Connecticut has had a strong economy since the early 19th century when the state, unable to support its population by farming, turned to a variety of nonagricultural pursuits. Shipbuilding and whaling were major industries; in the 1840s and 1850s. New London ranked behind only New Bedford and Nantucket, Massachusetts, among US whaling ports. Connecticut has been a leader of the insurance industry since the 1790s.
Because defense production has traditionally been important to the state, the economy fluctuates with the rise and fall of international tensions. Connecticut's unemployment rate stood at 8.7% in 1949, dropped to 3.5% in 1951 during the Korean conflict, and rose sharply after the war to 8.3% in 1958. From 1966 to 1968, during the Vietnam war, unemployment averaged between 3.1% and 3.7%, but the rate subsequently rose to 9.5% in 1976. In 1984, in the midst of the Reagan administration's military build-up, Connecticut's unemployment rate dropped below 5%, becoming the lowest in the country. Connecticut lessened its dependence on the defense sector somewhat by attracting nonmilitary domestic and international firms to the state during the 1980s and 1990s. In 1984, more than 250 international companies employed more than 30,000 Connecticut workers. Connecticut was a leader in the manufacture of aircraft engines and parts, bearings, hardware, submarines, helicopters, typewriters, electronic instrumentation, electrical equipment, guns and ammunition, and optical instruments. Despite its dependence on military contracts, between 1984 and 1991 manufacturing employment declined 22.4%, while nonmanufacturing jobs rose by 11.6%. Nevertheless, the state was hard hit by cuts in military spending in the late 1980s and early 1990s. In 1991, defense related prime contract awards had dropped 37.7% from the 1990 level. Pratt and Whitney, the jet engine maker, and General Dynamics' Electric Boat division, manufacturer of submarines, announced in 1992 that they would lay off a total of 16,400 workers over the following six years. In 1992, an estimated 70% of manufacturing was defense related, either through direct federal contracts, subcontracts with other companies, or in the manufacturing of basic metals used for weaponry. In 1993, unemployment stood at 7.3%. During the prosperous 1990s, unemployment fell steadily, and had reached 3% by 1999, although the ratio of manufacturing jobs continued to decline (overall, from nearly 50% in 1950 to 20% in 1999). Gross state product grew at annual rates of 5.7% in 1998, and 4.4% in 1999, and then soared to 8.7% in 2000. The national recession of 2001, growth slowed abruptly to 2.6%, as unemployment began to rise again. The downturn continued into 2002, as unemployment rose from 3.5% in June to 4.4% November 2002.
In 2001, Connecticut had the 22nd largest gross state product among the states, totaling $166.2 billion. Only 9% of the total was from the public sector, the 2nd-smallest proportion among the states (after Delaware, and tied with Massachusetts). The main contributors to the gross state product in 2001 were financial services, including insurance and real estate ($51.5 billion); general services ($35.7 billion); manufacturing ($24.3 billion), government ($15 billion); and transportation and utilities ($9.8 billion). While the service sectors had grown sharply since 1997 (financial services up 35.8%, general services up 20.4%, government up 27.5%, and transportation utilities up 17.3%), the output of Connecticut's manufacturing sector was only 5.5% above the output in 1997.