Connecticut

1
Connecticut

• Edward J. Deak, Ph.D.
• Professor of Economics
• Fairfield University
• Connecticut Forecast Manager

2
U.S. Financial Crisis/RecessionCT Delayed Entry
(08Q4 v. 08Q1)

• Backlog financial bonuses paid 2008
• - Current accrual of deferred income?
• Relatively limited housing bubble
• Weak - Supported mfg jobs/income
• Defense spending Supported mfg
• Relatively weaker housing bubble
• Restrained new home construction
• Restrained subprime/gimmic lending

3
U.S. Financial Crisis/RecessionCT Delayed Exit
(09Q3 v. 10Q2)

• Restructuring of Financial Industry
• Wall ST, Commercial/Investment Banks
• Weakened Hedge Fund Insurance Sectors
• Loss of Financial Service Jobs
• Jobs/Taxes in NYC, but unemployment/income in CT
• Stronger ? Defense Spending Limit Mfg
• State Local Budget Deficits
• Diminished Capital Gains/Bonus Income
• Slow Growth Aging Pop/Labor Force

4
CT Economy in RecessionCurrent Status 10/08

• Jobs Peak 12/07, ?Jan-Sept 08 -4.1k
• ? yag Trade, Bus Ser, Mfg, Const, Financial
• ? yag Health/Ed, Gov, LeisureHospitality
• UE Rate 4.41-6/07, 9/08 6.1 US6.1
• Gov Budgets State deficit -300m current
• Local cuts layoffs, CT 2010 2.6B
• Casino Revenues Both ?8.9 09Q1 FY
• New UE Claims ?55 9/08 v. 9/07 6,209

5
CT Housing Market in RecessionCurrent Status
10/08

• Permits 07?16.17,746, 08Q1-3?28
• Peak 0511,885, 07 lowest since 1991
• Sales Existing 07?12, 08Q1-3?24.5
• Peak 0558.1k, 0745.6k lowest since 96
• Median Prices 07?2320.6k peak CR
• 08Q1-3 ?8.3275k, Sept08?7.5 yag 260k
• Foreclosure Filings Oct 08 136 most US
• Subprime Del 08Q327.1, US26.8

6
Annual Job Change CT vs. U.S 2006-2012
Change
7
Peak-Trough Recession Job Chg1989-93, 2000-03,
2007-10?

• 1989-93 89Q11.678k 93Q31,527k
• Loss -151k Change -9.0 Length 14
  quarters
• 2000-03 00Q31,698k 03Q31,640k
• Loss -58k Change -3.4 Length 12
  quarters
• 2007-10? 07Q41,704 10Q21,642k
• Loss -62k Change -3.6 Length 10
  quarters
• Last Forecast Quarter 2012Q4 1,712k

8
Annual Unemployment Rate CT vs. U.S 2004-2012

9
Peak-Trough Recession UE Rate1989-93, 2000-03,
2007-10?

• 1989-93 88Q12.77 92Q27.47
• Gain470bp Change 270 Length 17
  quarters
• 2000-03 00Q42.13 03Q25.53
• Gain340bp Change 260 Length 10
  quarters
• 2007-10? 06Q24.2 10Q28.49
• Gain 429bp Change 202 Length 16
  quarters
• Last Forecast Quarter 2012Q4
• CT 6.35 U.S. 5.3

10
Nominal Income Per Capita Change CT vs. U.S
2004-2012
Change Nominal Personal Income
11
Peak-Trough Recession Nominal Per Income Per
Capita1989-93, 2000-03, 2007-10? (saar)

• 1989-93 89Q125.3k 93Q429.5k
• Gain4.2k Change 17 Length 19
  quarters
• 2000-03 00Q140.7k 03Q443.6k
• Gain2.6k Change 6.4 Length 15
  quarters
• 2007-10? 07Q154.2k 10Q459.6k
• Gain 5.4k Change 10 Length 15
  quarters
• Last Forecast Quarter 2012Q4 (saar)
• CT 3.963,892 U.S. 4.245,279

12
CT vs. U.S Home Permits Change 2004-2012
13
Peak-Trough Recession Permit ?1989-93,
2000-03, 2007-10? (saar)

• 1989-93 89Q114,658 92Q37,384k
• Loss -7,274 Change -50 Length 14
  quarters
• 2000-03 98Q112,488 01Q28,216
• Loss -4,272 Change -34 Length 13
  quarters
• 2007-10? 05Q412,155 09Q44,365
• Loss -7,790 Change -64 Length 16
  quarters
• Last Forecast Quarter 2012Q4 8,644

14
Median Sale Price Existing HomesCT vs. U.S.
2004-2012
000s Current
15
Peak-Trough Recession Home Price1989-93,
2000-03, 2007-10?

• 1989-93 88Q2218.5k 96Q4175.2k
• Loss -43.3k Change -19.8 Length 30
  quarters
• 2000-03 00Q2198.3k 00Q3195.8k
• Loss -2.5k Change -1.3 Length 1
  quarter
• 2007-10? 07Q2326.8k 10Q2232.2k
• Loss -96.6k Change -29.6 Length 12
  quarters
• Last Forecast Quarter 2012Q4
• CT 258.6k U.S. 187.6k

16
Mortgage Delinquency Rate CT vs. U.S 2004 -
2012
Mortgages Delinquent
17
Peak-Trough Recession Mortgage Delinquency Rate
1989-93, 2000-03, 2007-10?

• 1989-93 88Q12.92 92Q1 4.24
• Gain 132bp Change 45 Length 16
  quarters
• 2000-03 00Q12.94 02Q4 4.11
• Gain 117bp Change 40 Length 11
  quarters
• 2007-10? 07Q13.97 09Q1 5.54
• Gain 157bp Change 40 Length 8
  quarters
• Last Forecast Quarter 2012Q4
• CT 4.04 U.S. 4.51

18
Bankruptcies ChangeCT vs. U.S. 2004-2012
Change
19
Peak-Trough Recession Bankruptcies1989-93,
2000-03, 2007-10? (saar)

• 1989-93 88Q42.33k 93Q19.14k
• Gain 6.81k Change 392 Length 17
  quarters
• 2000-03 00Q410.5k 03Q312.1k
• Gain 1.6k Change 15 Length 11
  quarters
• 2007-10? 07Q25.0k 12Q219.8k
• Gain 14.8k Change 396 Length 20
  quarters
• Last Forecast Quarter 2012Q4
• CT 19,334 (saar)

20
CT Outlook Conclusions

• CT late into recession US 08Q1 v. CT 08Q4
• Late out of recession US 09Q3 v. CT 10Q2
• Job loss less than 89-93, greater 00-03
• UE rate higher than 89-93 or 00-03
• Nominal income growth constrained
• New home permit decline greater longer
• Home price decline greater shorter 89-93
• Higher delinquency and bankruptcy rates