🔒Bordonaro: At midyear, where is CT’s economy?

Slow and steady growth.

That’s been the story of Connecticut’s economy over the last few years.

In one respect, that’s good news for a state that experienced economic stagnation for more than a decade following the 2008 financial crisis. On the other hand, the state has still failed to regain all the jobs it lost during the Great Recession.

As we have now reached the midway point of 2024, it’s a good time to reflect on Connecticut’s economic performance through the first six months of the year.

Here are a few economic indicators worth tracking:

Labor numbers

Connecticut businesses added about 3,300 jobs in June, as the state’s unemployment rate dropped to 3.9% — its lowest level since August 2023, according to the state Department of Labor.

The state has experienced six consecutive months of job growth, posting an increase of 17,900 jobs during the first half of the year. In all of 2023, the state added 18,400 jobs.

Connecticut had 1,713,700 payroll jobs in June and has now recovered 105.2% of the jobs lost during the pandemic shutdown, according to the DOL. Of those, 1,476,600 are private sector jobs — an all-time high for Connecticut.

Also, the state’s June labor force participation rate was 64.6%, above the 62.6% national average.

Connecticut has an estimated 90,000 job openings, signaling the workforce shortage remains a problem.

The bottom line is, Connecticut has enjoyed a steady jobs recovery from the pandemic that continued during the first half of 2024. However, UConn economist and business professor Fred Carstensen notes the state still has about 7,200 fewer jobs than it did right before the Great Recession hit in 2008.

There’s another caveat: Carstensen said job gains in June were concentrated in sectors — government, tourism, and education and health services — “with low value-added impact” and that “are unlikely to be the source of strong future (economic) growth.” Those industries added a combined 4,900 jobs in June.

Meantime, the state lost 1,500 jobs in critical sectors — professional and business services and information — that are typically strong growth drivers, Carstensen said.

Over the past year, the state’s information sector has contracted by 4.8%, while the professional and business services industry has shrunk by 1%, DOL data shows.

“A study from McKinsey a decade ago highlighted that Connecticut was losing high-skill, high-wage jobs, and gaining low-wage, low-skill jobs,” Carstensen said. “While the state’s post-COVID recovery is good to see, it is not yet showing signs of reversing the dynamics to which McKinsey pointed.”

Gross Domestic Product

Meantime, Connecticut’s economy experienced slower GDP growth in the first quarter of 2024 compared to last year, according to the U.S. Bureau of Economic Analysis.

Real GDP grew 0.7% in Connecticut in the first quarter, which ranked the state 35th in the nation. By comparison, the state recorded 3.1% growth in the fourth quarter of 2023, and 2.1% growth for all of last year.

U.S. first quarter real GDP grew 1.4%.

Connecticut experienced the second-slowest first quarter growth in New England, ahead of only Maine, which recorded 0.6% growth. Rhode Island led New England with 3% growth.

The finance/insurance industry led growth in Connecticut, expanding by 0.61%. Manufacturing took a hit, with durable goods contracting by 0.55%, and nondurable goods shrinking by 0.08%.

Meanwhile, Connecticut’s personal income increased 6.1% in the first quarter, to $323.4 billion. New England averaged 6.3% growth in personal income, while the U.S. experienced 7% growth, BEA data shows.

Biz rankings

While business competitiveness rankings aren’t an economic indicator, they are still worth mentioning.

Connecticut this year remained in the bottom half of CNBC’s annual “Top States For Business” ranking, in part because it has become less business friendly.

The state dropped one spot to No. 32 in CNBC’s list; it was ranked 31st last year.

The cable news channel ranks each state in 10 categories, ranging from education and infrastructure to quality of life and the cost of doing business.

Connecticut actually improved in six of the 10 categories, with the biggest improvements seen in education.

The biggest movement in any category, however, was for “business friendliness,” which saw the state drop from 16th last year to 39th this year.

Connecticut Business & Industry Association President and CEO Chris DiPentima said that steep decline “largely reflects a series of recent policy decisions imposing or expanding costly workplace mandates, coupled with inaction on a transformative, bipartisan bill giving hundreds of thousands of small business employees access to quality, affordable health care.”

He was referring to workplace mandates passed by the legislature this year, including an expansion of the state’s paid sick leave law. He also lamented some lawmakers’ unwillingness to support so-called association health plans, which would allow qualifying chambers of commerce and trade groups to act as one large employer and offer their small business members self-funded health insurance benefits.

Some Democrats in the legislature, especially those who support government-run insurance, have opposed allowing association health plans in the state, despite the fact that the fully insured small group market has been losing competition and experiencing significant annual price increases.

DiPentima also said policymakers must do more to “lower the state’s high cost of living and make it much easier and less costly to start and run a business here.”

The reality is, Connecticut will never be a low-cost state in which to do business, but lawmakers must support policies that help avoid future tax increases. That includes maintaining the fiscal guardrails that have brought budget stability to the state — Connecticut’s rainy day fund now has $4.1 billion, putting the state in a strong position to weather a future recession.

Additionally, improving the state’s business friendliness may be the easiest area to improve because it doesn’t require a major financial investment. Lawmakers simply must stop proposing new mandates that make it harder for small to midsize businesses to operate here.

Future economic growth will be dictated, in part, by creating an environment that gives businesses confidence to make short- and long-term investments in the state.