Economists Say NJ's "No-Go"
Economy Is Idling in Neutral With an economic recovery like this, who needs a recession?
New Jersey and the nation are sputtering through the early stages of an uncertain economic recovery in which the pace of expansion is so slow and uneven that many businesses and job seekers are still calling it a recession.
Employment growth is practically nil, the computer technology and telecommunications sectors are mired in a long-term slump, business spending has yet to rebound, and corporate profits are weak. To top it off, a recent spate of discouraging economic data has sent the stock market reeling deeper into bear market territory, and the global economy is looking increasingly fragile.
Against this backdrop, two Rutgers University economists recently issued a somber assessment of the state's economic health. Although New Jersey appears to have dodged a double-dip recession, they said, we might have to settle for a protracted jobless recovery until sometime next year.
"We've gone from a go-go economy, to a slow-go economy, to a no-go economy," James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy, told reporters in a State House news conference on September 18.
Said Joseph Seneca, Rutgers University vice president for academic affairs: "The New Jersey economy is idling in neutral."
Hughes and Seneca said it appears that the state's 13-month recession ended in July with a small gain in statewide employment. However, they said it is unlikely the state will see any sustained job growth until sometime next year.
The day before Hughes and Seneca issued their mid-year report, the NJ Department of Labor (DOL) reported that statewide employment neither grew nor contracted in the month of August, but remained stable. A decline of 300 jobs in the private sector was offset by an increase of 300 jobs in the public sector.
The fractional loss of 300 private-sector jobs in August followed a modest gain of 1,100 jobs in July, the first monthly increase this year. That increase, however, was revised downward by the DOL from an initial estimate of 3,400. (See chart below)
Since hitting a decade-high peak of 3,432,700 jobs in June 2001, private-sector payrolls have declined by 35,700 jobs or about 1 percent. Assuming the state has escaped a double-dip recession, this would be one of the mildest recessions on record. By the same token, the nascent recovery is notably weak.
The vast majority of jobs lost in this recession have come from the manufacturing sector, which saw 28,300 jobs disappear between June 2001 and July 2002, a 6 percent decline. The service industries, accounting for 70 percent of private-sector employment, lost just 8,000 jobs, a decline of three-tenths of one percent. But the construction industries held steady, realizing an increase of 600 jobs, a rise of four tenths of one percent.
The report by Hughes and Seneca coincided with the release of the Mid-Year Review and Economic Outlook for 2002-2003 by the NJ Council of Economic Advisors, which Seneca chairs.
The Council's Mid-Year Review points to a number of positive and negative trends affecting the New Jersey economy.
Among the positive trends:
- Consumer spending on home and autos remains quite strong.
- Travel and tourism continue to improve.
- The state's service sector, accounting for 70% of statewide employment, is showing signs of improvement.
- New Jersey's 5.3% unemployment rate is down from a peak of 5.6% and below the national rate of 5.7% (See chart below)
- The construction industry, despite a pullback in office construction, remains healthy due to a strong housing industry and school construction.
Among the negatives:
- The "growth clusters" that have led job creation in New Jersey over the last ten years are still in recession and have yet to show signs of recovery this year. Of the six clusters, only casinos and entertainment added jobs in the first half of the year. The other clusters-pharmaceuticals/biotech, finance, research, logistics, and information technology (computer technology and telecommunications)-all lost ground.
- Weak business investment nationally is delaying a recovery in the all-important technology and telecommunications sectors.
- Weak economies in New York and Philadelphia are acting as a drag on the New Jersey economy.
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Economists Say NJ's "No-Go"