Employers Should Brace For Possible 2004 Payroll Tax Hike as New Law Expands Benefits
Employers should brace for a possible increase in Unemployment Insurance (UI) taxes as early as July 2004. The UI trust fund balance, thanks to legislative diversions and an expansion in benefits, has dropped to the point where an automatic increase in employer contributions appears likely.

Unless the economy rebounds strongly in the next few months, the balance in New Jersey's Unemployment Insurance Trust Fund will fall to a level that will automatically trigger an across-the-board increase in employer UI payroll taxes of more than 10 percent. By law, employee tax rates will remain unchanged.

The UI trust fund reserve balance has fallen by more than $1 billion since 2002. The demand for extended unemployment benefits has remained high, due to a weak economy. But the trust fund was weakened further by repeated diversions of UI revenues. The Legislature has taken nearly $1 billion in the past year to help balance the state budget.

The final blow came in July when Senator Steve Sweeney made costly changes to the UI program by attaching them to a must-pass budget bill. The changes will drain an additional $100 million from the trust fund each year by loosening UI eligibility rules. The Department of Labor, local municipalities, and the state's business associations opposed the changes.

NJBIA is exploring ways to head off the expected payroll tax hikes for employers. The requirement that employers alone must pay to replenish the UI trust fund no longer seems valid, given the fact that the Legislature has diverted nearly $4 billion for purposes unrelated to unemployment benefits during the past 10 years.

WANTED: Employers To Serve On Local Workforce Boards
NJBIA, in partnership with the NJ Department of Labor, is encouraging its members to volunteer for service on one of New Jersey's 16 Workforce Investment Boards (WIBs). Th

ese advisory panels bring local employers, unions, educators and community leaders together to help guide government programs for worker training in their region.

Business members play an important role in identifying the specific kinds of skills workers need to find meaningful work in their home counties. The time an employer invests in WIB service is an excellent way to insure that local schools and training programs produce qualified applicants for the jobs the company must fill to operate profitably.

By law, a majority of the members on each individual WIB must be employers. This goal is often difficult to achieve, however, since the hectic schedules of most business-people leave little time for outside service. Yet, employer participation on the WIBs is critical to ensuring that local training dollars are well spent.

Nationwide, more than 10,000 businesspeople volunteer to serve on local WIBs.

To learn if the Workforce Investment Board in your region is seeking business representatives, call Ms. Mickey Toth in the state's Employment & Training office at 609-633-0492 and ask for information on the WIB contact for your county.

Reorganized Labor Department Tackles Employee Training; Commissioner Kroll Calls Workplace Skills a Top Priority
State Labor Commissioner Al Kroll is looking for input from employers to help close New Jersey's emerging "skills gap"—the difference between the skill level of available workers and the skills employers need in their new employees.

Despite the fact that the state's unemployment rate is hovering around 6 percent, many employers cannot find the people they need to fill critical jobs. Businesses with a job opening typically receive a large number of applications, but only a portion of those applying have the right skills.

Throughout the recent economic slowdown, many employers have had difficulty finding skilled workers, including professional and technical staff. If this trend continues, many observers believe it will undermine New Jersey's future economic strength.

The threat of a long-term skills gap is not limited to New Jersey. Not long ago, the National Association of Manufacturers predicted that the shortfall of skilled workers nationwide could exceed 10 million within a few years. The problem is also not limited to high-skill workers alone. New Jersey employers with entry-level jobs complain that their applicants often lack the basic math, language and interpersonal skills needed in any workplace.

Commissioner Kroll has responded to this problem by initiating a reorganization of the NJ Department of Labor to make its worker training programs more effective. A new Department of Labor & Workforce Development is in the works. It is intended to bring order to today's complicated array of funding sources for training.

Workforce-related programs now handled by the NJ Department of Health & Human Services and NJ Department of Education will be moved to the Labor Department. The reorganization plan also directs that the employment services at county One Stop Centers be given an expanded role. The new Department of Labor & Workforce Development will seek to ensure that adult job applicants have all the basic skills needed to succeed in a workplace setting, putting a renewed emphasis on adult literacy.

Another initiative of the Department of Labor will bring employers, educators, workers and organized labor together to develop a broad state strategy to match worker skills to jobs.

