State’s Economy Rebounds in Second Quarter

Connecticut’s economy rebounded in the second quarter after a poor start to the year, with real GDP growing 2.8%—30th best of all states.

The U.S. Bureau of Economic Analysis’ quarterly report, released Sept. 27, shows the national economy expanded 3% in the second quarter.

The report revised Connecticut’s first quarter performance from modest 0.7% growth to a decline of 0.3%.

New England’s GDP increased 2.2% in the second quarter after expanding 3.6% in the first three months of the year.

Vermont’s economy performed the best of the New England states at 3.4% (16th), followed by Connecticut, Rhode Island (2.5%; 33rd), New Hampshire (2.1%; 40th), Massachusetts (1.9%; 41st), and Maine (1.7%; 44th).

Connecticut’s quarter-over-quarter growth ranks fourth in the Northeast, behind Vermont, Pennsylvania, and New York, with year-over-year growth at 2.67%, fifth in the Northeast.

Growth Challenges

CBIA president and CEO Chris DiPentima said he was encouraged by the GDP report, “especially with strong performances in key sectors including finance and insurance, healthcare, and manufacturing.”

“Still, Connecticut remains in the middle of the pack and it’s clear that we need to emphasize solutions that address challenges preventing the state from unlocking its full economic potential,” he said.

“We continually hear from businesses that the state’s regulatory environment hinders them from growing here, instead looking to expand in states that have undergone regulatory reform.”

DiPentima also noted that the pace of job growth is not meeting the demands of the state’s economy, with 12-month growth ranked 41st in the country at 0.8%.

“While job openings have increased 20% since February 2020, the labor force has declined 1.5%, in stark contrast to much of the region and the country,” he said.

“The CBIA Foundation’s long-term economic action plan highlights a number of recommendations to improve the regulatory process, create new career pathways, and make Connecticut a more attractive place to live and do business.

“It’s crucial that we work to spur further innovation and foster growth in high-tech industries— key markets to attract new businesses and residents to the state.

“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.”

Sector Performance

Connecticut’s $293.1 billion real GDP accounts for 24% of New England’s $1.2 trillion economy, and is the second largest in the region behind Massachusetts ($631.8 billion). 

Twelve of the 23 industry sectors that BEA tracks posted productivity gains in the second quarter, led by the finance and insurance sector, which expanded 0.7%. 

Healthcare grew 0.52, followed by durable goods manufacturing (0.43%), real estate (0.34%), professional services (0.32%), arts, entertainment, and recreation (0.31%), information (0.23%), nondurable goods manufacturing (0.15%), wholesale trade (0.15%), construction (0.15%), utilities (0.1%), and agriculture (0.04%). The mining sector was unchanged.

Finance and insurance’s year-over-year growth is 4.13%, outperforming the U.S. sector (3.33%).

Year-over-year output for Connecticut’s manufacturing sector grew 0.65%, compared with national growth of 3.9% over the same period.

State and local government contracted 0.16% to lead all declining sectors, followed by other services (-0.12%), accommodation and food services (-0.06%), transportation and warehousing (-0.05%), educational services (-0.03%), administrative services (-0.03%), military (-0.02%), retail trade (-0.02%), federal government (-0.02%), and management (-0.02%).

GDP grew in 49 states in the second quarter, with Idaho’s economy growing the fastest at 5.9%.

Kansas posted 5.6% growth, followed by Nebraska (5.3%), Utah (4.8%), and South Carolina (4.5%).

Alaska’s economy shrank 1.1% with North Dakota (0.1%), Minnesota (1.3%), Hawaii (1.4%), and Arkansas (1.5%) filling out the bottom five states.

Personal Income

Connecticut’s personal income, a key measure of economic competitiveness, grew 4.1% in the second quarter—44th best in the nation—after growing 9.3% in the first quarter of the year. 

U.S. personal income grew 5.3% in the second quarter after increasing 9.3% in the first three months of the year.

The New England states averaged 3.5%, down from 11.3% in the first quarter, with Vermont’s personal income expanding 5.2%—22nd best in the country. 

Connecticut’s personal income grew 4.1% in the second quarter—44th best in the nation.

Rhode Island posted 4.6% growth (35th), followed by Maine (4.4%; 39th), Connecticut, New Hampshire (4%; 46th), and Massachusetts (2.8%; 49th).

South Carolina (6.9%) saw the largest increase in personal income, followed by Utah (6.7%), Nebraska (6.6%), California (6.5%), and and Tennessee (6.1%).

North Dakota experienced the worst personal income quarterly performance among the 50 states at 2.3%, followed by Massachusetts, West Virginia (3.9%), Alaska (4%), and New Hampshire.