forecast of januar y 2007 new jersey : slow...
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Chart 1: New Jersey and U.S. Employment Indices
2000 to 2006
0.97
0.98
0.99
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1.01
1.02
1.03
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10
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Sources: N.J. DOL and U.S. DOL, December 2006.
Ind
ex:
Peak
of
Last
Bu
sin
ess
Cycle
=1.0
Employment: N.J.
Employment: U.S.
EXECUTIVE SUMMARY
New Jersey’s economy expanded very slowly in 2006,with the addition of only 34,600 jobs. The state’s jobgrowth, at 0.9 percent, was half a percent slower thanthat of the nation whose employment base increasedby 1.4 percent. (See Chart 1.) As implied in Chart 1,the state’s job growth weakened over the course of theyear. The state added over 40,000 jobs in the firstquarter of 2006 (at an annual rate), but less than25,000 in the fourth quarter. The state’s performancewas also lackluster when compared to its historicalrecord. Over the 60 year post-World War II era, NewJersey added jobs at an average annual rate of 1.6 per-cent, or about 40,000 jobs. During the past 30 years thenumber of jobs added annually continued to varyaround 40,000, although the annual growth ratedipped toward 1.3 percent as the job base rose.Unfortunately we expect that New Jersey will contin-ue to underperform the nation in terms of job growthagain in 2007.
While weak job growth is a concern, the distributionof growth across industries is also a problem. Nearly aquarter of the state’s new jobs in 2006 were in thepublic sector, clearly a problem when the state is try-ing to lower the tax burden on its residents. Further,of the three-quarters of new jobs in the private sector,most were in the relatively low wage administrativesupport and food service industries, while high wagesectors like manufacturing and information continuedto decline.
The state’s unemployment rate was consistently lowerthan the nation’s from mid-2003 until March 2006.However, their relative positions changed after Marchas a result of New Jersey’s comparatively slow expan-sion. In April, the state’s unemployment rate jumpedto 5.2 percent, surpassing the national rate by half apercentage point, and indicating that New Jersey’slabor market advantage has faded. In our opinion the
particularly sharp decline in the state’s unemploy-ment rate in October 2006 was likely the result of astatistical anomaly. (See Chart 2.)
Chart 2: New Jersey and U.S. Unemployment Rates
2000 to 2006
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Sources: N.J. DOL and U.S. DOL, December 2006.
Un
emp
loym
ent
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e(%
)
Unemployment Rate: U.S.
Unemployment Rate: N.J.
Jan.
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Apr
.200
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00O
ct.2
000
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CENTER FOR URBAN POLICY RESEARCH
FORECAST OF JANUARY 2007
NEW JERSEY: SLOW GROWTH IN 2006 EXTENDS INTO THE FUTURE
Nancy H. Mantell, Ph.D.Michael L. Lahr, Ph.D.
© RUTGERS ECONOMIC ADVISORY SERVICE | CENTER FOR URBAN POLICY RESEARCH | EDWARD J. BLOUSTEIN SCHOOL OF PLANNING AND PUBLIC POLICYCIVIC SQUARE | 33 LIVINGSTON AVENUE | NEW BRUNSWICK, NEW JERSEY 08901 | TELEPHONE: (732) 932-3133, EXT. 565 | FAX: (732) 932-2363
Chart 2: New Jersey and U.S. Unemployment Rates
2000 to 2006
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4.5
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Sources: N.J. DOL and U.S. DOL, December 2006.
Un
emp
loym
ent
Rat
e(%
)
Unemployment Rate: U.S.
Unemployment Rate: N.J.
Chart 1: New Jersey and U.S. Employment Indices
2000 to 2006
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Sources: N.J. DOL and U.S. DOL, December 2006.
Ind
ex:
Peak
of
Last
Bu
sin
ess
Cycle
=1.0
Employment: N.J.
Employment: U.S.
Chart 1NEW JERSEY AND U.S. EMPLOYMENT INDICES
2000 to 2006
Chart 2NEW JERSEY AND U.S. UNEMPLOYMENT RATES
2000 to 2006
The state’s populationgrew at an averageannual rate of 0.7 per-cent from 2000 to 2005.It will expand by 0.7percent a year between2005 and 2016, adding0.7 million residents. Asa result, New Jersey’spopulation will exceed 9million in 2010, andreach 9.4 million in 2016.Population growth inNew Jersey during theforecast period will con-tinue to be slower thangrowth nationwide.
R/ECON™
PAGE 2
The R/ECON™ forecast indicates that New Jersey’semployment base grew at a rate of 0.9 percent, or34,600 jobs, in 2006. With a weaker economy expectedfor the nation in 2007, job growth in New Jersey willslow further in 2007 and then average 0.9 percent ayear between 2007 and 2016. (See Table 1.)
Although the nation as a whole will add jobs fasterthan will New Jersey over the next few years, its rateof job growth will slow substantially after 2011.Through 2016, New Jersey’s share of the nation’s jobswill hover close to its current 3 percent. (See Chart 3)
Growth in national real output was more robust thangrowth in state real output in 2004 and 2005, and weexpect that to be the case over the forecast period aswell. Between 2005 and 2016, output in New Jerseywill expand by an average of 2.5 percent a year com-pared to an average of 3.1 percent a year expected forthe nation as a whole. This is due to the greater matu-rity of New Jersey’s economy and the state’s lowerrate of population growth.
