2014 Connecticut Economic Outlook


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Connecticut’s economy is sure to be a focal point in the 2014 gubernatorial election. And while there have been modest economic improvements, particularly in the housing market, the state’s ability to add jobs is lagging behind the nation as a whole.

What steps need to be taken to remake the economy in 2014? For Donald Klepper-Smith, chief economist and director of research for DataCore Partners in New Haven, part of the answer involves streamlining government in order “to make Connecticut more business-friendly, more affordable.”

“Right now, the pace of spending in state government continues to outpace our ability to afford it,” says Klepper-Smith. To reduce the level of state spending, Klepper-Smith favors what he calls “the creative reconstruction” of state government, including the privatization of some services. “There are opportunities to be explored and if enough savings can be achieved, it’s something that should be considered,” he says. “Of course, there are some union issues that need to be considered. But if it can be done while maintaining the same quality of service, then it definitely ought to be considered.”

Under current conditions, Klepper-Smith is projecting that Connecticut won’t regain all of the jobs it lost during the recession until late 2016. That projection is based on the state adding 1,700 new jobs per month between now and then.

Despite much-heralded efforts like Gov. Dannel Malloy’s “First Five” job-creation initiative, such steps aren’t quick fixes, says Matthew Nemerson, president and CEO of the Connecticut Technology Council. As an example, he points to the state’s success in luring Jackson Laboratories to Farmington. “There’s a short-term payoff in terms of construction, but it will be 10 years before people start to see the real benefits,” he says. “But that’s the kind of bold step you have to make when you’re competing in a global economy as well as against other states. It’s important for Connecticut to be able to play in that league.

According to Klepper-Smith, one potential area of job growth is the energy sector and more specifically, in the natural gas industry. Although Connecticut isn’t the first place one thinks of in terms of the natural gas industry, it is home to three natural gas pipelines. And if the Malloy administration has its way, more gas will be flowing through those pipelines to Connecticut homes and businesses.

Only about a third of Connecticut homes currently use natural gas, according to state officials. But during the 2013 legislative session, Connecticut’s Comprehensive Energy Strategy was updated to include expanding its availability to homes and businesses statewide. The state’s three natural gas transmission lines—the Algonquin, Iroquois and Tennessee gas pipelines—all have upgrades proposed to take advantage of  the lower cost of natural gas available from the Marcellus Shale deposit that stretches from central New York through Pennsylvania and across five other states.

Shelton-based Iroquois announced in January it was entering into a venture with the proposed Constitution pipeline project west of Albany, N.Y. The agreement would allow Iroquois to increase its supply of natural gas to New England. Houston-based Spectra Energy unveiled plans in May for an upgrade of its Algonquin natural gas transmission line, some portions of which have been around since 1958. Tennessee Gas, the third pipeline operator, has proposed eight miles of new transmission lines in the Hartford area.

Statewide, the Algonquin upgrade involves replacing about 33 miles of older transmission lines with newer pipes that are wider in diameter in various segments along the route. It also calls for adding 19 miles of new pipeline to the spurs that go into New London and other parts of eastern Connecticut.

Spectra Energy also has a transmission spur, or lateral, that goes into New Haven County via a route through Cheshire, Wallingford and North Haven, according to Jim Luskay, Spectra Energy’s regional project director. He says that improvements being done to the North Haven spur do not involve upgrading the diameter of the transmission lines or building extensions of the line at this point.

The upgrade of the main portion of the Algonquin line, which stretches from Danbury in the west to Thompson in the state’s Northeast corner, would enable the line to handle greater volumes of natural gas. Spectra Energy’s customers are utilities such as Yankee Gas and Connecticut Natural Gas that will have a greater need for the fuel as expansion of lines within communities grow.

2014 Connecticut Economic Outlook

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