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Connecticut Economy: Financial Crisis Impact & Recovery Trends 2008-2012

Explore the economic outlook in Connecticut from late 2008 to the end of 2012, analyzing the delayed entry and exit of the financial crisis, housing market status, job changes, unemployment rates, income per capita, home permits, sale prices, mortgage delinquency rates, and bankruptcies. Understand the impact on various sectors, trends, and forecasts during the recession and recovery period.

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Connecticut Economy: Financial Crisis Impact & Recovery Trends 2008-2012

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  1. CT Economic Outlook2008:Q3 to 2012:Q4 Edward J. Deak, Ph.D. Professor of Economics Fairfield University Connecticut Model Manager The New England Economic Partnership

  2. U.S. Financial Crisis/Recession:CT Delayed Entry (08:Q4 v. 08:Q1) • 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/Recession:CT Delayed Exit (09:Q3 v. 10:Q2) • 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 Recession:Current Status 10/08 • Jobs: Peak 12/07, Jan-Sept 08 = -4.1k •  yag: Trade, Bus Ser, Mfg, Const, Financial •  yag: Health/Ed, Gov, Leisure+Hospitality • UE Rate %: 4.4=1-6/07, 9/08 = 6.1 US=6.1 • Gov Budgets: State deficit -$300m current • Local $ cuts + layoffs, CT 2010 = $2.6B • Casino Revenues:Both 8.9%+ 09:Q1 FY • New UE Claims:55% 9/08 v. 9/07 = 6,209

  5. CT Housing Market in Recession:Current Status 10/08 • Permits: 07=16.1%=7,746, 08Q1-3=28% • Peak: 05=11,885, 07 lowest # since 1991 • Sales Existing: 07=12%, 08Q1-3=24.5% • Peak: 05=58.1k, 07=45.6k lowest since ‘96 • Median Prices:07=2%=$320.6k peak CR • 08Q1-3 8.3%=$275k, Sept’08=7.5% yag = $260k • Foreclosure Filings: Oct 08 +136% most US • Subprime Del: 08Q3=27.1%, US=26.8

  6. Annual Job Change %:CT vs. U.S 2006-2012 % Change

  7. Peak-Trough Recession Job Chg:1989-93, 2000-03, 2007-10? • 1989-93: 89:Q1=1.678k 93:Q3=1,527k • Loss = -151k % Change = -9.0% Length = 14 quarters • 2000-03: 00:Q3=1,698k 03:Q3=1,640k • Loss = -58k % Change = -3.4% Length = 12 quarters • 2007-10? 07:Q4=1,704 10:Q2=1,642k • Loss = -62k % Change = -3.6% Length = 10 quarters • Last Forecast Quarter 2012:Q4 = 1,712k

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

  9. Peak-Trough Recession UE Rate:1989-93, 2000-03, 2007-10? • 1989-93: 88:Q1=2.77% 92:Q2=7.47% • Gain=470bp % Change = +270% Length = 17 quarters • 2000-03: 00:Q4=2.13% 03:Q2=5.53% • Gain=340bp % Change =+260% Length = 10 quarters • 2007-10? 06:Q2=4.2% 10:Q2=8.49% • Gain =429bp % Change =+202% Length = 16 quarters Last Forecast Quarter 2012:Q4 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 Capita:1989-93, 2000-03, 2007-10? (saar) • 1989-93: 89:Q1=$25.3k 93:Q4=$29.5k • Gain=$4.2k % Change = +17% Length = 19 quarters • 2000-03: 00:Q1=$40.7k 03:Q4=$43.6k • Gain=$2.6k % Change =+6.4% Length = 15 quarters • 2007-10? 07:Q1=$54.2k 10:Q4=$59.6k • Gain =$5.4k % Change =+10% Length = 15 quarters Last Forecast Quarter 2012:Q4 (saar) CT: 3.9%=$63,892 U.S.: 4.2%=$45,279

  12. CT v. U.S Home Permits:% Change 2004-2012

  13. Peak-Trough Recession Permit %:1989-93, 2000-03, 2007-10? (saar) • 1989-93: 89:Q1=14,658 92:Q3=7,384k • Loss = -7,274 % Change = -50% Length = 14 quarters • 2000-03: 98:Q1=12,488 01:Q2=8,216 • Loss = -4,272 % Change = -34% Length = 13 quarters • 2007-10?: 05:Q4=12,155 09:Q4=4,365 • Loss = -7,790 % Change = -64% Length = 16 quarters • Last Forecast Quarter 2012:Q4 = 8,644

  14. Median Sale Price Existing Home:CT vs. U.S. 2004-2012 000’s Current $

  15. Peak-Trough Recession Home Price:1989-93, 2000-03, 2007-10? • 1989-93: 88:Q2=$218.5k 96:Q4=$175.2k • Loss= -$43.3k % Change= -19.8% Length= 30 quarters • 2000-03: 00:Q2=$198.3k 00:Q3=$195.8k • Loss = -$2.5k % Change= -1.3% Length= 1 quarter • 2007-10?: 07:Q2=$326.8k 10:Q2=$232.2k • Loss= -$96.6k % Change= -29.6% Length= 12 quarters • Last Forecast Quarter 2012:Q4 • 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: 88:Q1=2.92% 92:Q1= 4.24% • Gain= 132bp % Change= 45% Length = 16 quarters • 2000-03: 00:Q1=2.94% 02:Q4= 4.11% • Gain= 117bp % Change= 40% Length = 11 quarters • 2007-10?: 07:Q1=3.97% 09:Q1= 5.54% • Gain= 157bp % Change= 40% Length = 8 quarters • Last Forecast Quarter 2012:Q4 • CT = 4.04% U.S. = 4.51%

  18. Bankruptcies % Change:CT vs. U.S. 2004-2012 % Change

  19. Peak-Trough Recession Bankruptcies:1989-93, 2000-03, 2007-10? (saar) • 1989-93: 88:Q4=2.33k 93:Q1=9.14k • Gain= +6.81k % Change= 392% Length= 17 quarters • 2000-03: 00:Q4=10.5k 03:Q3=12.1k • Gain = 1.6k % Change= 15% Length= 11 quarters • 2007-10?: 07:Q2=5.0k 12:Q2=19.8k • Gain= 14.8k % Change= 396% Length= 20 quarters • Last Forecast Quarter 2012:Q4 • CT = 19,334 (saar)

  20. CT Outlook Conclusions • CT late into recession: US 08:Q1 v. CT 08:Q4 • Late out of recession: US 09:Q3 v. CT 10:Q2 • 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

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