The State economy turned the corner last year, adding 58,800 private-sector jobs and another 17,100 government jobs for a total of 75,900 new jobs in all.

While the state turned in its best performance in four years, economists said the unusually high growth in the number of government jobs was problematical.

The current economic recovery is most notable for what it hasn't done-create a healthy stream of new jobs. Employment growth has been lackluster at best.

New Jersey got off to a miserable start in 2004, losing 4,800 private-sector jobs in January and February. In all of 2003, private-sector employment grew by a mere 12,000 jobs in the state, 60 percent less than originally reported. (This information comes from revised employment data published in March by the NJ Department of Labor.)

The paltry addition of 12,000 private-sector jobs last year is far below the average of 80,000 created annually in the latter half of the 1990s. It is even substantially less than the postwar average of 50,000 new jobs a year.

The revised data also shows the state's employment recession to have been longer and deeper than originally thought. Total private-sector employment peaked at 3,431,200 in December 2000 and did not reach its recession low until March 2003, 27 months later. As of February of this year, employment in the private-sector was still 67,000 jobs below its pre-recession high.
(See Chart below.)

The New Jersey Department of Labor has put on a good face, noting that the State as a whole added about 25,500 jobs last year. But this pronouncement ignores that more than half of that gain (13,500) came from government hiring. And while there is nothing wrong with government jobs, they are not an indicator of the true health of the economy. One could even argue that hiring additional government workers during a period of economic weakness is an unwanted burden on taxpayers.

The State also notes that New Jersey's unemployment rate is lower than the nation's and that it fell to 5.4 percent in February from 5.5 percent the month before. While this is true, one should keep in mind that month-to-month changes in the volatile unemployment rate tell us less about the health of the economy than the numbers of new jobs actually being created by confident, expansion-minded businesses. Those are the jobs that really count, and so far they are barely worth counting.

Weak as it was, New Jersey's employment performance in 2003 was better than the nation as a whole, which actually lost 10,000 private-sector jobs last year. And the nation has regained less than 400,000 of the 3.4-million private-sector jobs it lost over the last three years. (The national recession officially ended in November 2001.)

At this stage of the game, more than two years into the current economic expansion, New Jersey should be creating 5,000 private-sector jobs every month and the nation at least 150,000. We aren't even close to those modest goals. This has turned into one of the greatest "job-lost" (to steal a phrase) recoveries in our nation's history. The discouraged job seekers must be asking themselves: With an economic recovery like this, who needs a recession?

The dismal employment picture is a puzzle to economists, whose repeated and confident proclamations that a burst of employment growth is just around the corner are being replaced with backpedaling and head scratching.

Many explanations are offered for weak employment growth, including a theory advanced by the Federal Reserve Bank of New York that many of the jobs lost in the recession were permanently lost, and thus it will take a bit of time before those jobs can be replaced by new jobs in new growth industries.

Another problem is a lack of confidence in the world of business. Business owners are reluctant to hire new permanent employees until they see a sustained pickup in new business that justifies an expansion of their payrolls. The already high cost of doing business, which includes rocketing healthcare costs, makes employers more inclined to boost productivity than to add to the head count.

Taking a look at the employment details in New Jersey, the State's private service-producing industries added 24,100 new jobs in 2003. This was offset by a loss of 1,800 jobs in construction jobs and 10,400 in manufacturing. The net gain in the private sector, as mentioned earlier, was 12,000.

Most of the jobs losses in New Jersey, as in the nation, have come in the manufacturing sector, which has only recently emerged from its worst postwar employment recession.

Over the last three years (2001-2003), 74,000 manufacturing jobs were lost in New Jersey, a 17 percent decline. In the nation as a whole, the manufacturing recession started a little earlier than it did in New Jersey. Manufacturers nationally lost more than 3 million jobs between July 2000 and December 2003.

Ironically, at least here in New Jersey, manufacturing employment actually grew in the first two months of 2004, even if by only 600 jobs. At the same time, the State's private service industries, normally the workhorse of economic growth, lost 6,400 jobs.

The stabilization of manufacturing employment in New Jersey is consistent with a host of economic indicators in this region and the nation that show goods producers coming out of their funk.

But if manufacturing has turned the corner, why have the service industries retreated? Stay tuned. This economic recovery is a puzzlement, and we might not fully understand its dynamics for months or years to come.

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NJBIA Vice President Christopher Biddle prepared this report.

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