Connecticut’s unemployment rate ticked up slightly in December from 4% to 4.2%, as the state shed 500 jobs, according to numbers released by state Department of Labor on Monday.

For the full year in 2025, the state’s unemployment rate rose 1% — a notable increase, though unemployment remained low compared to historical figures. Connecticut’s unemployment rate at the end of 2025 was also lower than the national rate of 4.4%. 

But overall, 2025 was a mixed year for the state’s economy, as job growth slowed and the labor force — the number of people working or looking for work — contracted. Some industries experienced declines in jobs even as the state reported GDP growth through the second and third quarters of last year. (Fourth quarter GDP growth hasn’t been reported yet.)

“There was considerable volatility in 2025 with national issues playing a role in dampening Connecticut’s job growth,” Labor Commissioner Danté Bartolomeo said in a statement. “Over the past year, Connecticut’s workforce declined; that makes it harder for employers to hire and it reduces retail and services spending.”

Those “national issues” included tariffs and inflation, both of which have amplified economic uncertainty as their exact effect on the economy over the coming months and years remains unclear. The Connecticut Department of Labor has also cited changes in immigration enforcement as a concern in recent months, noting that the national crackdown could affect this state’s labor force, which has relied on immigrant workers to offset the effects of the state’s aging population.

The latest labor report rounded out a year of stagnation in the state’s labor market. Connecticut currently has a labor force participation rate of 64%, which is higher than the national rate of 62.5%. But some 20,000 people left the labor force in 2025, potentially making it harder for companies to fill open roles.

The state currently reports having some 70,000 job openings.

“Connecticut’s economy has shown resilience through some ups and downs this year,” CTDOL Director of Research Patrick Flaherty said in a statement. “As we’ve said in the past, the state’s economy will follow national trends, so we remain watchful of inflation, the impact of tariffs, and overall hiring.”

Connecticut’s economic picture is mixed – but shows warning signs

Connecticut employers shed 2,200 jobs overall in 2025, despite reported job increases in six out of the twelve months.

In November of last year, Connecticut ranked 37th for job growth in the nation, with states like Missouri, South Carolina and North Carolina landing in the top 10. In 2025, job growth increased 0.4% nationally, while it declined 0.1% in the state. 

Looking at the past year, most of the recent job declines in Connecticut were concentrated in specific job sectors, including retail (- 4,800 jobs), accommodation & food services (-3,000 jobs), and private education (-2,800 jobs). 

The losses were partially offset by growth in sectors like government (+3,200 jobs) and health care (+3,300 jobs). 

The muddled job picture raises concerns about growth in the state, which still has not recovered many of the jobs lost during the Great Recession. Connecticut officials have looked to support investments in emerging technologies and foster workforce growth in science and research-based industries, but business leaders say the state has a ways to go.

“Connecticut employers and their employees are showing remarkable resilience — navigating uncertainty, innovating, and driving productivity,” Chris DiPentima, president and CEO of the Connecticut Business and Industry Association, said in a statement. “But innovation alone cannot sustain long-term growth if underlying workforce challenges remain unaddressed.” 

The state Department of Labor acknowledged that some issues holding back job growth were out of the state’s hands, with the national economy currently in flux. Hiring has slowed nationally and it’s unclear exactly how much tariffs could harm U.S.-based companies. DOL’s Flaherty said he is expecting “modest growth” in 2026 so long as the national economy doesn’t tip towards a downturn. 

For now, local and national economists aren’t ringing alarm bells. But the data does suggest Connecticut leaders may look to address the state’s relatively high cost of living, an issue that has repeatedly been cited as straining Connecticut workers and hampering growth. 

With lawmakers returning to Hartford for the 2026 legislative session next week, business advocates say now is the time to act. “Employers are doing their part,” DiPentima said. “If policymakers do the same, Connecticut can put all the pieces together for stronger, more sustainable economic growth.”