Recession Has Cost NJ Manufacturers More than 62,000 High-Paying JobsThe current recession has cost the state's manufacturers more than 62,000 high-paying jobs over the last two years. In recent months, overall employment in New Jersey has bounced up and down like an errant tennis ball, leaving economists puzzled about the likely future direction of the state economy. On the national economic front, few hopeful signs have emerged that the economy's recent dismal performance-a kind of purgatory that is neither expansion nor recession-will end anytime soon.
The national economy hit a soft patch in the first quarter. Consumer confidence collapsed to a nine-year low, business pessimism hardened, retail sales declined, employment fell sharply in most sectors of the economy, profit warnings multiplied, and manufacturing slid back into recession territory. And business spending on new plants and equipment, seen as a key to any sustained economic recovery, failed to make a comeback.
The Employment Situation in New Jersey
In New Jersey, a net 14,000 private-sector jobs were lost last year, following a deeper net loss of 53,300 jobs the year before. Virtually all of the losses came in the state's troubled manufacturing sector.
Probably due in part to the severe winter weather, private sector employment in New Jersey actually fell to a recession low of 3.36 million in February of this year, many months after regional economists had already declared an end to the recession here. (See Chart Below)
However, a surprisingly strong net gain of 21,300 private-sector jobs in the month of March more than compensated for a loss of 13,600 jobs in February, according to NJ Department of Labor data.
The March employment gain left the state's private sector with a net increase of 18,900 jobs for the first quarter of this year, but with a net loss of 28,900 jobs since the official start of the statewide recession in June 2001.
Employment in the state's service industries (not including government)-which accounted for more than 8 in 10 private-sector jobs and were the main engine of economic growth in the 1990s-has essentially stagnated. Since the start of the recession, service sector employment has inched up by 8,800 jobs, a fractional gain.
Service sector growth has been held back by employment losses in five key growth clusters that powered much of the state's rapid employment gains in the 1990s-pharmaceutical/biotech, finance, research and technical services, logistics (such as distribution), and information technology (which includes telecommunications). These growth clusters collectively lost nearly 22,000 jobs in 2002, according to the Governor's Council of Economic Advisors.
The state's construction industry has actually fared quite well, supported by a vibrant housing market. Since June 2001, the construction trades have tacked on 6,900 jobs for a gain of more than 4 percent. (See Table Below)
The sector that has suffered most in this recession, in New Jersey and the nation, is manufacturing. Goods producers have suffered through a long and punishing downturn that has cost many jobs.
Garden State manufacturers have shed 44,000 jobs since the official start of New Jersey's recession in June 2001. However, because the recession began earlier for manufacturers than for other industries, the real losses have been deeper. Since January 2001, when manufacturing employment began to fall rapidly, the state's goods producers have suffered a net loss of 62,500 high-paying jobs, a whopping 15% decline. (See Chart Below)
New Jersey's unemployment rate rose to 5.9 percent in March from 5.7 percent in February, one tenth of a percentage point higher than the national rate of 5.8 percent. The state unemployment rate remains below the recession high of 6 percent reached in the last six months of 2002.
Looking ahead, forecasters expect private-sector employment in New Jersey to rise by about 40,000 jobs in 2003. While this marks an improvement over the job losses of the last two years, this rate of job growth would be slightly below the postwar average and well below the nearly 80,000 jobs created annually between 1996 and 2000.
Philadelphia Federal Reserve Outlook
The outlook for manufacturing in the region-and the nation-remains highly uncertain. More than 30 months into the national manufacturing downturn, evidence of a sustained upturn has failed to materialize.
A closely watched indicator of manufacturing activity in southern New Jersey gives a mixed outlook. The Philadelphia Federal Reserve Bank found that manufacturing shipments and new orders in its region, which includes southern New Jersey, declined for a fourth consecutive month in April. More ominously, it found that manufacturing activity in March and April actually contracted, falling below the dividing line between recession and expansion. This paralleled a decline in manufacturing activity nationally, a decline that ended a promising string of up months last fall.
Despite dismal current conditions, the Philadelphia Fed survey found-surprisingly-that the region's manufacturers as a group were optimistic about future conditions, with 60 percent expecting their business activity to improve over the next six months and only 13 percent anticipating a decline.
NJ Council of Economic Advisors Outlook
The Governor's Council of Economic Advisors expects the state economy to roughly track the progress of the national economy over the coming year and to achieve moderate gains in economic activity and employment. The Council forecasts a 4.7 percent rise in gross state product this year, up from 3.1 percent last year, along with a gain of about 40,000 jobs. They expect New Jersey, due to its above average wealth, to benefit disproportionately from any federal income-tax cuts. This in turn should help bolster consumer spending and retail sales.
Personal income growth, which fell to a recession low of 2.8 percent last year, is expected to rise by 4 percent in 2003, providing a boost to New Jersey retail sales, which were flat in 2002.
An important engine of the state economy, housing construction, defied the recession last year and is expected to remain vibrant in 2003. Approximately 28,000 new housing permits will be issued in 2003, about the same as last year but down from a high of 34,000 in 2000. The state's exceptionally strong housing market has driven new-home prices up 40 percent over the last five years, and the average value of a new home now exceeds $200,000.
The recession has put a dent in the state's commercial construction industry. The office market has suffered most acutely due to widespread corporate layoffs and some business closings. The value of new commercial construction permits (office, retail and industrial) is expected to fall for a second consecutive year to $5.8 billion in 2003 before managing a modest recovery in 2004. The vacancy rate for Class A office space has soared to 15 percent or higher in many of the state's busiest office corridors.
The weakest sector of the state economy last year was exports. The total value of New Jersey-based shipments fell by 15 percent compared with a 7 percent drop nationally. Declining technology sales and business capital spending were responsible for much of the trade loss. Indeed, exports of computer technology, electronics and electrical machinery fell by 57 percent last year. At $22.4 billion, the state's 2002 exports were well below the $28.8 billion record set in 2000. disbursements.
Back To News Center
Recession Has Cost NJ Manufacturers More than 62,000 High-Paying Jobs