Connecticut's economy grew a modest 1% in 2016, second slowest of the New England states and 32nd among all states.

A U.S. Bureau of Economic Analysis report shows the state's gross domestic product shrank by 0.9% in the first quarter of last year before bouncing back with 2% growth in the last three months.

2016 New England GDP GrowthEconomic growth fell from a 2015 post-recession high of 2.2% and continues to trail the region and the country.

The New England region posted 1.7% growth in 2016, led by New Hampshire (3%) and Massachusetts (2%), while the U.S. averaged 1.5%.

"It's not a terrible report. It's not a report to celebrate," said CBIA economist Pete Gioia.

"It's somewhere in between."

Gioia said there's a direct connection between Connecticut's sluggish economy and below par job growth.

Connecticut lost 200 jobs in 2016, the state's first year since 2009—the heart of the recession—without employment gains.

Through March of this year, Connecticut's recovered just 77% of the 119,100 jobs lost in the recession, the sixth slowest growth rate in the country.

"The jobs recovery is a huge drag on what we can do," Gioia said.

Positive Signs

Gioia saw positive signs in the state's fourth quarter numbers, with growth primarily driven by the finance and insurance sector, which grew 0.84% in the last three months of the year.

"It's not beyond the realm of possibility for Connecticut to see 2% annual GDP growth," he said.

Professional, scientific, and technical services performed the strongest overall in 2016, growing 0.27%. Finance and insurance posted 0.23% growth for the year.

It's not beyond the realm of possibility for Connecticut to see 2% annual GDP growth.
— CBIA economist Pete Gioia
Information saw 0.2% growth, followed by utilities (0.12%), construction (0.09%), whole sale trade (0.08%), retail trade (0.08%), healthcare (0.05%), transportation and warehousing (0.04%), durable goods manufacturing (0.02%), mining (0.02%), other services (0.02). management (0.01%), arts and entertainment (0.01%), and agriculture, forestry, fishing, and hunting (0.01%).

Nondurable goods manufacturing was the worst performing sector, shrinking 0.2%, followed by government (-0.07%), educational services (-0.06%), administrative and waste management services (-0.03%), and accommodation and food services (-0.01%),

Top, Bottom States

Washington (3.7%) and Oregon (3.3%) posted the top GDP growth rates in the nation. Utah, New Hampshire, and Florida filled out the top five states with 3% growth each.

North Dakota's economy continues to experience sluggish growth, shrinking 6.5% last year, worst in the nation.

Alaska's economy also shrank 5%, followed by Wyoming (-3.6%), Oklahoma (-2.3%), and West Virginia (-0.9%).

Continuous sluggish economic growth is a contributing factor to Connecticut's projected $4.9 billion two-year deficit, with declining tax revenues for fiscal 2017 adding $1.3 billion to the budget hole.

This fiscal instability prevents businesses from making critical investments that top-performing states, particularly in the South and West, are prioritizing to drive strong economic growth.