On Friday, April 25, Don Klepper-Smith presented his economic forecast, “Back to the Basics: Economic Fundamentals within the US, Connecticut, and Danbury Area Economies,” for the Greater Danbury Area to the Danbury Chamber of Commerce at the Rock Ridge Country Club.

Klepper-Smith is chief economist and director of research at DataCore Partners LLC. Klepper-Smith was presenting his research and findings about the US, Connecticut, and Danbury area economies.

Klepper-Smith informed the crowd that the Danbury area was first limited to eight municipalities based on the 2010 census: Danbury, Newtown, Bethel, New Milford, Brookfield, Bridgewater, Sherman, and New Fairfield. Now, the labor market area includes 24 municipalities that encompass the southwestern corner of the state based on 2020 census data.

“You’ve been folded into an area that now includes 24 municipalities … There is no way for me to monitor in real-time job growth … So, right now, in some respects, you’re going to be flying blind,” Klepper-Smith said.

“The job numbers are far more important than the U3 statistics, Klepper-Smith said.

Klepper-Smith focused his seminar on four main topics: consumer fundamentals within the US economy, with an overview of domestic labor markets, inflation, and consumer confidence; the odds of a recession; Connecticut fundamentals with total non-farm jobs, prospects for growth, and potential challenges; and the Danbury labor market area.

The US Economy In 2025

Klepper-Smith began by explaining that “every economic cycle is unique.”

“The things that precipitated a recession in 1980 are different from the things that precipitated recession in 2008, 2010. Today, we’re looking at downside pressure on the economy,” he said.

“In my mind, what makes the current environment different from that of others is the degree to which misconceptions and misrepresentation of key economic metrics are now coloring economic perspective. Therefore, the current landscape of partisan politics means that objective economic analysis is becoming more elusive, difficult to come by,” Klepper-Smith said.

He added that the longer these misperceptions are left unattended, they will turn into facts in some people’s minds. Klepper-Smith also mentioned that he believes most people are “generally aware or confused as to the overall health of the US economy.”

He explained that there are four components of gross domestic product (GDP): personal consumption expenditures, gross private domestic investments, net exports of goods and services, and government consumption expenditures/gross investment.

Klepper-Smith pointed out that personal consumption expenditures and business investment are 87% of today’s economy.

“Government spending [is] slightly under 20%, net exports [are] minus 3.9. [They] are a relatively small portion of the pie. So constant discussion about on again, off again tariffs is missing the point. People in this room, between the business sector and consumers, are controlling 90% of the pie,” Klepper-Smith said.

“At the end of the day, it’s not the economists that are going to decide whether we’re in recession or not. It’s businesses and consumers, and it’s how you spend and how you invest,” he said.

He presented some pros and cons of the US economy in 2025. Some pros include that oil prices have been cut in half, non-farm jobs jumped up 228,000 in March of this year, and “official” inflation has remained steady at 3% in 2024.

Some cons are that consumer sentiment reading from University of Michigan is 50.8, “the second lowest reading since 1952,” Klepper-Smith pointed out. He also noted that the stock market has “considerable” volatility right now and that there are “fiscal challenges” at the federal, state, and local levels.

“The consumer confidence numbers coming out of the conference board, down 10% year over year. As of March, the expectations index, let me be clear, this is one of the most important readings I’ve looked at in the last 40 years. I want to see the leading indicator of the leading indicator. The leading indicator of the leading indicator when it drops below 80, nine times out of ten, you’ve got a recession in the next six to nine months,” Klepper-Smith stated.

He continued, “This is the real crux of the matter here … when the feds start cutting aids to state, and states start cutting aid to municipalities, what happens next? You’re looking at upside pressure on personal and real property tax, and municipalities are going to be forced to find new sources of revenue.”

Klepper-Smith also said that “recessions are the cleansing mechanism to rid the economy of excesses.” He noted two positives of a recession as reducing high levels of consumer and corporate debt and interest rates decline as demand for credit slackens.

