[August 30, 2009]

The Day, New London, Conn., Anthony Cronin column: A Little Sunshine In August

Aug 30, 2009 (The Day - McClatchy-Tribune Information Services via COMTEX) -- All in all, August was a pretty good month for the economy.

We like that. Get a few more of these and, heck, maybe we've got a trend.

--The "Cash for Clunkers" program sold a lot of cars, nearly 700,000 across the country, with assistance from Uncle Sam (that's you and me taxpayer, by the way).

--The economy only shrank by 1 percent during the second quarter, which economists tell us is a good sign the third quarter will be better.

--The housing market is recovering, and housing sales in New London County were up almost 1 percent this past month. Modest, yes, but still an increase.

--The jobless rate in Connecticut fell slightly this past month, to 7.8 percent, and jobless rates around New London and Windham counties also declined.

--Even the stock market, despite a few backs and forths, is showing resilience after its years-long freefall, with double-digit gains in the major market indices.

So maybe a modest recovery is just around the corner. Maybe.

Donald Klepper-Smith, the longtime observer of Connecticut's economy, says there's reason for hope.

"We've seen more evidence that the domestic recession is about over and that economic recovery in the technical sense will soon commence," proclaims Klepper-Smith, president of the economics consulting firm DataCore Partners and chairman of the governor's council of economic advisers.

But job growth -- a persistent problem across Connecticut -- and consumer confidence remain key to the hoped-for recovery.

Klepper-Smith, writing in his latest research note to clients, does warn that this "pending recovery" will not be lifting all the boats in the harbor. "Many dislocated workers will find it difficult to find gainful employment in an environment where labor costs ... remain formidable." In fact, says the Connecticut economist, job expansion -- at least at the front end of the next up business cycle -- is likely to be very weak, "and possibly non-existent." Yet there is good news. " ... We have pulled back from the brink of financial disaster as Wall Street has now realized meaningful gains, while some investment banks have reaped sizable profits." Klepper-Smith raises an interesting point about those profits and bonuses afforded to Wall Street. "It appears that our economic system is becoming even more polarized with Wall Streeters doing well, and many on Main Street still encountering significant financial hardships." He says the bailout process for Wall Street and the auto industry has, in effect, set up a two-tiered system: those protected from risk (the big bailout recipients) and those who are still exposed to risk (Main Streeters and small business). "This, in my opinion, sets up a bad dynamic and possibly creates even greater economic polarization in the long run," says Klepper-Smith.

Nonetheless, in the near term, this economist offers some optimism. His bottom-line forecast? "July's Connecticut employment figures were in line with expectations. Domestically, I think the U.S. economy is giving every indication that it is in the process of bottoming and that the worst of the recession is behind us." Anthony Cronin is The Day's business editor.

To see more of The Day, or to subscribe to the newspaper, go to http://www.theday.com. Copyright (c) 2009, The Day, New London, Conn.

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