Connecticut faces a multi-pronged whammy: federal tax law changes and continued state deficits. First, although it’s not fully clear yet, federal tax law changes will likely cap state and local tax deductions for individuals at $10,000 and limit further the home mortgage deduction. Second, despite having adopted a new budget a month or so ago, the state is again running a deficit because sales and tax revenues are down over $200 million halfway into the budget year.
We conducted an assessment based on historical employment performance. This appraises the likelihood of a Connecticut employment downturn in the near future. Our model tells us that over the next year we have around a 40 percent chance of hitting a slowdown. By contrast, a likelihood of national recession, using the same methodology, is close to 11 percent towards the end of 2018.
How likely are we to slow down while the U.S. breaks all kinds of records? The chances are high. Connecticut’s downturns and recessions are not always synchronized with those of the nation. In fact, over the last 27 years we have not been synchronized with the nation approximately 11% of the time (38 of 334 months). We were down for 25 months when the national economy was humming along happily, and we have done better than the national economy 13 months when the US economy was sputtering.
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