Manufacturing Decline Underlies ‘Unprecedented Weakness’ in NJ Job Growth

Twenty-eight months into its current employment expansion, New Jersey’s private-sector economy is limping through one of the weakest periods of job growth in more than 50 years, an analysis of State employment data shows.

Since hitting a cyclical low in March 2003, private-sector employment in New Jersey has grown by only 69,000 new jobs. That works out to an average annual gain of just 29,600 jobs, less than half of the annual growth of nearly 67,000 private sector jobs in the 1990s expansion. This is also well below the state’s long-term historical average of about 40,000 per year.

Underscoring this problem, private-sector employment declined by 3,700 jobs in July, bringing total private job growth so far this year to just 21,200.

Rutgers University economists James Hughes and Joe Seneca noted in their July 2005 Rutgers Regional Report that New Jersey’s 2002-2005 expansion “has demonstrated unprecedented weakness.” And they urged the State to put a renewed focus on policies that would encourage private-sector job growth.

“The State is no longer one of the leaders in employment growth; instead, it lags the nation,” Hughes and Seneca said.

The biggest factor behind New Jersey’s disappointing job-growth performance in recent years has been an enormous slide in manufacturing jobs. Over the last four and a half years, nearly a quarter of all manufacturing jobs in this State have disappeared, offsetting employment gains in other sectors of the economy.

Between December 2000 (the start of the recession) and July 2005, total manufacturing employment declined by 92,100 jobs, falling to 329,900 from 422,000, a 22 percent decrease.

These losses were particularly acute in 2001, when 40,000 positions vanished. In the two years that followed, the losses moderated, but were still significant, with a decline of 23,600 jobs in 2002 and 14,000 in 2003.

A reprieve of sorts followed in 2004 with a loss of only 7,300 manufacturing jobs, and while there were hopes that this reprieve would continue into 2005, the picture so far has been mixed. The first six months of 2005 brought heightened losses, with 7,100 jobs disappearing between January and July.

However, July brought the first gain of the year with 700 new jobs.
New Jersey’s manufacturing employment losses have been nearly universal, affecting every major industry group except pharmaceuticals.

The driving force behind these losses is the exceptionally high cost of doing business in New Jersey, costs that include employee health coverage, energy, taxation and environmental compliance.

Regional economists say the rate at which new private-sector jobs are being created is a meaningful gauge of the health of the State economy. From this vantage point, the New Jersey economy trails the nation.

The national economy created more than 2 million private-sector jobs last year, a nearly 2 percent increase, making 2004 a breakout year for the United States as a whole. By contrast, New Jersey created only 31,300 private-sector jobs in 2004, a gain of barely 1 percent. This placed the Garden State 41st in the nation in its rate of employment growth.

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