End of Recession Nears,
But Anemic Recovery PredictedHopeful signs abound that the national recession, which began a year ago in March, is coming to an end, if it hasn't already. However, many economists expect New Jersey and the nation to emerge from a shallow recession into an anemic and uneven recovery that could well make 2002 a year of lackluster growth.
Officially, the longest national expansion on record ended in March 2001 with the onset of the 10th recession since World War II. If the recession ends this month (February), it will be within the norm for postwar recessions, which have lasted an average of 11 months.
In New Jersey, we enjoyed 106 months of continuous economic growth (May 1992-March 2001), the second longest postwar expansion. The longest expansion on record, 110 months, was set in the 1960s.
Taking a look at the performance of the NJ economy last year, the state's private sector sustained its first net loss of jobs in nine years. Between December 2000 and December 2001, 29,000 jobs disappeared.
That's quite a contrast to an average of 80,000 new jobs created in each of the previous five years.
Virtually the entire decline came in the manufacturing sector, where 27,300 jobs were lost in 2001. That's six percent of the state's factory workforce, an enormous contraction. This represents the largest loss-both as a total number and as a percentage-n the last decade.
Emblematic of the decline was the announced closing of the Ford assembly plant in Edison, which will erase 1,600 New Jersey jobs. The closing of the Edison facility, incidentally, leaves just one auto assembly plant in the entire Northeast, the GM plant in Linden.
While manufacturing accounts for the bulk of New Jersey's job losses over the last year, the other major sectors of the economy-construction and services-barely kept their heads above water.
The construction industry gained a mere 800 jobs, an increase of just one half of one percent, and the service industries actually lost 2,400 jobs, a decline of one tenth of one percent.
Although New Jersey remains in a deep manufacturing recession and the rest of the economy has stalled, we appear to be doing better than the nation as a whole.
We ended the year with an unemployment rate of 4.9 percent in December, well above the low of 3.6 percent we hit a year ago. However, this is nearly a whole percentage point below the national unemployment rate of 5.8 percent. And we've been below the nation for 25 consecutive months.
New Jersey's economic downturn is causing some real pain for our new Governor. The state budget deficit is now pegged at $2.9 billion for the fiscal year ending this June. This reportedly makes it proportionally the deepest state budget deficit in the nation. A deficit of $5 to $6 billion is anticipated for the fiscal year, which begins in June.
Looking ahead, economic activity in 2002 in New Jersey will be weaker than it was last year. The first half of the year is expected to be flat, followed by a modest recovery that will produce about 10,000 new jobs.
Here's a forecast based on unofficial projections by state economists:
Gross State Product-Growth of the state economy, as measured by the gross state product, will be 2.2% this year, the weakest since 1990.
Retail Sales-The rate of retail sales growth slowed dramatically last year and will slow again this year to a paltry 1.4%.
Car Sales-New car sales fell by more than 3% last year even with all of the incentive financing. They are expected to fall by 6% this year.
Housing-New-home sales fell by 20 percent last year to 27,000, down from the expansion high set the year before. Sales will remain flat this year before creeping up again in 2003.
Employment-A gain of about 10,000 jobs in 2002 will be the worst performance since the last recession. But employment is expected to perk up in 2003, led by pharmaceuticals, research & technology, finance and warehousing/distribution.
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End of Recession Nears,