New Jersey’s private-sector employers added a modest 35,400 jobs in 2005, a 1 percent increase, the NJ Department of Labor and Workforce Development (DOL) reported recently. This performance left New Jersey trailing the nation in job growth once again, evidence that the state remains mired in a sluggish recovery.

The DOL’s year-end report on NJ employment growth came even as the national economy was cooling. US Gross domestic product, after ten quarters of solid growth, grew by just 1.1 percent in the fourth quarter of 2005. The slowdown—brought on by a sputtering housing market, a spike in energy costs, subdued consumer spending and a big trade deficit—has set economists to squabbling. Is the slowdown temporary or is it the start of a prolonged event that will take a big bite out of economic growth in 2006?

In the meantime, New Jersey continues to behave like an economic caboose, trailing the nation rather than leading it. For two years in a row, New Jersey has done poorly compared with the rest of the nation in its rate of private-sector employment growth.

In 2004, New Jersey added 31,300 private-sector jobs, making it 41st in the nation in its rate of job creation. The addition of 35,400 private-sector jobs in 2005 is marginally better (see Chart), but it still leaves New Jersey lagging the rest of the country. Private-sector employers nationally added 1.8 million jobs in 2005, an increase of 1.7 percent, compared to 1 percent for New Jersey.

New Jersey did end the year on a moderately up note. Private-sector employment rose by 5,800 jobs in November and 2,600 jobs in December. Nonetheless, there is little evidence to suggest that the State has emerged from a see-saw pattern of weak and inconsistent job growth that has plagued it in recent years.

In fact, New Jersey still hadn’t recouped all of the jobs it lost in the last recession. Total private-sector employment at the end of 2005 remained 3,200 jobs below the previous peak of 3.43 million set in December 2000.

The pronounced weakness in the state’s current employment expansion has led Rutgers University economists Jim Hughes and Joe Seneca to declare it to be the weakest expansion in half a century.

Certainly, the current rate of job growth is well below the rates of growth seen in the 1980s and 1990s expansions, when 60,000 to 100,000 new jobs were added annually. Since hitting a cyclical low in March 2003, private-sector employment in New Jersey has grown by 83,200 new jobs. This works out to an average annual gain of only 30,255 jobs.

Employment growth in the current expansion has come mostly from construction and lower wage service industries. Over the last five years (December 2000-December 2005), the biggest percentage gains have come in leisure and hospitality (up 14.6 percent), education and health services (up 12.1 percent), and construction (up 11.3 percent). (See Table for details)

But overall service sector employment growth, which was the workhorse of a robust period of job expansion in the 1990s, is flagging. It has grown by a mere 2.8 percent over the last five years, and there has been unusual weakness in high-paying sectors like professional and business services (down 2.1 percent) and trade, transportation and utilities (down 2 percent).

Most of the losses over the last five years have come in manufacturing (down 23.5 percent) and information services (down 31.9 percent), which includes computer technology and telecommunications.

This report was prepared by Christopher Biddle, NJBIA Vice President of Communications. He can be reached at 609-393-7707, ext 227.

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