News Release: June 21, 2002The loss of 5,800 private-sector jobs in May has dashed hopes of an early recovery in New Jersey, the New Jersey Business & Industry Association said yesterday.
With last month's employment decline, the state's private sector has shed a net total of 36,100 jobs since the recession officially started in July of last year. Most of the job losses have come in the first five months of this year.
"The continuing job losses tell us the recession isn't over yet," said NJBIA President Joe Gonzalez. "The hoped-for spring turnaround has not materialized, the economy remains sluggish, and companies are still cutting expenses to keep their heads above water."
According to the latest employment report by the NJ Department of Labor, released earlier this week, the state's private sector lost 21,700 jobs in the first five months of this year. That brings the total private-sector employment loss over the last 11 months to 36,100. (See chart below)
This represents the private sector's largest employment decline in a decade.
The New Jersey Business & Industry Association tracks the monthly changes in the state's private-sector employment as reported by the Department of Labor. (Private sector employment does not include government jobs.)
Although the unemployment rate fell to 5.4 percent in May from a revised 5.6 percent in April, this one-month change is not useful in judging the current health of the state economy. The unemployment rate is notoriously volatile from month to month, and economists consider it useful as a lagging indicator. It is not uncommon for the unemployment rate to rise for several months after a recession has ended. To put the current unemployment rate in perspective, it has risen sharply over the last 16 months, rising approximately two full percentage points since hitting an expansion low of 3.5 percent in February 2001. (See chart below)
The bulk of the employment losses in the current recession have come in the state's beleaguered manufacturing industries, which erased 12,900 jobs in the first five months of this year. This comes on top of a loss of 26,300 jobs in all of 2001, the steepest one-year drop in a decade.
Manufacturing employment has fallen steadily over the last 20 years. Since hitting a peak of more than 800,000 in 1979, factory jobs have declined by nearly 50 percent to their current level of 425,100. The rate of decline tends to moderate during economic expansions and accelerate during recessions.
Employment in the state's service sector (not including government), which accounts for 80 percent of private-sector employment, has been erratic over the last eleven months. Since hitting a peak of nearly 2.82 million jobs last June, service-sector employment has fallen by 9,900 jobs, a decline of slightly less than a half a percentage point. (See table below) More tellingly, however, most of that decline (7,000 jobs) has come in the first five months of this year.
Although the construction industry erased 1,800 jobs in the first five months of this year, it has lost only 100 jobs since the recession started last July. As of May, construction employment stood at 161,100.
A slumping real estate market has contributed to the state's economic malaise. Burdened by a glut of empty office space caused by corporate cost cutting, the vacancy rate has remained flat at 12 percent since late last year. At the top end of the market, vacancy rates have hit 20 percent.
A potential bright spot in the state and national economies is the manufacturing sector. In stark contrast to the last two years, US manufacturing in May grew for the fourth consecutive month. Factory orders have been bolstered, among other things, by continued strength in new home sales. Economists say a sustained turnaround in manufacturing, which led us into the recession, would provide the foundation for a durable economic recovery.
