Economic headwinds: CT struggles to regain financial services and insurance jobs

Connecticut’s financial services industry — a cornerstone of Hartford’s and the state’s overall economy — remains in a jobs crisis.

Jobs in finance, insurance and real estate – which make up the broader “financial business” industry – have not only struggled to rebound from the global health pandemic, but the employment in the sector remains well below pre-Great Recession levels.

And the finance and insurance sector was identified as the biggest contributor to Connecticut’s 4.7% economy contraction in the second quarter, according to the U.S. Bureau of Economic Analysis, the nation’s second-largest decline. after Wyoming.

The Wall Street Journal recently reported that New Britain-based Stanley Black & Decker cut 1,000 finance jobs as part of a wider restructuring, although the company later refuted that figure.

Either way, economists say many factors are putting pressure on financial services jobs in the state, including retirements and increased automation in the sector.

However, boosters and other experts say Connecticut remains a hub for financial services activity, and the state could grow the sector by focusing on improving the competitiveness of its businesses and offering tax incentives to stimulate industry.

Numbers

At the end of August, Connecticut’s financial activities sector employed 118,600 people, compared to about 123,000 jobs at the start of 2020, just before the pandemic caused a partial shutdown of the economy. At a two-year low, the sector employed 116,000 people.

Looking further ahead, the industry employed around 144,000 people at the start of 2008, before the Great Recession set in. Over the past three decades, employment in Connecticut’s financial activities peaked in January 2007, at 145,600. The state is currently about 18% below that level.

Across all industries, Connecticut has recovered just 87.9% of the 289,400 jobs lost at the start of the pandemic, in March and April 2020. This slow recovery comes as employers also struggle to fill jobs. vacant. Connecticut businesses reported 113,000 job openings at the end of July, according to the US Bureau of Labor Statistics.

Economist Don Klepper-Smith said technology is playing a big role in the financial business sector’s struggle to find jobs.

“In this age of technology, a lot of companies are leveraging technology to displace some of that workforce,” Klepper-Smith said. “There are certain sectors of the economy, like the service sector, where you can’t do that. But when we talk about finance, insurance and real estate, we talk about economies of scale and we talk about technology. We have seen a shift in the workforce and I think this is a trend that will continue for the foreseeable future.

Retirements and workers leaving the financial services sector due to the pandemic or better opportunities elsewhere, in addition to the lure of low-tax states, have also contributed to job losses, experts say.

“I think we’ll rebuild, but there’s a bigger issue at play,” said economist Fred McKinney, co-founder and partner at consulting firm BJM Solutions LLC. “Connecticut has been, more or less, stagnant (in terms of job growth) for a number of years. We’re a net exporter of young talent. We have a lot of universities here and a lot of those grads go elsewhere. We really need to think hard about how we keep talent in the state; how do we attract talent.

There’s also the issue, Klepper-Smith said, of making the Nutmeg state more business-friendly and therefore more competitive with states in other parts of the country. In this regard, he said, there is a long way to go.

Connecticut was ranked 39th in CNBC’s 2022 America’s Top States for Business report, dropping 15 spots from last year. This drop has become a talking point in the race for the top-level governor.

Klepper-Smith, a longtime Nutmeg State consultant to banks and even former Republican Gov. Mr. Jodi Rell, said if Connecticut does a full reassessment of how states like South Carolina – where he now resides – poached businesses in the northeast, and implements some of these policies, a rebound in employment is possible.

“We need to figure out what works in other states — things like tax incentives — and use those in Connecticut,” he said. “Why does Connecticut continue to be ranked among the bottom (of business-friendly states)?”

Fred Carstensen, professor of economics and business at UConn, said there are things the state and employers in the financial services industry can do to keep and attract jobs here.

“If you have a good pool of jobs, you can retain and grow jobs,” he said.

Also, he said tax incentives can help in the short term.

The Lamont administration revamped the state’s incentive strategy, moving from upfront grants and tax credits to a pay-as-you-grow system that rewards companies with tax refunds after have created at least 25 jobs.

The so-called JobsCT program targets certain industries, including the financial services sector.

Impact of hybrid working

Due to the pandemic, many businesses in Connecticut — and nationwide — have incorporated a hybrid/remote work model.

The state financial services sector is no different. In fact, it’s probably embraced remote working more than many other industries.

Major insurance companies — like UnitedHealthcare and Prudential — have announced plans to significantly reduce the footprint of their downtown Hartford offices as they move to a more permanent hybrid model. This has a negative impact on downtown activity and pedestrian traffic.

What remains unclear is the impact of the increased adoption of remote working on local and national employment levels, as the model allows companies to recruit workers from anywhere in the world. the country or even abroad. It also gives some workers the flexibility to live wherever they want, even if their job is technically based in Hartford or Stamford.

Kenneth Goroshko, professor of economics, finance and insurance at the University of Hartford Barney School of Business, said he does not believe there is widespread use of foreign workers to replace workers of Connecticut in the financial services sector.

Attempts to do so could backfire, he said.

It’s harder for fully remote workers to understand or adopt a company culture, and work is best done in person for the purposes of collaboration, brainstorming and mentoring, he said. .

“I would say replacing workers in Connecticut with other workers is not common,” Goroshko said. “I think in the long term, the concept of engagement, working with others in the office is still the best option, especially from a mentorship perspective. Young people coming out of college are looking for mentorship opportunities and you can’t get that by staring at a screen and watching everything on Zoom.

Experts said there were bright signs in Connecticut’s financial business sector.

UConn’s Carstensen noted that health insurer Cigna’s recent decision to invest $386 million to renovate its Windsor data center was “very encouraging.”

“We need data centers and IT infrastructure in the state,” Carstensen said, because they help power various industries, including financial services.

Connecticut in 2021 passed new data center incentives, although they haven’t spurred much activity to date.

Susan Winkler — vice president and executive director of the Connecticut Insurance and Financial Services cluster, an arm of the MetroHartford Alliance — said the state is still seen by many as an “international hub” of insurance business and of financial services.

She highlighted the March 2022 formal agreement between the UK and several Connecticut government entities to launch a new Insurtech Corridor.

The collaboration, Winkler said, is expected to enable participating UK and Connecticut businesses to: access resources to accelerate their business growth; connect with business development and investment opportunities; and streamline US and UK market entry by leveraging local insurance ecosystems.

“We forged this agreement because, we recognize, that between Hartford and London, they are two centers of global insurtech technology influence,” Winkler said.