NJ Economy Turns a Corner with
Solid Job Growth in 2nd QuarterLed by a surge in private-sector job creation, the New Jersey economy turned a corner in the second quarter, leading regional economists to declare an end to the state's lingering employment recession.
New Jersey's private-sector employers added nearly 32,000 workers to their payrolls between March and June, bringing the net gain for the year to 26,000 jobs.* (See footnote at the conclusion of this article.) Broad gains in the services and construction industries were responsible for most of the job growth. But a marked slowing of job losses in the long depressed manufacturing sector also helped.
With total private-sector employment reaching close to 3.4 million in June, the state at mid-year was just 18,800 jobs shy of its last employment peak, which was reached in June 2001 just before the statewide recession got underway.
"We saw strong job growth from February to June, with just a small setback in May, signaling, we believe, the end of the recession in the state," Nancy Mantell, director of the Rutgers Economic Advisory Service (R/ECON), said in a mid-July news conference.
The erratic performance of the economy has kept economists off balance for some time. Regional economists declared victory over the recession last October, but the job gains that had preceded their announcement quickly evaporated. The employment low point in the recession actually arrived in February of this year.
In the second quarter of this year, however, the economic data provided evidence of a more sustained expansion in New Jersey and the nation. This included a modest upturn in manufacturing activity and a slowing of factory job losses. Manufacturers have lost more than 65,000 jobs in New Jersey and more than 2.5 million jobs nationally over the last three years. While many industries have experienced a mild recession, manufacturers by and large have suffered through their most severe contraction since World War II.
Signs of a nascent recovery in manufacturing include three consecutive months (May-July) of positive growth in the New York area and two months in the Philadelphia region (May and June), according to recent Federal Reserve Bank surveys.
Evidence of a turnaround in manufacturing also comes from recent employment reports, which shows the rate of decline to be moderating. In the first half of this year, New Jersey's factory payrolls fell by 5,400 jobs, considerably less than the 15,300 lost in the first half of 2002.
While the manufacturing sector has only just begun to show signs of a turnaround, employment in New Jersey's private-sector service and construction industries has actually been expanding at a healthy pace for some time.
As shown in the table below, employment in both sectors has surpassed the statewide pre-recession peak reached in June 2001. As of June, employment in the service industries was 24,100 jobs above its pre-recession peak. The construction trades were up by 7,300 jobs.
New Jersey's unemployment rate peaked at 6 percent in the second half of 2002 and was 5.8% in June, well below the national rate of 6.4% for that month.
Nationally, there are good reasons to be optimistic about the economic recovery. Interest rates are at record lows, driving a continuing boom in housing construction and sales. Consumers are spending again, encouraged by low interest rates, falling mortgage costs, and federal tax cuts. In June, manufacturing production expanded for a second consecutive month, and durable goods orders rose by the most in half a year.
An improving economic picture and rising earnings have pushed the stock market indices well off their lows set last October. At the close of the second quarter, the Dow industrials were up 23 percent and the technology-heavy Nasdaq index was up 46 percent.
All of this recent economic data provides evidence that the economic recovery is finally gaining traction. This is expected to push the nation's output of goods and services from about 2% in the second quarter to more than 3% in the second half.
*Footnote-Private-sector employment in June rose by 6,400 jobs, less than half of the preliminary estimate of 13,600 jobs, the NJ Department of Labor (DOL) said in its August 12 employment release. Most of the downward revision came in the leisure and hospitality sector, which lost 2,600 jobs in June, rather than gaining 3,000 as originally estimated.
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NJ Economy Turns a Corner with