Connecticut’s economic growth slowed down early this year and lagged behind the pace of expansion in most other states, according to new federal data.

In the first quarter of 2024, the state’s real gross domestic product increased 0.7 percent, at an annual rate, compared with an uptick of 1.0 percent in all of New England and a national increase of 1.4 percent, according to data released last Friday by the federal Bureau of Economic Analysis. In 2023, the state’s GDP grew 2.1 percent, which was the highest rate in New England, but lower than the national average of 2.5 percent. 

“It’s disappointing to see this sluggish start to 2024, and this report shows signs that the state’s economy may be softening. However, Connecticut saw impressive economic tailwinds in 2023, and it’s important not to overreact to one quarter of change,” Chris DiPentima, CEO and president of the Connecticut Business & Industry Association, said in a written statement. “This is a reminder that we must remain hyper-focused on growing the state’s economy, so we don’t fall behind the region and the country.”

Connecticut’s first-quarter real GDP growth rate ranked 35th among the states and was second-lowest in New England. Among neighboring states, real GDP increased 2.5 percent in New York, 1.0 percent in Massachusetts, 3.0 percent in Rhode Island and 1.0 percent in New Jersey. Nationwide, Idaho produced the highest growth rate, at 5.0 percent, while South Dakota recorded the lowest rate at minus-4.2 percent. 

“I do track (quarterly GDP data) and do look at it closely,” Daniel O’Keefe, the commissioner of the state Department of Economic and Community Development, said in an interview. “But what matters most is how we compare to our prior periods and how we’re trending as the year progresses overall, in terms of upward or downward revisions.”

In the first quarter, Connecticut saw growth in several sectors, including finance and insurance; retail trade; and arts, entertainment and recreation. But the decreasing output of manufacturing — a sector that also experienced a quarterly decline nationwide — was a significant reason for the overall slowdown in the state's GDP growth in the first quarter. 

One of the greatest headwinds for Connecticut manufacturers is the difficulty of finding qualified candidates to fill their thousands of job openings. Across all industries, there were about 87,000 job openings across the state in March 2024, the most-recent month for which there is finalized federal data. In comparison, there were about 46,000 job openings statewide in March 2014.  

Connecticut’s labor force, which includes people who are working and those who are unemployed but actively looking for work, amounted to an estimated 1.915 million people in May 2024. The total marked an improvement from the state’s pandemic-era low of 1.799 million that was hit in May 2021, but it was still down about 16,000 people from February 2020.

The labor squeeze in Connecticut is the product of many factors, including widespread worker retirements since the beginning of the pandemic and many people not being able to enter or return to the workforce because of unaffordable or inaccessible child care. At the same time, a lack of affordable housing makes it more difficult to keep people in the state and recruit newcomers.

“After seeing relatively strong growth in 2023, the decline in manufacturing is something we need to keep a close eye on,” DiPentima said. “Many manufacturers in the state begin Q1 with a lower inventory and ramp up throughout the year. Workforce remains a challenge for the manufacturing industry, and manufacturers tell us one of their biggest hurdles to growth is finding and retaining talent.”

As Connecticut’s GDP growth lagged behind the country and several of its neighbors, so did its personal-income growth. In the first quarter, personal income in the state increased 6.1 percent on an annual basis, a rate that ranked 37th in the nation.

Personal income rose 7.0 percent nationwide. Among neighboring states, it grew 7.0 percent in New York, 6.2 percent in Massachusetts, 7.1 percent in Rhode Island and 5.7 percent in New Jersey. South Carolina posted the highest rate of personal-income growth, 9.5 percent, while North Dakota accounted for the lowest rate, 0.6 percent.

Despite its headwinds, Connecticut’s economy is still progressing on several fronts. The state has recovered the approximately 290,000 jobs that it lost as a result of economic shutdowns at the beginning of the pandemic, and it has added jobs for five consecutive months. 

“I would love to see Connecticut growing faster than any state and faster than the country overall,” O’Keefe said. “That is the ‘North Star’ and our ultimate goal.”