The Connecticut Economy

Klepper-Smith began discussing Connecticut’s economy by noting that 22% of the state’s budget comes from federal dollars.

“So what happens when the fed cuts into the states, states cut into municipalities, forcing them to find new sources of revenue? Are we looking at a problem here? I think we are,” Klepper-Smith said.

He explained that the story of Connecticut is a “good news/bad news story.” Connecticut’s non-farm employment has rebounded from pandemic levels in April of 2020, gaining back 308,500 jobs as of March, but is still 9,500 jobs away from the peak level in the 2008-2010 recession.

He briefly discussed the “public benefits charge” on the state’s electric bills, citing it to be an “economic development issue.”

“I was shocked when I had a friend come down and visit us … who told me he was paying $160 in January for the public benefits portion of his electric bill. That’s not sustainable. That’s an economic development issue that needs to be solved,” Klepper-Smith said.

He explained that Connecticut’s electric bills are 30% higher than the national average, and “[urges] for a special session at the state legislature … because this is not sustainable anymore. It’s simply not.”

Klepper-Smith pointed out that Connecticut has “ranked at the bottom quintile now consistently for the last 20 years” in terms of business climate and tax competitiveness. Connecticut is experiencing “net-outmigration,” losing over 200,000 people from April 2010 to July 2019, and another 24,000 between April 2020 and July 2024.

The Connecticut economy has “underperformed” the US economy over the last 14 years. While the US Real GDP has grown 38.8%, Connecticut’s has only grown 10.5% since 2010.

Klepper-Smith said, “The structural change is evident. We’re going to be lucky in Connecticut, lucky, to see a positive fractional gain in 2025. What do I expect? In reality, I expect the numbers to step down, commencing, probably sometime around mid-year, and we’re going to see that number probably producing a slightly negative number for all of 2025.”

Danbury Labor Market Area

Klepper-Smith started discussing Danbury as having a “rich history,” making note of the hat factory that produced 4.5 million hats in the 1880s.

He noted that there is a diversified economy in the area and is home to many “top-shelf firms,” such as Northwell Health, formerly Nuvance Health, Boehringer-Ingelheim Pharmaceuticals, and Sonic Materials.

The areas he expects to see grow are medical technology, telehealth, robotics and automation, artificial intelligence and machine learning, and logistics, distribution, and inventory management.

He said, “The good news is you continue to outperform. When we look at job growth, comparing the [labor market area] here that we did have through December, it shows that, before reconfiguration data, the total of non-farm jobs outperform.”

Klepper-Smith added that employment in Danbury increased 26% compared to the state’s 21.9% since April 2020. He contributed this to the proximity to the New York City metropolitan region, the region’s lower cost of doing business, and “surprising strength in goods producing sectors.”

“When you look at goods producing employment in Danbury, you’re six times the state average. You make stuff here! You make stuff. And stuff is what it’s about,” Klepper-Smith said.

He also explained that Danbury-Stamford-Bridgeport has the lowest unemployment rate in the state, there are more jobs in the labor market area, and the non-seasonal adjustment unemployment rate is 4.3%, the lowest in the state.

The seminar ended by Klepper-Smith reminding the crowd that “businesses will determine whether we have a recession or not, depending on how they invest in their strategic plan … consumers the same thing.”

The state of the economy relies on confidence: business confidence, investor confidence, and consumer confidence.

“The aggregate data, if we look at it objectively, it shows a mix of positive and negatives, but the key leading economic indicators are pointing to a recession. Not all economic indicators are created equal,” Klepper-Smith said.

“How would I label your situation here in Connecticut?,” Klepper-Smith asked. “I think, to be all honest, I think Governor Lamont is doing an incredible job. I give him a lot of credit … It’s about everybody pulling on the same end of the rope, the same way we did with the governor’s council.”

He described the economy with one word: tenuous.

Klepper-Smith ended by saying, “Greater Danbury. Credit to the people in this room. I give you a standing ovation. You continue to outperform on key metrics.”

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Reporter Sam Cross can be reached at sam@thebee.com.