1

The Regional Economic Outlook

Rae D. RosenSenior Economist and Assistant Vice - President

Federal Reserve Bank of New YorkJanuary 5, 2006

2

Key Points:

• Connecticut’s economy is growing but the recovery in employment continues to lag the pickup in output.

• The recovery in employment has been slower than expected. • Nominal job growth, less than one percent, is likely this year.

• In an era of slow job growth, attention to infrastructure and issues that affect corporate retention could help the region maintain its competitiveness and leverage the existing economic base.

3

Personal IncomePercent change from 4 quarters earlier

-3

-1

1

3

5

7

9

11

13

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

3-

1-

1

3

5

7

9

11

13

Percent

United States

New York

United States 2005 Q3 5.6%New York 2005 Q3 4.8%Connecticut 2005 Q3 5.0%Massachusetts 2005 Q3 4.3%

Percent

Source: Bureau of Economic Analysis, FRBNY calculations.

Connecticut

Massachusetts

4

-7

-5

-3

-1

1

3

5

7

9

11

13

15

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

7-

5-

3-

1-

1

3

5

7

9

11

13

15

Percent

United States

Percent

Wages and SalariesPercent change from 4 quarters earlier

United States 2005 Q3 5.9%Connecticut 2005 Q3 4.5%Massachusetts 2005 Q3 3.1%

Source: Bureau of Labor Statistics, FRBNY calculations.

Connecticut

Massachusetts

5

0

2

4

6

8

10

0 2 4 6 8 10 12 14 16 18 20 22 24

Number of Months

Percent

Connecticut Expansion PatternsIncrease from Employment Trough to Peak

Source: Bureau of Labor Statistics, FRBNY calculations.

Feb. 1983 – Feb. 1989

Dec. 1992 – Dec. 2000

Apr. 2004 – Oct. 2005

6

Recent Trends in Regional EmploymentPercent change from 12 months earlier

-7

-5

-3

-1

1

3

5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

-7

-5

-3

-1

1

3

5

Percent Percent

United States

Source: Bureau of Labor Statistics, FRBNY calculations.

United States Nov. '05 1.5%Connecticut Nov. '05 0.7%Massachusetts Nov. '05 0.5%

Connecticut

Massachusetts

7

Recent Trends in Regional EmploymentPercent change from 12 months earlier

-7

-5

-3

-1

1

3

5

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

-7

-5

-3

-1

1

3

5

Percent Percent

US

Source: Bureau of Labor Statistics, FRBNY calculations.

United States Nov. '05 1.5%Connecticut Nov. '05 0.7%Massachusetts Nov. '05 0.5%Stamford Nov. '05 0.7%Hartford Nov. '05 0.5%

Connecticut

StamfordHartford

Massachusetts

8

Labor Force Growth Slows

-4

-3

-2

-1

0

1

2

3

4

5

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006

-4

-3

-2

-1

0

1

2

3

4

5

Percent Percent

United States

Source: Bureau of Labor Statistics, FRBNY calculations.

U.S. CT MA NY

1970-1980 2.6% 1.6% -0.8% -1.6%1980-1990 1.6% 1.4% 1.0% 0.9%1990-2000 1.3% -0.3% 0.5% 0.5%

Average Annual Growth Rate

Connecticut

New York

Massachusetts

9

Connecticut Net Migration

-20,000

-18,000

-16,000

-14,000

-12,000

-10,000

-8,000

-6,000

-4,000

-2,000

0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004-20,000

-18,000

-16,000

-14,000

-12,000

-10,000

-8,000

-6,000

-4,000

-2,000

0

Returns Returns

Source: Internal Revenue Service, Statistics of Income.12

10

Connecticut Migration

60,000

70,000

80,000

90,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 200460,000

70,000

80,000

90,000

Returns Returns

Connecticut In

Connecticut Out

Source: Internal Revenue Service, Statistics of Income.11 13

11

Second District Unemployment Rates

November 2004 November 2005

United States 5.4% 5.0%

Massachusetts 4.8% 4.9%

New York City 6.3% 6.4%Connecticut 4.6% 5.1%

Hartford* 4.8% 5.6%

Stamford* 4.8% 4.8%

Source: Bureau of Labor Statistics, FRBNY calculations, *data as of September.

12

Net Domestic and International MigrationApril 2000 to December 2004

Net Domestic Migration

Net International Migration

Connecticut -22,760 69,030

New York -852,260 621,150

New Jersey -149,440 269,060

Source: U.S. Bureau of the Census.

13

Growth in Service Jobs% change November 2005 / November 2004

U.S. Connecticut Stamford Hartford NYC

Professional & Business 2.7 0.4 -1.0 1.9 2.5

Security/Commodity Broker 3.2 4.8 6.3 N/A 5.3

Leisure and Hospitality 1.6 0.6 3.8 1.1 3.0

Arts, Entertainment and Recreation -0.4 0.0 7.0 N/A 4.3

Accomodation And Food 1.9 0.8 2.6 1.9 2.6

Eating and Drinking 2.2 0.4 N/A N/A 2.8

Accommodations 0.5 3.6 N/A N/A 2

Health and Social 2.4 1.0 1.0 1.2 1.7

Educational 1.3 0.9 N/A N/A 4.1

All Services 1.5 0.6 1.1 0.6 1.2Services as % of Total Employment 83.4 84.0 86.7 84.2 93.8

Source: Bureau of Labor Statistics, FRBNY Calculations.

