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December 11, 2023

Bordonaro: The good, bad and uncertainty of 2023

Contributed Fireworks outside the state Capitol.
By Greg Bordonaro

As we head into the final weeks of 2023, it’s a good time to reflect on a busy last 12 months.

While many people came into the year concerned about a potential recession, the state’s economy seems to have held up stronger than expected, at least for the majority of 2023. 

Greg Bordonaro

But concerns about economic headwinds — including the effects of high interest rates and labor shortages — persist.

Here’s a look back on the good, bad and uncertainty from 2023.

The Good

Connecticut hasn’t always been known as a fiscally stable state, especially earlier this century, but it has been in recent years, so much so that lawmakers in 2023 approved an income tax cut for the first time in decades. 

It will save taxpayers more than $460 million per year.

According to the CT Mirror, the state has recorded nearly $11 billion in surpluses since 2017, when lawmakers adopted a spending cap and other fiscal guardrails that aimed to counter years of fiscal instability. Those surplus dollars have helped the state build up a $3 billion-plus rainy day fund and pay down billions of dollars in long-term pension debt.

Surpluses could continue through at least 2028, according to recent state projections, which should give businesses more confidence about Connecticut’s future direction. 

Employers added 25,600 jobs this year through October, pushing Connecticut’s unemployment rate down to 3.5%.
That’s better than the U.S.’ 3.9% jobless rate. 

Connecticut has also regained all the 289,100 jobs that were lost during the March-April 2020 COVID lockdown period, labor officials said.

The Bad

Not all the economic news was rosy.

Several high-profile employers announced plans to leave Connecticut or reduce their presence here. 

Telecommunications giant Frontier announced in September it will relocate its headquarters from Norwalk to Dallas. Frontier said it will maintain a Connecticut presence, but chose Dallas for its central U.S. location and because it’s a “business friendly” city. 

In January, Danish toy maker LEGO Group said it planned to relocate its North American headquarters and about 740 jobs from Enfield to Boston by 2026, in search of a wider talent pool. 

In that same month, Campbell Soup Co. announced it was relocating the Norwalk headquarters of its Pepperidge Farm subsidiary to New Jersey.

Meantime, Connecticut’s economy grew just 0.3% during the first quarter of 2023, compared with a national average of 2% growth, according to the U.S. Bureau of Economic Analysis.

High costs of doing business and living, and lack of affordable housing remain determinants to growth. Those issues must continue to be addressed by state policymakers.

The office market continues to slump as remote and hybrid work models remain in place. 

Many employers are still trying to figure out how to get more workers back to the office, even for just a few days a week, while other companies have embraced more flexible work arrangements and are using it as an opportunity to reduce office space expenses. 

Greater Hartford companies shed a net 651,000 square feet of office space during the first three quarters of 2023, according to brokerage firm CBRE. About 30% of the region’s office space is currently available. 

Complicating efforts to get more employees back to the office is the state’s persistent workforce shortage. Connecticut employers reported 103,000 open positions in September, which equates to five available jobs for every three people who are unemployed.

More office workers are needed to restore vibrancy to Hartford and other Connecticut cities.

The Uncertainty

What’s still unclear is the future direction of the national and Connecticut economies. 

U.S. GDP grew at a higher-than-expected 5.2% rate in the third quarter, but high interest rates have slowed business investment. 

Spending on Connecticut commercial property sales, for example, plunged 67% during the first half of 2023, according to CBRE data. 

Overall, $850.9 million in office, apartment, retail and industrial property sales were recorded in Connecticut during the first half of 2023, compared to $2.6 billion in deals during the year-ago period, CBRE data shows.

Anecdotally, bankers and business owners have told me the lending environment has tightened. Whether that translates into a meaningful economic slowdown is yet to be determined. 

So far, we haven’t seen wide-scale layoffs by companies, which is a positive sign. 

But employers are likely headed into 2024 with some trepidation about the economic outlook for the next six to 12 months. 

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