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Fiscal cliff threatens factory comeback

Published 1:00 pm, Thursday, December 13, 2012
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Top Manufacturing States 1.Oregon 2. Indiana 3. Wisconsin 4. Massachusetts 5. Louisiana 6. Connecticut (tied with Iowa and Michigan) Source: University of Connecticut
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Connecticut's manufacturing sector appears to be poised for growth, but larger economic forces that might cost the state 20,000 jobs next year stand in the way.

The University of Connecticut's quarterly The Connecticut Economy was released Wednesday in Shelton at manufacturer Lex Products, highlighting the importance of the sector to the economy.

This quarter's issue provided an analysis of the state's sector and found it tied for sixth in the nation for the best overall manufacturing environment.

Steven Lanza, the author of the new index on manufacturing, said Connecticut factory productivity is among the highest in the nation with output growing by 50 percent between 1990 and 2007 despite a drop in employment of 35 percent.

He found that factory employment in the state has stabilized around 165,000, appearing to finally halt decades of job shedding.

In 1969, one of three jobs in Connecticut was in a factory, he said, but today manufacturing accounts for less than 10 percent of all jobs.

Despite the job slide, manufacturing has continued to be an economic engine in the state, accounting for 25 percent of gross domestic product growth last year. Only the financial services industry played a larger role.

With manufacturing being brought back from overseas and high wages being paid, Connecticut manufacturing should be poised for growth, but the quarterly's forecast for 2013, tells a different story.

Using four different scenarios, the quarterly found at best, Connecticut could add 10,000 jobs in 2013, providing Congress comes up with a deal to prevent an economic plunge over the fiscal cliff.

The president and congressional leaders are trying to find a way to soften the blow to the economy from the combination of tax increases and spending cuts scheduled to begin in January.

The worst case scenario shows the state losing 20,000 jobs next year. The expected situation, according to the UConn publication, is for the state to add about 7,500 jobs.

"It's a year to get through," said Nick Perna, an economic advisor to Waterbury-based Webster Financial, of 2013.

He said even if Washington, D.C., addresses the fiscal cliff, they will leave behind, "a fiscal pothole."

He said there's no way they can completely eradicate the $700 billion drag the nation is facing, and that will ultimately result in some spending cuts and tax increases. After 2013, he said, the nation should be on better footing and hopefully, so will Europe.

Europe is important, he said. Because once it recovers from a recession, the euro will be stronger in relation to the dollar and that is good for U.S. exporters.

The biggest issue at the federal level for Connecticut manufacturing in 2013, is probably defense cuts, he said.

But manufacturers and other businesses are also facing a big state issue, Connecticut's growing budget deficit.

Perna said the uncertainty over how that will be addressed does not bode well for growth here.

He pointed to Massachusetts as a good foil for Connecticut. The Bay State has solid growth in jobs and economy and does not face the budgetary problems that Connecticut does.

Jerry Clupper, executive director of the New Haven Manufacturers Association, said the industry has a lot on the positive side these days and the troubles ahead are familiar ones: tight credit, slow growth and European debt troubles, to name a few.

"All the things that people are worrying about, even with them, we've been able to sustain a modest growth pattern," he said.

Part of that is due to efficiency in factories, but also due to an expansion of markets, with many smaller manufacturers exporting products.

Clupper said the best chance for growth in Connecticut is from innovation and he cited several smaller firms -- with fewer than 50 employees -- that are exporting innovative metal forms to power products.

Lex Products itself makes portable power for both civilian and military uses.

"There's a reason to be positive," he said.