Net Job Growth Net Job GrowthAvg. Salary 24600 (0.8%) Avg. Salary 20,700 (1.5%)

Mgt. of Companies $128,000 3100 - -Financial Services - - - -Prof., Tech. amd Scientific $70,600 1900 - -Average Wage XFinancial $46,000 $58,300Construction $48,400 5800 $56,800 6,600Health, Soc. Srvcs. $39,000 15200 $43,100 4,500Education $37,400 1300 $42,900 3,500

Trans., Warehousing - - $42,700 1,400Unclassfied $34,300 15900 $36,700 700Admin. Support $33,600 5600 $34,200 5,300Arts, Entertainment $27,200 2100 $31,300 1,600

Retail Trade - - $29,800 4,800Accomodations $18,600 8100 $19,000 4,600

Finance $112,700 -600 $133,800 -1,700

Mgt. of Companies - - $130,100 -2,800Utilities $93,700 -1900 $87,700 -100

Prof., Tech. amd Scientific - - $80,400 -2,200Whsl. Trade $66,400 -400 $65,900 -300Information $76,500 -7100 $64,000 -800Mfg. $63,000 -23600 $63,500 -4,700Trans., Warehousing $41,600 -3850 - -Retail Trade $27,000 -1400 - -Source: Bureau of Labor Statistics, Bureau of Economic Analysis; Calculations Federal Reserve Bank of New York.

Private Sector Job Growth 2003Q1 to 2005Q1

ConnecticutNew Jersey

15

Home PricesPercent change from 4 quarters earlier

-6

-4

-2

0

2

4

6

8

10

12

14

16

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

-6

-4

-2

0

2

4

6

8

10

12

14

16Percent Percent

Source: Office of Federal Housing Enterprise Oversight.

United States

New York

United States 2005 Q3 12.0%New York 2005 Q3 11.9%Connecticut 2005 Q3 10.6%Massachusetts 2005 Q3 8.0%

Connecticut

Massachusetts

16

Percent of Residential Mortgage Loans with Installments 90 Days Past Due

0.0

0.2

0.4

0.6

0.8

1.0

1.2

92Q1 94Q3 97Q1 99Q3 02Q1 04Q3

0.0

0.2

0.4

0.6

0.8

1.0

1.2

PercentPercent

Source: Mortgage Bankers Association.

New York

Connecticut

United States 2005 Q2 0.85%New York 2005 Q2 0.64%Connecticut 2005 Q2 0.45%

United States

17

Percent of Residential Mortgage Loans in Foreclosure Started During the Quarter

0.0

0.5

1.0

1.5

2.0

2.5

92Q1 94Q3 97Q1 99Q3 02Q1 04Q3

0.0

0.5

1.0

1.5

2.0

2.5

PercentPercent

Source: Mortgage Bankers Association.

Connecticut

New York

United States 2004 Q4 1.17%New York 2004 Q4 1.12%Connecticut 2004 Q4 0.82%

United States

18

Office Vacancy Rates

Percent Percent

United States 2005 Q3 14.8%Metro Stamford 2005 Q3 13.4%Metro NYC 2005 Q3 8.2%Metro Hartford 2005 Q3 17.9%

0

5

10

15

20

25

30

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

5

10

15

20

25

30

Metropolitan Stamford

United States-Metropolitan

Metropolitan NYC

Hartford

Source: Coldwell Banker, Cushman and Wakefield.

19

Appendix

20

$70,095

$73,110

$53,694

$36,030

$56,408

$28,705

$47,443

$41,509

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

10 20 30 40 50

Fairfield County

Hartford County

New York City (five boroughs)

Median Household Income and Higher Education

Source: U.S. Census Bureau, Census 2000.Note: Data are for counties, except where noted

Percent of Population Age 25 and above with a Bachelor’s Degree or higher

Westchester County

Kings County (Brooklyn)

Bronx County

Suffolk County (Boston)

New Haven County

Median Household Income

21

Source: U.S. Bureau of the Census, American Community Survey 2004.

Highest Degree ObtainedPercent of population 25 years old and older

U.S. CT Fairfield Hartford NYC

High School Diploma or Higher 83.9 89.0 89.1 86.5 78.3

Bachelor's Degree or Higher 27 34.6 43.5 31.3 31.5

Graduate or Professional Degree 9.9 14.6 17.6 14.2 13.4

22

Immigrants Arriving

Pre-1990

Immigrants Arriving

1990-1999

US Born 2000

Degree<High School 34 29 20High School Graduate 26 23 29Some College (<Bachelor's) 18 17 27Bachelor's or above 22 31 24

ConnecticutImmigrant and U.S Born Population by Educational Level

25 Years Old and Older(Percent)

Source: U.S. Census Bureau.

23

Country of OriginPeriod Entered

Median Income* Number

Japan 1990-99 $60,000 774Non foreign born CT 1990-99 $38,000 1,201,814China, Hong Kong 1990-99 $35,000 2,441Philippines 1990-99 $32,000 1,478Foreign born pre1990 $31,200 151,105Russia, Ukraine, Uzbekistan 1990-99 $30,000 1,776Korea 1990-99 $30,000 469India, Bangladesh, Pakistan 1990-99 $27,900 5,297Poland 1990-99 $27,000 4,277Jamaica, Trinidad, Haiti, Guyana 1990-99 $20,000 5,291Dominican Republic, Puerto Rico 1990-99 $17,000 6,449Mexico 1990-99 $16,600 2,308Ecuad, Colum, Peru, Hond, El Salvador 1990-99 $15,000 5,489

Earnings in Connecticut

* Median Earnings 1999 for Connecticut population 25 and older with any incomeSource: U.S. Census Bureau.

24

Consumer Price IndexPercent change from 12 months earlier

-5

-3

-1

1

3

5

7

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

-5

-3

-1

1

3

5

7Percent Percent

Source: Bureau of Labor Statistics, FRBNY calculations.

CPI

Services

CPI Nov. '05 3.5%Durable Goods Nov. '05 -0.3%Services Nov. '05 4.0%

Durable Goods