The state’s consumer inflation rate rose 3.9 percent in2005, primarily due to the rapid rise in oil and naturalgas prices after Hurricanes Katrina and Rita but alsodue to supply concerns based on political problems invarious oil-producing nations. The state’s consumerinflation rate rose to 4.1 percent in 2006 with the run-up of energy prices before autumn and with increas-ing wage rates. The inflation rate will begin to fall inthe first quarter of 2007 and average 2 percent a yearbetween 2007 and 2016. Declines in the inflation ratesfor both the state and the nation to around 2 percentover the next few years assume that oil and housingprices will retreat from the highs reached in mid-2006.By late 2012, the price for West Texas Intermediate
will be under $60 per barrel, while the price of hous-ing will begin to climb in late 2007.
New Jersey’s unemployment rate averaged 4.4 percentin 2005, down substantially from the previous threeyears. The rate rose to 5.0 percent in 2006 and willcontinue to rise until 2008, with slow growth expectedfor employment, peaking at 5.6. The state’s unemploy-ment rate will then trend downward to 5 percent in2016. Although the state rate will be higher than thenational rate beginning in 2006, the two rates will startto converge in 2011. (See Chart 4.)
After two years of very slow growth during the reces-sion and recovery, personal income in New Jersey rose5.6 percent in 2004 and 5.7 percent in 2005. Incomegrowth should average 5.8 percent a year between2005 and 2016.
Chart3
Page 1
Chart 3: Employment Growth in New Jersey and the United States
1980 to 2016
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Sources: N.J. DOL, www.wnjpin.state.nj.us, December 2006: R/ECONTM, January 2007;and Global Insight, December 2006.
An
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New Jersey Growth Rate
US Growth Rate
New Jersey as a Percent of the US
Table 1
SUMMARY OF NEW JERSEY ECONOMIC FORECAST
2007
2004 2005 2006 2007 to
2016
Annual Percentage GrowthNonagricultural Employment 0.5% 1.1% 0.9% 0.6% 0.9%Real Gross State Product 3.1% 2.1% 2.3% 2.2% 2.5%Personal Income 5.6% 5.7% 6.7% 5.0% 5.7%Population 0.5% 0.4% 0.5% 0.7% 0.7%Consumer Prices 3.8% 3.9% 4.1% 1.4% 2.0%
PercentageUnemployment Rate (average) 4.9% 4.4% 5.0% 5.5% 5.3%
Source: R/ECONTM, January 2007.
Table 2
SUMMARY OF U.S. ECONOMIC FORECAST
2007
2004 2005 2006 2007 to
2016
Annual Percentage GrowthNonagricultural Employment 1.1% 1.5% 1.4% 0.9% 0.9%Real Domestic Product 3.9% 3.2% 3.3% 2.2% 2.9%Personal Income 6.2% 5.2% 6.4% 4.9% 5.4%Population 1.0% 0.9% 0.9% 0.9% 0.9%Consumer Prices 2.7% 3.4% 3.2% 1.7% 1.8%
PercentageUnemployment Rate (average) 5.5% 5.1% 4.6% 4.9% 4.7%
Sources: Global Insight, U.S. Economic Outlook, December 2006.
Table 1
SUMMARY OF NEW JERSEY ECONOMIC FORECAST
Chart 3EMPLOYMENT GROWTH IN NEW JERSEY AND THE UNITED STATES
1980 to 2016
Chart 4: New Jersey and U.S. Unemployment Rates
1990 to 2016
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Sources: Global Insight, December 2006, and R/ECONTM January 2007.
Un
em
plo
ym
en
tR
ate
(%)
New Jersey
US
JANUARY 2007
PAGE 3
The fastest job growth in New Jersey during theforecast period will be experienced by the fourservice sectors. They will grow at rates averagingat least 1.2 percent a year through the forecastperiod. These sectors will provide more thanseven out of ten of the state’s net new jobs dur-ing the next 10 years. The tilt of the economytoward services is not a new phenomenon inNew Jersey—during the preceding 15-year peri-od these sectors also supplied 70 percent of thestate’s new jobs.
Other bright spots in the state’s economy in theforecast period will be finance and transporta-tion. Both are high-paying sectors that will gainjobs over the forecast period. On the other hand,the construction industry, which gained jobs dur-ing the 1990s and through 2005, will lose them inthe forecast period with the slowdown in the res-idential real estate market.
Since 1990, manufacturing has lost jobs at a rateof over 3 percent a year, for a total loss of 200,000jobs. Since 2000, the information industry has lostjobs at an average annual rate of more than 5percent, yielding a total loss of 30,000 jobs overthe past 5 years. Job losses in both industries willcontinue to mount throughout the forecast peri-od, although at slower rates.
Table 1
SUMMARY OF NEW JERSEY ECONOMIC FORECAST
2007
2004 2005 2006 2007 to
2016
Annual Percentage GrowthNonagricultural Employment 0.5% 1.1% 0.9% 0.6% 0.9%Real Gross State Product 3.1% 2.1% 2.3% 2.2% 2.5%Personal Income 5.6% 5.7% 6.7% 5.0% 5.7%Population 0.5% 0.4% 0.5% 0.7% 0.7%Consumer Prices 3.8% 3.9% 4.1% 1.4% 2.0%
PercentageUnemployment Rate (average) 4.9% 4.4% 5.0% 5.5% 5.3%
Source: R/ECONTM, January 2007.
Table 2
Chart 4NEW JERSEY AND U.S. UNEMPLOYMENT RATES
1990 to 2016