Job growth slowed to a crawl in New Jersey and the nation over the summer. New Jersey's private-sector employers added just 5,900 new jobs in June, July and August, following a period of robust growth in the spring.

In the first eight months of the year (January-August), the State's private-sector employers added 35,200 new jobs. The vast majority of those jobs were created in March, April and May. This puts New Jersey on track to add about 50,000 private sector jobs in 2004, more than three times the number of jobs created in 2003 but considerably less than the nearly 80,000 new jobs added annually in the latter half of the 1990s.

Even with the addition of these new jobs, New Jersey has recouped only two-thirds of the 93,000 private-sector jobs that it lost in the State's 2001-2003 employment recession. (See Chart below.)

(The NJ Department of Labor stated in its most recent employment report that New Jersey employment “reached an all-time high” in August. However, this claim was based on the total number of jobs created in the private and government sectors combined. Since December 2000, state and local governments have added close to 50,000 new jobs. By this measure, statewide employment did reach an all-time high in August. But the addition of public-sector jobs requires higher tax rates to support, and it could act as a drag on real economic growth.)

In August, New Jersey's unemployment rate fell to 4.8 percent, down from 5.0 percent the month before, but still higher than the recent low of 4.7 percent set in June.

Of the state's three major sectors, two have enjoyed job growth. Construction added 6,000 new jobs in the first eight months of the year, and services added 31,100. Employment in the manufacturing sector appears to have stabilized following big recession losses. Only 2,000 factory jobs were lost in the first eight months of 2004, compared with a loss of 74,000 or 17 percent in the previous three years combined.

Manufacturing activity in the Philadelphia and New York regions, which includes most of New Jersey, remains positive after a year of growth, according to Federal Reserve Bank surveys. Manufacturing activity in the New York region saw a big jump in September, recovering lost momentum. In the Philadelphia region, the most recent survey revealed a larger than expected decline in activity, but new orders and employment were strong, indicating that growth should continue.

New Jersey businesses have been adding jobs at a somewhat faster pace than the nation as a whole. As of August, private-sector employment in the US was still 1.7 million jobs or 1.6% below its pre-recession peak. In New Jersey, private-sector employment as of August was still 26,900 jobs (or 0.8%) below its peak.

Most of New Jersey's private-sector employment gains have come in the services sector, particularly in education and health services, leisure and hospitality, and financial services. The information services sector, which includes the telecommunications industry, is still down by 26,200 jobs. (See Table)

Surprisingly, recent employment growth has done little to ease New Jersey's recession-induced glut of office space. The vacancy rate for Class A (top-rated) office space stood at 19.9 percent in the second half of this year, two and a half times the pre-recession rate. A Rutgers University report speculates that companies today need far less space per employee, a trend accelerated by corporate cost-cutting, telecommuting and outsourcing. Whereas 20 years ago a company would need 227 square feet per employee, that number is closer to 175 today.

Like other state governments, New Jersey has benefited from renewed economic growth. In New Jersey and the nation, state tax revenues have surged this year, with strong growth seen in every major tax category (corporate, personal and sales).

Nationally, concerns earlier this summer that the fledging national expansion had stalled were eased by the modest addition of 120,000 private-sector jobs in August. But the June-August period saw the addition of less than 100,000 jobs a month, compared with more than 300,000 per month in the March-May period.

Meager job growth and rising oil prices, not to mention the threat of terrorism and uncertainty about who will be elected President, have dampened investor confidence. The major stock indexes have traded in a narrow range for most of the year, unable to gain any real traction.

But the Federal Reserve gave the economy a vote of confidence September 21 when it raised its target for short-term interest rates by a quarter percentage point for the third time this year. The target, now 1.75 percent, is up from a 45-year low of 1 percent. In raising the rate, the Fed said the economy “appeared to regained some traction.”

Sharply higher business spending and continued strength in manufacturing have been important contributors to economic growth so far this year. Consumer spending and housing sales, while cooling somewhat, have remained at respectable levels.

Return to text

Return to text

	Return to Employment Watch Archives