Confidence among business owners and managers continues to build as the winners of November’s election are closing in on their first days on the job in both Hartford and Washington, D.C.
The Connecticut General Assembly, where Republicans picked up seats in both houses last month, opens for business Jan. 4. The state senate will be tied 18-18 with Democratic Lt. Gov. Nancy Wyman able to break any tie votes. Democrats also lost seats in the state house, but maintain a seven-vote majority.
Coupled with the election of Republican real estate mogul Donald Trump to the presidency, local business advocates continue to share reasons for optimism.
The National Federation of Independent Business has not conducted any polling specific to Connecticut, but results of a national survey show a surge of confidence among small business owners since the Nov. 8 election. The NFIB Index of Small Business Optimism for November rose 3.5 points to 98.4. The category known as "expected better business conditions" surged 44 points following the election, NFIB said in a Dec. 15 press release. Plans to hire jumped five points from the previous month.
“To say that small business owners in Connecticut, and throughout the rest of the country, have higher expectations now would be an understatement,” said Andrew Markowski, Connecticut state director for NFIB.
Trump's appointment of Greenwich resident Linda McMahon, co-founder of WWE Entertainment, to head the U.S. Small Business Administration has also lifted spirits among Connecticut small business owners, according to local leaders. McMahon focused on economic issues in two unsuccessful runs for the U.S. Senate.
The uptick in Connecticut attitudes is real, said Markowski, citing recent conversations with business operators, given that Republicans are generally thought to be the more pro-business party.
“There is a renewed sense of optimism,” he said.
NFIB has several thousand Connecticut members among its 325,000 nationally.
More reasons for optimism
A state employee pension deal, announced by Democratic Gov. Dannel Malloy, is also seen as a step in the right direction, according to NFIB leadership.
“We’re still digesting it, but it’s a welcome short-term stopgap,” Markowski said. “It shows the need to tackle the issue.”
Earlier this month, Malloy and the State Employee Bargaining Agent Coalition announced an agreement to reduce the assumed rate of return for the State Employee Retirement System to 6.9 percent, from 8 percent.
Benjamin Barnes, Malloy’s budget director, said the “unnecessarily optimistic” rate added as much as $4.2 billion to the state’s unfunded liabilities between 2001 and 2014.
Moody’s Investors Service reacted positively to the news, noting it as “credit positive.”
“Lowering the rate will put Connecticut in line with other states and private-sector plans, and will strengthen confidence in the state’s ability to resolve the unfunded liability,” Malloy said in a Dec. 15 press release.
Malloy’s optimism is not new, said Kelly Donnelly, the governor’s spokeswoman.
“To be fair, the governor has consistently been ‘glass is half full’ in Connecticut,” Donnelly said. “We have more work to do but we’re doing a lot of things well.”
Malloy also applauded the Dec. 15 release of unemployment data that showed a gain of 2,100 jobs in November, which broke a four-month streak of losses. Connecticut’s 4.7 percent unemployment rate is reason to cheer, he said in a statement.
“Provided that these estimates hold, the state’s unemployment rate hasn’t been this low in nearly a decade,” he said. “This is positive news and we remain determined to continue to move in a direction that will encourage businesses to grow their employment base here in our state and attract out-of-state companies to move within our borders.”
The governor and business group leaders are both stressing the need for “stability,” ahead of the next session of the General Assembly that begins next month.
To improve the hiring climate and increase the numbers of businesses, Malloy said he supports “more structural stability within our state finances in order to create more predictability for businesses.”
Business leaders hope that means no tax increases or additional regulatory burdens.
“The first principle is to do no harm,” Markowski said.
The governor’s budget and legislative proposals remain “works in progress,” Donnelly said last week, when asked about possible tax increases and regulatory policies. Malloy is scheduled to make his budget speech in February. His State of the State speech is slated to be delivered on the Assembly’s Jan. 4 opening day.
Tempering expectations, University of Connecticut finance professor Fred Carstensen noted that the Connecticut business community must still compete against its stronger neighbors, Massachusetts and New York. Both will continue to outperform Connecticut, said Carstensen, who also serves as director of the Connecticut Center for Economic Analysis.
“The budget is badly framed and is certainly pulling the economy down,” he said. “The state is foregoing something like $1 billion annually in federal reimbursements, and there is little, if any, serious discussion about how to improve the situation in Connecticut. So I doubt we will see any significant policy initiatives at the state level, only more ill-considered budget cuts.”
Short- vs. long-term outlook
Businesses make plans as far as 10 years out, whereas the state budget is planned over just two years, noted Brian Flaherty, senior vice president of public policy at the Hartford-based Connecticut Business and Industry Association, the state’s largest business group.
Spirits are generally up since the election, but past tax increases and reductions in incentives continue to put the brakes on Connecticut optimism, Flaherty said.
CBIA’s third-quarter Economic and Credit Availability Survey, performed in partnership with Farmington Bank, showed an increase in the percentage of companies expecting to reduce their payrolls, rising to 23 percent from 15 percent in the second quarter. The percentage expecting to add jobs dropped to 19 percent from 32 percent, according to the survey, which encompassed 176 business managers who answered mailed questionnaires between Oct. 25 and Nov. 15.
“They’re being very cautious,” Flaherty said. “The Connecticut economy is growing, but employers are looking for traction.”
Don Klepper-Smith of New Haven-based DataCore Partners LLC said the data indicates "cracks in our economic recovery," although the former chief economist to Republican Gov. M. Jodi Rell said that didn't necessarily mean recession.
“Clearly, it’s a challenging time but there’s a great deal to build on,” Flaherty said. “We start off from a good place.”