🔒Lanza: Expect ‘slow-to-no’ CT job growth in 2025

The Federal Reserve’s two-year assault on rising prices has had its intended effect as the topline inflation number has dropped back to Earth, while the labor market has cooled considerably.

Inflation has fallen from its high of 9% in 2022 to between 2% and 3% now, while over the same period, labor market job growth has slowed from a breakneck 300,000 monthly pace to a more leisurely 150,000 monthly gain, easing upward pressure on wages.

For Connecticut, that has produced a similar slackening in labor market conditions. Annual job growth slowed from about 26,000 in 2023 to about 14,000 in 2024. Monthly job openings, though still higher than average, have fallen by more than 25% between the start of 2023 and the end of 2024.

And the growth in private sector workers’ average hourly earnings appears to have stabilized, albeit at a level above inflation, so real wages are still on the rise.

So, how is 2025 shaping up? The Fed has begun easing its grip on the money supply, but is in no hurry to lower interest rates in the immediate future, according to Chairman Jerome Powell.

Forecasters with both the Philadelphia Fed and Wall Street Journal expect job growth nationally to slow further, which would translate into monthly job gains in Connecticut of fewer than 500. Given that Connecticut payrolls were flat in late 2024, the state would do well to add 5,000 jobs over the course of 2025.

Yale New Haven Health’s plan to convert the old Macy’s store at the Meriden Mall into an outpatient center is a sign of the times: expect health care to be the big job-gainer, and retail trade the big job-loser.

Despite slow-to-no job growth in 2025, the state’s tight labor supply will keep the unemployment rate in check, and productivity gains will enable real state GDP growth to outpace job growth and remain in positive territory.

Steven P. Lanza is an associate professor in residence at UConn and author of “The Connecticut Green Sheet”