Connecticut’s economy is doing all right, says Federal Reserve Bank of Boston visiting scholar Nicholas Perna, regardless of what you’ve been led to believe.
While giving a brief presentation at the Chamber of Commerce’s annual Eggs & the Economy Breakfast at Marly’s restaurant on Jan. 13, Mr. Perna noted that although Connecticut still has fewer jobs than in 2007, the state is moving in the right direction.
“A year from now, we’ll be back to where we were” in terms of total jobs, he said, although that doesn’t account for the state’s growing workforce.
According to Mr. Perna, the state added at least 25,000 jobs this year compared to 18,000 in the years before. He expects the state will add another 25,000 to 35,000 jobs in 2015, thanks to the effects of the 2011 budget deficit going away, an improving national economy and low oil prices.
Mr. Perna is the chief economist at Webster Bank, and has formerly worked for the New York Federal Reserve Bank and General Electric. He visits the Chamber of Commerce every year to give a general outlook on the state and national economies.
One of the largest problems with Connecticut’s economy today, the economist believes, was the “non-issue” governor’s race between Gov. Dannel Malloy and Republican Tom Foley, when the potential $1.5-billion deficit was “the most imminent” threat.
The income tax continues to be a point of debate in the state, and Mr. Perna offered an opinion on the topic: the state’s switch to an income tax made its revenue stream more volatile.
“We are latching onto tax sources far more volatile” than those tapped before, he said. “Now they’re even more volatile.”
On the topic of oil, Mr. Perna said the “demand curve for oil is very vertical.”
“If prices go down, you don’t spend a lot more,” he explained.
Gas prices will probably rebound in the next year, he said, after some changes in Saudi Arabian and OPEC policy, but will probably not reach their 2014 height of more than $100 a barrel.
Such low prices were not expected by Russia, he said, as he explained his theory on the beleaguered country’s economy.
President Vladimir Putin, the economist hypothesized, understood the Russian economy was entering a recession when he invaded Ukrainian Crimea.
Mr. Putin figured he could “blame Russia’s problems on the West,” but he didn’t think gas prices would drop so drastically, Mr. Perna said.
He also criticized Germany’s commitment to austerity measures for Euro-zone countries in dire financial straits. As one example, he pointed out that Greece was planning to leave United Europe.
“Seventy-five percent of Greeks don’t want out of the Euro. But they do want out of the stranglehold” that are austerity measures, he said.
“The Germans think they’re the only hardworking people in Europe. They will fight inflation at all costs … that’s an obstacle to the recovery,” he said.
In terms of the United States’ recovery after the Great Recession, Mr. Perna said that “people who said quantitative easing was going to affect inflation were just wrong.”