State’s GDP Falls in First Quarter Amid Tariff, Job Growth Concerns

Connecticut’s economy contracted for the first time in over three years in the first quarter of 2025 amid tariff concerns, slower consumer spending, and ongoing volatility in the state’s jobs market.

The state’s real GDP declined 0.9%, 27th in the country, after growing 1.8% the previous three months and 2.6% in 2024.

New England’s economy shrank 0.8%, with national GDP down 0.5% as just 10 states saw growth according to a June 27 U.S. Bureau of Economic Analysis report.

New Hampshire’s economy performed the best in the region, contracting 0.1%, 13th among all states.

Rhode Island’s GDP declined 0.2% (13th), followed by Vermont (-0.3%; 18th), Connecticut, Massachusetts (-0.9%; 28th), and Maine (-1.2%; 32nd).

Connecticut’s quarter-over-quarter growth ranks eighth in the Northeast, behind Pennsylvania (0.3%), Delaware (0%), New Hampshire, Rhode Island, Vermont, Maryland (-0.5%), and New York (-0.7%).

Tariffs, Job Growth

CBIA president and CEO Chris DiPentima said that businesses imported critical goods ahead of scheduled April tariff hikes and seesawing federal trade policy, impacting productivity during the quarter.

“I don’t think this is a slowing down in the economy, but it’s showing the volatility in the economy on a month-to-month basis,” he said.

“There were a lot of businesses trying to get ahead, so they brought in a lot of inventory from overseas before those products and services increase in price, based on whatever is the end result of the tariffs.”

 DiPentima also noted that the state’s labor market challenges—year-over-year job growth is just 0.1%, seven-tenths of a point behind the national rate—were also impacting GDP growth.

“The wild swings in the jobs market this year make it clear that Connecticut’s labor market struggles are holding back our economic potential,” DiPentima said.

“Key factors driving Connecticut’s stagnant economy—such as the high cost of living—went unaddressed once again by policymakers during the legislative session.”

DiPentima pointed to the CBIA Foundation’s long-term economic action plan and its recommendations to improve regulatory processes, create new career pathways, and make Connecticut a more attractive place to live and do business.

“Improving the state’s business climate, addressing our workforce needs, and enhancing the quality of life are critical to driving and sustaining economic growth in Connecticut,” he said.

Sector Performance

Connecticut’s $295.9 billion real GDP accounts for 24% of New England’s $1.2 trillion economy, and is the second largest in the region behind Massachusetts ($636.9 billion). 

Just eight of the 23 industry sectors that BEA tracks posted productivity gains in the first three months of the year, led by the real estate sector, which expanded 0.7%. 

Information grew 0.64%, followed by state and local government (0.12%), professional services (0.09%), military (0.07%), administrative services (0.04%), durable goods manufacturing (0.01%), and federal government (-0.01%).

Finance and insurance—a key component of the state’s economy—saw the greatest decline of any sector, contracting 0.64% after expanding 0.4% the previous quarter.

“Some of that has to do with the volatility in the stock market in the first quarter,” DiPentima said. “And that sector’s job growth continues to lag.”

Construction output declined 0.28%, followed by educational services (-0.27%), retail trade (-0.27%), wholesale trade (-0.2%), management (-0.07%), utilities (-0.16%), other services (-0.15%), healthcare (-0.12%), arts, entertainment, and recreation (-0.1%), accommodation and food services (-0.07%), nondurable goods manufacturing (-0.07%), transportation and warehousing (-0.06%), agriculture (-0.04%), and mining (-0.01%).

South Carolina’s economy performed the best of any state in the first quarter of the year, expanding 1.7% after growing 3.6% the previous quarter.

Florida posted 1.2% growth, followed by Alabama (1%), North Carolina (0.8%), and Arkansas (0.8%).

Nebraska’s economy shrank 6.1% with Iowa (-6.1%), Montana (-4.4%), Kansas (-3.3%), and Wyoming (-3.1%) filling out the bottom five states.

Personal Income

Connecticut’s personal income, a key measure of economic competitiveness, grew 5.8% in the first quarter—43rd best in the nation—after growing 5.3% in the previous quarter. 

“Personal income is a positive sign,” DiPentima said. “The wage increases are more than offsetting inflation in Connecticut.

“And that means employers are doing everything they can to attract and retain people and grow their businesses, and ultimately grow Connecticut’s economy.”

The New England states averaged 5.6%, up from 2.9% in the fourth quarter, led by Vermont at 7%—24th best in the country. 

“Wage increases are more than offsetting inflation in Connecticut.”

CBIA’s Chris DiPentima

Rhode Island posted 6.8% growth (28th), followed by Maine (6.1%; 31st), New Hampshire (6.6%; 32nd), Connecticut, and Massachusetts (4.9%; 48th).

U.S. personal income grew 6.7% in the first three months of the year after increasing 5.4% in the fourth quarter of 2024.

North Dakota (12.7%) posted the largest increase in personal income, followed by South Dakota (11.4%), Mississippi (9.9%), South Carolina (9.1%), and Oklahoma (9.1%).

Washington saw the slowest personal income quarterly performance among the 50 states at 3.2%, followed by Idaho (4.7%), Massachusetts, California (5.2%), and Arizona (5.4%).