Connecticut’s Economy Craves Caution, Adaptability 

The CBIA Foundation’s September release of By the Numbers: Tracking Connecticut’s Economic Competitiveness was intended to act as a launchpad—reflecting where Connecticut has been, while anticipating where Connecticut is going.  

Since then, the data to write the rest of the story has been sparse as a result of the lapses in federal funding and government shutdown.  

While we saw a national glimpse at federal jobs numbers, Connecticut’s picture is missing a few critical pieces.  

Still, it’s important to build the best picture possible of where our economy is headed.  

Labor Market  

The most recent labor market snapshot we have comes from August. While it’s far from complete, it offers some signs worth noting.  

Connecticut’s payrolls grew 0.7% over the past year—just shy of the national 0.9%—but still the fastest pace in New England.  

Beneath that headline, however, the story is less encouraging—Connecticut’s labor force has grown only 1% since February 2020, compared to nearly 4% nationally, ranking Connecticut second slowest in the region.  

This tight labor market has pushed unemployment down to 3.8%, among the lowest rates in the country, but it also creates challenges for employers who are hiring.  

With 71,000 open jobs as of July, businesses report labor costs rising faster than any other expense—and more than three quarters told CBIA’s 2025 Survey of Connecticut Businesses that recruitment and retention are top priorities.  

Looking beyond August, the national picture has grown more complicated. While September exceeded expectations with 119,000 new jobs, downward revisions to August brought the three-month average to just over 62,000 jobs per month—less than half the pace of the same period last year, when monthly gains averaged 133,000.

At the same time, Challenger reports that 2025 has already logged the most announced layoffs since 2020, with October among the busiest months for job cuts.  

Private payroll data from ADP adds another layer of caution—hiring has slowed markedly, with year-to-date gains essentially flat in New England and only 0.3% nationally.  

Taken together, these signals point to a national labor market that is cooling, even as headline unemployment remains low. 

Industry Breakdown 

Industry performance tells its own story about Connecticut’s evolving economy. 

Since payrolls peaked in mid-2018, the strongest gains have come from transportation, warehousing, and utilities—up an impressive 34%—followed by private education (12.6%), healthcare and social assistance (7.3%), construction (6%), and state government (4.3%). 

On the other end of the spectrum, retail has shed 10% of its jobs, while manufacturing (-4.4%) and financial activities (-4.3%)—two of the state’s largest sectors—have also declined, alongside local government (-2.9%) and information (-2.5%). 

Over the past year, transportation and warehousing continued to lead with 2.6% growth, joined by accommodation and food services (2.4%), financial activities (2.1%), healthcare (1.9%), and professional and business services (1.5%).

Meanwhile, manufacturing slipped 0.5%, retail fell 1.2%, construction dropped 1.5%, and federal government payrolls contracted by 2.2%. 

These trends underscore both the resilience of service-oriented sectors and the ongoing challenges for traditional industries. 

Connecticut’s GDP: Strong Quarter, Mixed Signals 

Connecticut’s economy delivered a strong performance in the second quarter, growing at an annualized rate of 4.6%.  

That pace ranked tenth nationally and first in the northeast.  

Still, year-to-date growth stands at 2.4%, comfortably ahead of the national average of 1.6%.  

Recent growth is a welcome change from longer-term trends that have shown weakness. Since 2019, Connecticut’s economy has expanded just 6.9%, compared to more than 16% nationally. 

When looking at sectors, financial activities and manufacturing posted standout gains in the second quarter, up 12.2% and 9% respectively. However, it is worth noting that this growth came on the heels of a challenging first quarter for both sectors that were heavily impacted by changes to tariff policy.  

The longer run growth in both industries also differs from employment in those industries, which have seen long-run declines in payrolls.  

Meanwhile, transportation and warehousing, professional and technical services, and healthcare and social assistance have been leaders, growing 12%, 5%, and 3.3% since the second quarter of 2024.  

Lagging behind are accommodation and food services (-.5%), retail trade (-1%), utilities (-4%), and federal civilian (-4.6%) year-over-year. 

Uncertainty And The Data Gap 

If there’s one theme that shadows every economic discussion right now, it’s uncertainty.  

Timing for key data releases has become unpredictable, leaving policymakers, businesses, and analysts to navigate without the usual guideposts.  

Federal reporting delays have already pushed back jobs and inflation updates, and the risk of further disruptions means that even near-term trends are harder to pin down.  

Adding to the uncertainty, the U.S. Supreme Court is weighing a case that could throw out some tariffs, a decision with potentially wide-ranging implications for trade and pricing.  

Closer to home, Connecticut lawmakers just convened a special session to allocate funds to offset changes in federal spending—another reminder that fiscal planning is being reshaped in real time.  

For businesses and households alike, these shifting dynamics underscore the need for caution and adaptability as we close out the year. 

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About the author: Dustin Nord is the Dustin Nord is director of the CBIA Foundation for Economic Growth and Opportunity.