A diverse panel led by the State Employment & Training Commission (SETC) will focus on key industry groups that government and business agree have the greatest potential for job growth in the coming decade. These include finance, logistics (warehousing and transportation services), entertainment and the arts, information technology and science. Similar data has already been assembled on New Jersey's large pharmaceutical and biotech industries.

The goal is to identify the specific skills that jobs in these sectors will require in the future. The focus will not be limited to high-skill positions alone, but will encompass the full range of jobs needed at all levels—including entry-level support staff.

NJBIA shares Commissioner Kroll's view that worker training must be a top priority for the state of New Jersey. It is critical to our future job growth. Yet, these new initiatives cannot succeed unless private-sector companies play an active role in identifying the specific skills employees must have. The Association urges interested member companies to become involved and looks forward to working with the new Department of Labor & Workforce Development in addressing New Jersey's growing need for qualified workers.

For more information, contact Jeff Stoller at jstoller@njbia.org or ext. 209.

New Maximum UI, TDI Rates for 2004
The New Jersey Department of Labor has announced new maximum benefit rates for Unemployment Insurance, Temporary Disability Insurance and Workers' Compensation. The new rates take effect in January 2004.

Maximum weekly unemployment benefits will be $490/week, up from $482 in 2003. Maximum disability benefits will be $459/week, up from $450. The maximum workers' compensation benefit for temporary disability, permanent total disability, permanent partial disability, and dependency will be $650/week, up from the current $638.

Unemployment payroll taxes will be levied on an employee's first $24,300 of income, up from a taxable wage base of $23,900 this year.

NEW JERSEY EMPLOYMENT WATCH
State Economy Turns a Corner with Solid Job Growth
Led by a surge in private-sector job creation, the New Jersey economy turned a corner in the second quarter, leading regional economists to declare an end to the state's lingering employment recession.

New Jersey's private-sector employers added nearly 32,000 workers to their payrolls between March and June, bringing the net gain for the year to 26,000 jobs. Broad gains in the services and construction industries were responsible for most of the job growth. But a marked slowing of job losses in the long depressed manufacturing sector also helped.

With total private-sector employment reaching close to 3.4 million in June, the state at mid-year was just 18,800 jobs shy of its last employment peak, which was reached in June 2001 just before the statewide recession got underway.

"We saw strong job growth from February to June, with just a small setback in May, signaling, we believe, the end of the recession in the state," Nancy Mantell, director of the Rutgers Economic Advisory Service (R/ECON), said in a mid-July news conference.

The erratic performance of the economy has kept economists off balance for some time. Regional economists declared victory over the recession last October, but the job gains that had preceded their announcement quickly evaporated. The employment low point in the recession actually arrived in February of this year.

In the second quarter of this year and into the summer, however, the economic data provided evidence of a more sustained expansion in New Jersey and the nation. This included a significant upturn in manufacturing activity and a slowing of factory job losses.

Manufacturers have lost more than 65,000 jobs in New Jersey and more than 2.5 million jobs nationally over the last three years. While many industries have experienced a mild recession, manufacturers by and large have suffered through their most severe contraction since World War II.

Signs of a nascent recovery in manufacturing in this region include three consecutive months (May-July) of positive activity in the New York area and two months in the Philadelphia region (May and June), according to recent Federal Reserve Bank surveys.

Evidence of a turnaround in manufacturing also comes from recent employment reports, which show the rate of decline to be moderating. In the first half of this year, New Jersey's factory payrolls fell by 5,400 jobs, considerably less than the 15,300 lost in the first half of 2002.

While the manufacturing sector has only just begun to show signs of a turnaround, employment in New Jersey's private-sector service and construction industries has actually been expanding at a healthy pace for some time.

As shown in the accompanying table, employment in both sectors has surpassed the statewide pre-recession peak reached in June 2001. As of June, employment in the service industries was 24,100 jobs above its pre-recession peak. The construction trades were up by 7,300 jobs.

New Jersey's unemployment rate reached 6.1% in July, up from 5.8% in June. It has remained below the national average.

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

Gains and Losses in Private-Sector Employment Since Onset of Recession
	Services	Manufacturing*	Construction	Total Private
Pre-Recession Peak	2,846,500	422,500	158,800	3,411,200
June 2003	2,867,700	356,700	166,500	3,392,400
Net Change in Jobs	21,200	-65,800	7,700	-18,800
Percentage Change	0.74%	-15.57%	4.85%	-0.55%
*Manufacturing employment recession began in January 2001. Downturn in services and construction employment began in July 2001.