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Opinion: The Great Recession and NJ’s Lost Employment Decade

From 2001 to 2010, New Jersey experienced a net loss of 156,100 private-sector jobs, driving the total down to 3.2 million—a level not seen since 1998. That marks the only time since payroll employment statistics were first compiled in 1939 that the state ended a decade with fewer private-sector jobs than it started with.

James W. Hughes

Could New Jersey be ahead of the national curve when it comes to regaining jobs? It’s beginning to look that way. Trouble is, the state was ahead of the curve when it came to losing jobs. In fact, the losses came so early and so relentlessly that the years 2000 to 2010 could be called the Lost Employment Decade.

Just how bad was it? New Jersey experienced a net loss of 156,100 private-sector jobs in the period, driving the total down to 3.2 million—a level not seen since 1998. That marks the only time since payroll employment statistics were first compiled in 1939—71 years ago—that the state ended a decade with fewer private-sector jobs than it started with.

Joseph J. Seneca

The trouble began with the early-decade downturn of 2001 to 2003, lingered through the weakest expansion on record in the middle of the decade, and then came back with a vengeance in the so-called Great Recession of 2007 to 2009.

The latest employment revisions released by the New Jersey Department of Labor and Workforce Development reveal that between January 2008 and January 2010, the state lost 245,500 private-sector jobs, or 7.1 percent of its total. In all but one of those months, New Jersey lost private-sector jobs (see the figure). The exception was March 2008, which saw a meager gain of 100.

Those losses came from a variety of sectors:

--Manufacturing: 163,000 jobs lost, a 39% reduction

--Telecom and Internet: 123,000 jobs lost, a 34% decline

--Trade and transportation: 78,000 jobs lost, a 9% drop

--Finance and insurance: 13,000 jobs lost, a 6.2% reduction

That these figures are not the worst on record probably comes as little comfort. The recession of March 1989 to May 1992 still holds the record as the worst decline in New Jersey since the Great Depression. During that 38-month period, the state lost 265,100 private-sector jobs. The current downturn would have to last another 14 months to match its length, and it would have to lose another 19,600 jobs to match its absolute severity.When the January 2010 employment figures were released (9,800 private-sector jobs lost), that dubious honor seemed within range.

Then came February. Recently released figures show that New Jersey gained 4,200 private-sector jobs in February 2010—the first monthly increase since those 100 jobs were gained in March 2008. That broke an ominous four-month pattern of accelerating private-sector job losses (September 2009 to January 2010). The first sizable gain in almost two years is definitely a welcome development, and February could prove to be a landmark for the state’s economy.

But it pays to remember that one month does not necessarily indicate a trend. First, there was a minor setback in March, when 600 private-sector jobs were lost. Second, a closer look at the details of the current downturn also suggests caution.

New Jersey reached its cyclical employment peak in January 2008, and employment declines started the next month. Monthly private-sector employment losses during the February 2008-to-October 2009 period were characteristic of a harsh but rather typical recession. But then Lehman Brothers collapsed and the aftershocks hit New Jersey hard and fast. The scale of job losses in the November 2008-to-March 2009 period was simply unprecedented.

And even when the job losses began to ease in the second and third quarters of 2009, it didn’t quite qualify as great news because things were only getting worse at a slower pace. This became popularly known as the economic second derivative (from Calculus 101): The rate of change of the rate of change turned positive. So, by September 2009, the monthly loss was down to 1,000 jobs—and net job creation looked close at hand.

Unfortunately, the losses started to increase once again in the fourth quarter of 2009, reaching 9,800 jobs lost in January 2010. At this point, it seemed as if the state was sliding backward, with job losses accelerating.

So how to read February’s return to net job creation? Even with March’s small setback, maybe it finally signals the beginning of the end of the Lost Employment Decade. Nonetheless, we expect that over the next several months, New Jersey will see an erratic pattern of employment change, with monthly ups and downs. This was the pattern of the 2001-to-2003 downturn, and it will probably continue until the nation returns to sustained employment growth.

One other figure to consider. During the February 2008-to-January 2010 period, New Jersey lost 10,225 private-sector jobs per month. This is far higher than the average monthly loss of 6,976 jobs that occurred during the recession of 1989 to 1992. Even if the current downturn is shorter, the intensity of the monthly employment losses of the past two years has been significantly greater—only highlighting the challenges that lie ahead for New Jersey as it seeks to leave the Lost Employment Decade behind.

James W. Hughes is Dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. Joseph J. Seneca is University Professor of Economics at the Bloustein School.

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