Report: Economic Recovery

To Be Weak

By Stephen Singer

Associated Press

HARTFORD — A University of Connecticut study offers a gloomy outlook for the state’s economy, citing persistently high unemployment, personal income failing to rise, and weak real estate markets.

The Connecticut Center of Economic Analysis recommended Wednesday that more than $1 billion in unused research and development tax credits be reclaimed by the state to build and equip manufacturing, pharmaceutical, bioscience, and research space that would create nearly 40,000 high-wage jobs.

“There is currently little prospect for a robust recovery in Connecticut’s economy,” the report said. “Even where there are glimmers of prospective growth, caution is warranted.”

The report, titled “Drifting Down: What Will Restore Connecticut’s Economic Vitality?,” said state legislation enacted this year should improve Connecticut’s performance in a few years, but no policy initiatives will likely drive a strong recovery in the short term.

“There is little to argue that the state’s revenue picture will improve sufficiently to reduce massive, multibillion-dollar budget deficits over the next two to four years,” said the report, written by Peter Gunther, a senior research fellow at the Connecticut Center of Economic Analysis.

Fred Carstensen, director of the center, said the report’s conclusions are grim but realistic.

“No one that I know of thinks we’re going to have a robust recovery,” he said in an interview. “We’re going to go along with a trickle of new jobs. That’s about it.”

Connecticut added jobs in April and the rate of unemployment dipped to 9 percent from 9.2 percent in March, the state Labor Department said last week. Job gains were reported for the fourth consecutive month, but the University of Connecticut study said employment will likely contract in the coming months.

Dan Kennedy, a senior economist at the Department of Labor, said the state agency will release its own data soon. He would not comment on the university’s forecast.

The study also said housing permits are a fraction of what they were at their peak, jeopardizing a recovery in construction.

Applying unused tax credits to economic development would be a “real game-changer,” it said.

It recommends that Connecticut make agreements with companies currently holding tax credits, which would allow the state to begin making five annual payments of $200 million in exchange for the credits.

Economic activity generated by the investments will produce significant tax revenue, the report said.

The state Department of Revenue Services said about $1.3 billion in research and development tax credits were carried forward to the 2008 income year. No more than one third of the credit may be taken as a tax credit in a year, requiring that the remaining two-thirds be carried forward, the agency said.