Is CT’s economy ‘growing’? It depends on how you define it

Is Connecticut's economy growing? It depends on whom you ask, and it’s often more complicated than looking at one single measure. One might consider inflation, income distribution, cost-of-living, total output, exports and many other factors, each of which paints a different picture of the state’s economy.

“We have more people employed” is one of the many things Gov. Ned Lamont touted earlier this week in response to a claim that Connecticut’s economy is continuously weakening.

The criticism came from Fred Carstensen, a professor and economist at the University of Connecticut who heads the Connecticut Center for Economic Analysis, and it was asked during a one-on-one interview on Tuesday between The Connecticut Mirror and Lamont.

“Right now, we have the fastest growing economy in the northeast by a little bit,” Lamont continued.

But what makes an economy “grow” and be “fast”? It depends on whom you ask, and it’s often more complicated than looking at one single measure. One might consider inflation, income distribution, cost-of-living, total output, exports and many other factors, each of which paints a different picture of the state’s economy.

One common way to look at it, though, is by considering employment — how many people are working, how many are eligible, how many are looking to work and so forth.

Lamont said that there are more people employed now than before. Is that true? According to data from the U.S. Bureau of Labor Statistics, it depends on the time frame. The average number of people employed in 2023 in Connecticut was 1.822 million, which is a:

• 0.63% decrease from the 2022 average (1.833 million → 1.822)

• 2.16% decrease from 2019 (1.862 million → 1.822)

• 6% increase from 2013 (1.718 million → 1.822)

• 5.7% increase since 2000 (1.723 million → 1.822)

More people are employed in Connecticut than decades ago, but that’s normal of any state that’s seeing an increase in population.

While the number of employed people grew in the state by 5.7% since 2000, the 16-and-over population increased by 12% — a difference not unexpected, as Connecticut’s population is aging, along with other factors.

Another measure that shows this relationship is the employment to population ratio. In 2000, the ratio of employed people to the total population was 65%. In 2023, it was 61.8%. Decreases were seen for every other New England state as well.

Shorter-term, there were fewer people employed last year than before the pandemic in 2019, when Connecticut saw a record number of workers at 1.862 million. All New England states except Rhode Island experienced a decrease in the number of workers since 2019.

The portion of the population that isn’t working could be either not part of the labor force or unemployed. The number of people that are unemployed or looking for a job out of the entire labor force makes up the unemployment rate.

The 2023 unemployment rate for Connecticut was 3.8%, the highest in New England, but any “unemployment rate around 4% would be considered low by historic standards,” writes a researcher from the state’s Department of Labor in the March 2024 edition of the Connecticut Economic Digest.

The unemployment rate has been falling since 2020, a sign of recovery from the pandemic, but the rate is still slightly higher than before the pandemic, a trend also seen for Massachusetts but not for any other New England state. In 2019, the unemployment rate in Connecticut was 3.6% while in 2023 it was 3.8%.

The 2023 unemployment rate is not as low as levels seen in 2000, when it reached 2.1%, but it’s still lower than the 4.9% rate seen in 1990.

Some argue that an increasing unemployment rate can be a good thing, despite its negative connotation. In a September 2022 national analysis, a time when the unemployment rate rose, the chief economist at the U.S. Department of Labor at the time wrote that, “The unemployment rate rose for a positive reason — more unemployed workers began seeking jobs.”

If more people are joining the labor force by looking for a job, the unemployment rate will go up, since there will be more people classified as “unemployed.”

There’s also a measure known as the labor force participation rate, which combines both measures discussed above: The employed plus the unemployed as a share of the total working age population.

In 1990, Connecticut’s labor force participation rate was 70.6%, but last year it sat at 64.2%. This decades-long decreasing trend is also seen for other New England states and is associated with an aging population and a decrease in participation from certain groups of men, as explained by researchers from the U.S. Census Bureau and the Federal Reserve Bank of Philadelphia.

In recent years though, the 2023 participation rate has recovered from a historic low in 2021, but it is not yet back to levels seen in 2019 before the pandemic, where the rate was 66.3%, just 2.1 percentage points higher than last year’s rate.

So what does this all mean? Lamont was right in that there are more workers now than decades ago, but that’s expected if the population of a state is growing. But when taking that into account, the number of workers is not increasing as fast as the 16-and-older population. As of last year, employment numbers and labor force participation rates for the state are still not at pre-pandemic levels, and the unemployment rate is higher, although decreasing.

And among New England states, Connecticut last year had the highest unemployment rate and the third-lowest labor force participation rate, but it wasn’t the only New England state to see decreases.