive and neg- ative. Federal contracts negotiated with defense-relat- ed manufacturers in the state help our economy, while a retreat from world markets is harmful because many of our businesses rely heavily on exports. Less imports inevitably leads to less exports. Ulti- mately, our own policies matter the most. Creating a business-friendly environment is central to economic vitality. This is easier said than done, but it is entirely feasible. What's your 2018 economic outlook for Connecticut? Slow Growth How many jobs will Connecticut add? 4,500 What will Connecticut's unemployment rate be at the end of 2018? 5.5% What type of GDP growth will Connecticut see in 2018? 0.5% Which industry will add the most jobs? Health care and education Which industry will lose the most jobs? Manufacturing, retail trade, leisure and hospitality What's your 2018 economic outlook for Connecticut? Moderate Growth How many jobs will Connecticut add? 7,500 What will Connecticut's unemployment rate be at the end of 2018? 4% What type of GDP growth will Connecticut see in 2018? 1% Which industry will add the most jobs? Health care and social assistance Which industry will lose the most jobs? Government What's your 2018 economic outlook for Connecticut? Moderate Growth How many jobs will Connecticut add? 10,000 What will Connecticut's unemployment rate be at the end of 2018? 4.5% What type of GDP growth will Connecticut see in 2018? 1.5-2% Which industry will add the most jobs? Defense-related industries Which industry will lose the most jobs? Relatively low-tech manufacturing

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