OLR Research Report

October 3, 2008




By: John Moran, Principal Analyst

You asked for an overview of Connecticut economic downturns and job losses and gains over the past 25 years.


The last 25 years show periods of lengthy job growth followed by periods of lengthy job losses. This report compares Connecticut and U.S. unemployment rates and job growth over this period. Currently, job growth is very small in Connecticut.


Chart 1 shows the peaks and valleys of nonfarm employment. The shaded-in areas depict the last three recessions. The U.S. Bureau of Labor Statistics and the Connecticut Department of Labor's (DOL) Office of Research determine job growth through a survey of employers in the state. DOL uses job growth as the primary measure of whether the state is in a recession.

Chart 1. Recent History of CT Nonfarm Employment Showing Recent Recessions

Source: CT Department of Labor, Office of Research

Factors in the 1989-1992 recession: (1) bursting of the late 1980s housing/real estate bubble, (2) large cuts in defense spending (in part due to the Cold War's end) disproportionately impacted Connecticut's defense-related manufacturing, and (3) belt tightening across the insurance industry.

Factors in the 2000-2003 recession: “dot com” bust, and the terrorist attacks of Sept. 11, 2001.

Table 1 shows the number of jobs lost in the two most recent recessions and the time elapsed before the state returned to its pre-recession employment level.

Table 1. Jobs Lost and Time Elapsed Before Jobs Regained



Jobs Lost

Time Elapsed Before Jobs

Returned to Pre-recession Level

Feb. '89 to Dec. '92


10 years, 11 months (January 2000)

July 2000 to July 2003


7 years (July 2007)

Source: CT DOL, Office of Research


● The '89-'92 recession was followed by seven and half years of steady job growth.

● The '00-'03 recession was followed by five years of steady job growth, which continues to the current data (i.e., August 2008).

Chart 2 illustrates how the Connecticut unemployment rate over the last 25 years has generally tended to be lower than the national rate. This has changed somewhat in recent years as the state and national rates have been very close since 2005.

In January 2008, the state unemployment rate was lower than the national rate, but in February it was 5.0% while the national rate was 4.8%. The state and the national rates reversed positions a few times over the next several months and after being identical in July, the state rate jumped to 6.5% in August and the national was 6.1%. This 0.4% difference represents the largest amount by which the state unemployment rate exceeds the national for the years shown on Chart 2.

Chart 2: CT and US Unemployment Rates

Although the state unemployment rate is growing job data shows the state is still adding jobs. How can jobs and unemployment both go up in the same month? DOL researchers indicate two possible reasons.

One possible explanation is that some unemployed people may have re-entered the workforce by looking for work again. The new federal extension of unemployment benefits for workers who have exhausted the normal benefit schedule is an incentive for people to look for work again. In order to obtain unemployment benefits, a claimant must demonstrate that he or she is looking for work. Furthermore, if a person stops looking for work, he or she is not counted in the unemployment figures.

Another possible explanation is that the jobs data comes from a survey of employers and the unemployment data comes from a survey of households. This means if some Connecticut residents who work in another state lose their jobs, they would show up in the unemployment survey but not in the jobs survey (since only Connecticut employers are included). The most common example is Fairfield County residents who work in New York City.


Connecticut's job growth ranking among the 50 states shows the Nutmeg state is slow in recovery to get out of a recession. But it also shows Connecticut not leading other states into a recession. In other words, we are not the first into a recession and neither are we the first out.

Below are some highlights that illustrate this:

● In 2003, most states had come out of the recession and were showing job growth. In fact while Connecticut still had a slightly negative growth rate of -0.71%, 33 other states had positive growth.

● 2004 and 2005 were good growth years nationally (almost all states had job growth). But Connecticut saw comparatively modest growth (ranking 40th in 2004 and 43rd in 2005).

● In 2007 growth had started to slow nationally, but CT had comparatively good growth (0.95%) and ranked 21st.

Partial year data for 2008 shows Connecticut is still experiencing job growth while 30 other states have had a net loss of jobs. Connecticut's job growth is razor thin at .05%. In real numbers that means the state added 900 jobs from January to August of this year (out of 1.7 million jobs). (For more information on Connecticut's job growth ranking see OLR Report 2008-R-0517.)

In recent days separate announcements by the Indian tribes that run the state's two casinos may be signs of further weakening of the state's economy.

The Mohegan Tribe announced on September 22 the indefinite postponement of its casino expansion project. They have completed a new $400 million casino, and hired about 300 new employees. But they are postponing building the new hotel and related facilities worth $734 million in additional construction. In addition to the construction jobs that will be missed, they had planned to hire another 1,200 people to staff the unfinished facility. The tribe indicated they would review the situation in a year to see whether they could proceed.

Then on September 30, the Mashantucket Pequot Tribe announced it was laying off 700 of its nearly 11,000 employees at the Foxwoods Resort Casino and the MGM Grand at Foxwoods. Both tribes attributed their decisions to the downturn in the economy.