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.

Economists with the Rutgers Economic Advisory Service said in a recent report that the 2.7 percent surge in public-sector employment was bigger than any other sector of the State economy. "This is one result of statewide deficit spending, and is one of the contributing causes to the endemic property tax problem in New Jersey," the authors said.

Government job growth in New Jersey, whether measured as an absolute number or as a percentage increase, also outstripped comparable employment growth in neighboring states and the nation. (See Table 1)

The 2.7 percent growth rate in New Jersey last year was three times faster than in the nation as a whole. In the neighboring states of Connecticut and New York, the number of public-sector jobs declined, while in Pennsylvania, Maryland and Delaware, they increased only marginally.

New Jersey's rapidly expanding government bureaucracy, far from being a sign of economic strength, can be viewed as a drag on growth because it is supported by rising state and local taxes, which robs businesses and consumers of spending power. Most of the growth in government employment came at the State level, where 7,500 jobs were added, followed by local schools (4,500), and local governments (4,300). Federal employment declined last year in New Jersey.

Putting aside the issue of government employment, the New Jersey economy had a good year in 2004. The net gain of 58,800 private-sector jobs was the best in four years. This follows a meager gain of 12,000 jobs in 2003 and declines in 2001 and 2002. (See Chart 1)

Even with last year's gain, the State's private sector remains 3,300 jobs short of the all-time employment high of 3,431,200 jobs set in December 2000. Thus, four years after the start of the 2001 recession, New Jersey still has not won back all of the jobs lost in the downturn.

If government jobs are added back in, New Jersey's employment picture appears to be brighter. Total statewide employment, which includes both private and public sector jobs, eclipsed its pre-recession high in April 2004.

The growth of the State economy, though steady over the last year, has been uneven, with some sectors showing strength and others weakness.

The sectors that contributed most to last year's private-sector job growth were private education and health services (15,200 jobs), leisure and hospitality (12,500), professional and business services (10,400), financial services (9,600), and construction (8,200). (See Table 2)

These gains were somewhat offset by continued small losses in two sectors that, while they have put the worst behind them, are still shedding jobs-namely, manufacturing (down 4,600 jobs in 2004) and information (down 700), which includes telecommunications and computer technology.

Manufacturing and information were also two of the sectors that led New Jersey and the nation into recession four years ago. As a consequence, the job losses they have sustained over the last four years have been substantial. Manufacturing employment has declined by 78,500 jobs or about 19 percent since December 2000, and the telecom sector lost 15,000 jobs, a 27 percent fallback, between 2001 and 2004.

The large employment decline in both industries was compounded by the fact that most lost jobs paid wages that were higher than the State average. In 2003, the average manufacturing wage in New Jersey was $53,000 and the average telecom wage was $55,100, significantly higher than the statewide average of $40,500 for all occupations.

The good news in both sectors is that job losses have slowed. In the telecom sector, promising new industries are providing a boost. Most of the telecom losses have come from the heavily regulated wired sector, but these losses are being offset by growth in wireless technology, fiber optics, and voice-over-the-Internet protocol. And the manufacturing sector has gained tremendous momentum over the last year, buoyed by a falling dollar, low interest rates and a rebound in business spending.

Looking ahead, New Jersey is expected to add close to 50,000 jobs annually over the next few years, with most of that growth coming in education, health, leisure and hospitality, and professional and business services, according to projections by the Rutgers Economic Advisory Service. The state's unemployment rate, which recently fell in December to a four-and-a-half-year low of 4.2 percent and is well below the national average of 5.4 percent.

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