Hartford Business Journal

HARTFORDBUSINESS.COM | JANUARY 12, 2026 29 WHAT TYPE OF GDP GROWTH WILL CT SEE IN 2026? WHICH INDUSTRY WILL ADD THE MOST JOBS? WHICH INDUSTRY WILL LOSE THE MOST JOBS? HOW MANY JOBS WILL CT LOSE? WHAT'S YOUR 2026 ECONOMIC OUTLOOK FOR CT? WHAT WILL CT'S UNEMPLOYMENT RATE BE AT THE END OF 2026? Economic Forecast Federal budget cuts, structural gaps put CT jobs at risk T he September jobs report, published in December, showed that Connecticut is losing jobs. The state ranks 50th in payroll growth from 1989 to 2025 and is one of only three states that have failed to fully recover from the Great Recession. After a period of encouraging growth in employment and state GDP following the pandemic, employment is now contracting even as defense spending and other drivers continue to lift GDP. Projections of the impact of sharp federal reductions to SNAP and Medicaid and Medicare budgets suggest the cuts could cost Connecticut nearly 10,000 jobs. A dramatic increase in ACA premiums is also expected to drive thousands of households to forgo health insurance and significantly strain the budgets of those seeking to maintain coverage. Severe cuts to federal grants, combined with a new tax on university endowments, are already resulting in hiring freezes and layoffs. When added to reductions in state support for UConn and threatened cuts to state infrastructure investment, the outlook points to contracting employ- ment across Connecticut, with health care and education bearing most of the losses. Nationally, two dynamics have supported the economy: sustained consumption by wealthier households — the top 20% — and data center investment to meet massive demand tied to AI. Eight of the 12 Federal Reserve districts — those without significant data center investment — already appear to be in recession. Despite record stock market valua- tions, the national economic picture looks increasingly problematic. While Connecticut is home to many wealthy households, it has relatively weak IT infrastructure, ranking behind Vermont and New Hampshire, and, despite having a highly competitive data center project on offer, appears to have little interest in changing that dynamic. With the exception of the Yale-UConn quantum initiative — which, even if successful, will not become econom- Fred Carstensen Professor, Finance and Economics; Director, CT Center for Economic Analysis University of Connecticut ically impactful for several years — there is little evidence that Connecticut will see meaningful job creation or growth in the next couple of years, even as job losses and the drivers of contraction are already visible and occurring. The critical question is whether, Negative Growth 0% 10,000 Defense Manufacturing 4.2% Health Care & Education PatriCk J. Flaherty Director of Research and Information Connecticut Department of Labor After post-pandemic surge, CT job growth set to slow in 2026 WHAT TYPE OF GDP GROWTH WILL CT SEE IN 2026? WHICH INDUSTRY WILL ADD THE MOST JOBS? WHICH INDUSTRY WILL LOSE THE MOST JOBS? HOW MANY JOBS WILL CONNECTICUT ADD? WHAT'S YOUR 2026 ECONOMIC OUTLOOK FOR CT? WHAT WILL CT'S UNEMPLOYMENT RATE BE AT THE END OF 2026? Moderate Growth 2.1% 5,000 Health Care 4.1% Retail Trade C onnecticut expanded rapidly after the end of the COVID-19 shutdown and has added jobs every year since. The first years after the shutdown were characterized by rapid labor turnover, an extremely high level of job openings, and extremely low unemployment. In 2025, the labor market looked more normal, with an unemployment rate that was above its unsustain- able lows but still on the low side by historic standards, and job openings that came down from their lofty heights but remained on the high side by historic standards. Connecticut will likely see further slowing in 2026. Changes in federal policy on the spending side will constrain growth in some sectors, such as private higher education, while reduced international immigra- tion will constrain labor supply. Nevertheless, the Connecticut economy came out of the pandemic in remarkably good shape and will avoid a downturn as long as the national economy remains in positive territory. in the next legislative session, the state — given its strong fiscal position and billions of dollars in reserve funds — will pursue initia- tives to mitigate what appears to be coming. Connecticut has the resources to change course; the question is whether it has the will.

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