HARTFORD — Connecticut’s real economic output grew in the fourth quarter by 2.4% on an annualized basis, according to federal data just released.
Despite this nugget of good news, the big picture still doesn’t look so rosy. The state economy continued to contract throughout 2017. Since 2014, Connecticut’s performance ranks 49th, besting only Louisiana. This carries on a deeply troubling pattern: 2014, 2016 and now 2017 all saw contraction, ranging from -0.7% to -0.2%.
Worse still, Connecticut’s economy, measured in real GDP, corrected for inflation, has contracted every year since 2008 except 2015, which saw modest growth of 1.1%. The result is a smaller economy today than Connecticut had in 2004.
This very weak performance stands in sharp contrast with all of the other New England states, whose economies have enjoyed real growth, as have those of New York, New Jersey and Pennsylvania.
An increasingly common misconception is that Connecticut’s job creation surplus has helped offset the punch packed by the state’s economic woes. Connecticut has seen 78 continuous months of job creation measured year-by-year since 2010. Private sector jobs are now above their previous peak, but public sector jobs, which include those at Foxwoods and Mohegan Sun, have been contracting and will likely continue to contract for a couple more years. But jobs created in the private sector have been systematically of lower quality than that of jobs lost. Thus, real personal income, like real output, has been contracting even as employment has grown.
Adding to the complexity of the situation in Connecticut is the increasing number of residents who work out of state. Since 2016, more than 35,000 Connecticut residents have found jobs outside of Connecticut — so the number of Connecticut residents employed is near an all-time peak. Unfortunately, those 35,000 all pay their income tax first to the state where they work, thus contributing to the fiscal crisis in Connecticut.