Despite an extraordinary five-point surge in interest rates to combat inflation, the U.S. economy defied gravity in 2023, in turn adding lift to Connecticut’s economy.U.S. inflation, which peaked at 9% in 2022, has dropped to within a point of the Fed’s 2% target, without the dreaded surge in unemployment or slump in national output.For Connecticut, […]
Despite an extraordinary five-point surge in interest rates to combat inflation, the U.S. economy defied gravity in 2023, in turn adding lift to Connecticut’s economy.
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U.S. inflation, which peaked at 9% in 2022, has dropped to within a point of the Fed’s 2% target, without the dreaded surge in unemployment or slump in national output.
For Connecticut, that meant jobs didn’t shrink as feared; instead, they grew at twice the number that is typical of recent years of recovery or expansion.
Connecticut added over 20,000 jobs during 2023, and saw unemployment ease to a near-record low 3.5%. Nonfarm jobs have returned to pre-pandemic levels, and private sector employment in the state is at an all-time high.
So, what’s in store for 2024? There’s barely a whisper of recession, though plenty of chatter exists that the Fed’s tightening will eventually bring the economy back down to Earth.
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Sure, that could translate into job losses for Connecticut, but the state’s ongoing momentum and tight labor markets suggest job growth will continue.
Expect the state to add around 10,000 jobs in the new year, a number more in line with long-run growth trends. The real challenge may be finding willing workers at a time when the state’s labor force participation rate drifts ever lower.
Tight labor conditions will hold unemployment in check at its current low rates.
Health-related industries will continue to lead the state’s growth sectors, and not just because the state’s older demographic requires more medical services; Connecticut is also a leader in the booming health technology field.
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Unfortunately, there’s little sign the secular decline in the state’s flagship financial services sector will end, although a similar erosion in manufacturing jobs has abated thanks to a recent resurgence in factory work and, importantly for Connecticut, federal defense contract dollars.
Steven P. Lanza is an associate professor in residence at UConn and author of“The Connecticut Green Sheet”
