Opinion: The Recession Is Over, but Good NJ Jobs Still Scarce

The state and the country are slowly adding jobs, but many of them are in below-average-paying sectors

As 2011 unfolds, New Jersey is slowly starting to escape the oppressive national clutches of the Great 2007-2009 Recession. One of the key aspects of this recovery is a small uptick in employment. While the state’s employment recovery is lagging the nation’s, at least it’s finally on the economic mend.

That recovery, however, does bear scrutiny.

As jobs have been created — in New Jersey and in the nation as a whole — they are often in below-average-paying industries like waste management, wholesale and resale trade, and healthcare and food services. The white-collar service sector has yet to be a full participant in the employment recovery. A key question now is whether–or, more optimistically, when — it will.

The place to start, as always, is with the numbers.

The Great Recession officially started in December 2007 and ended in June 2009. With newly revised employment data released in February and March of this year, a final autopsy can now be made.

In 2008, the first year of the recession, the United States lost 3.8 million private-sector jobs. This was the worst employment-loss year since payroll employment statistics were first compiled in 1939. That same year, New Jersey lost 108,300 private-sector jobs, the second worst employment-loss year ever for our state, surpassed only by the 136,800 jobs lost in 1990 as the result of a statewide real estate bust.

In 2009, the nation lost nearly 5 million private-sector jobs. Technically, the recession ended in June 2009 and was followed by six months of recovery. Nevertheless, 2009 supplanted 2008 as the nation’s worst employment-loss year. Also in 2009, New Jersey shed 117,700 private-sector jobs. Thus, 2009 replaced 2008 as the second worst employment-loss year in the state.

The nation’s private-sector employment loss those two years totaled nearly 8.8 million jobs (-7.6 percent). New Jersey’s two-year decline totaled 226,000 jobs (-6.6 percent). Thus, the nation’s rate of employment loss was somewhat steeper than New Jersey’s (-7.6 percent vs. -6.6 percent).

The employment hemorrhage was finally staunched in 2010. The United States, digging out from a somewhat deeper employment hole, had a job growth rate in 2010 of just over 1 percent, while New Jersey had a gain of just 0.2 percent. Part of this difference is due to a very strong national manufacturing recovery, a sector of the economy in which New Jersey is now severely underrepresented.

Despite the clear turnaround, a long road back lies ahead for both the United States and New Jersey.

As of March 2011, the nation was still over 7 million private-sector jobs below the level it had at the start of the recession (December 2007). New Jersey was still down 223,900 jobs. Part of this slow recovery and deep hole is attributable to the increased productivity of the economy. At the end of the fourth quarter of 2010, three years after the recession began, Gross Domestic Product (GDP) — the total output of the U.S. economy — finally returned to pre-recession levels. However, as of December 2010, private-sector employment was still 7.6 million jobs below its pre-recession level. Thus, the nation’s economy was producing the same level of output, but doing so with 6.6 percent fewer workers!

To reiterate this key point, the nation was producing the same economic output at the end of 2010 as it did before the Great Recession started. But it was doing so with 7.6 million fewer workers.

This pattern of full GDP recovery and severely lagging employment recovery raises significant questions. Is this a new normal of sustained high-productivity growth spurred by relentless cost discipline and innovative new technologies, enabling the economy to grow in the future with minimal increases in employment? Is it also due to the growth of highly affordable, highly educated labor in global growth markets that can effectively substitute for job growth in the United States? Alternatively, is it a painful, but temporary post-recession reluctance to hire by corporate America due to lingering uncertainties? Are American workers now stretched to the limit in achieving output gains, with future advances requiring employment expansion? We may see some answers to these questions in 2011.

Thus far in 2011, the national labor market news is encouraging. With the first quarter completed, the nation has added 564,000 private sector jobs. Employment gains have accelerated each month this year with 230,000 new private-sector jobs gained in March. The first quarter pace , if sustained for the year, would result in over 2.2 million new private-sector jobs. This would be the best annual gain since 2005.

Still, the natural disaster damage to the Japanese economy and potential supply chain disruptions; the oil price uncertainties of the North African and Middle East political disruptions; and the continuing problems of euro-zone sovereign debt raise concerns about whether the pace of economic growth can be sustained.

Below the surface of accelerating employment growth, the nation and New Jersey are still afflicted with bottom-heavy job growth: employment gains have primarily been taking place in below-average-paying industrial sectors.

For example, three of the four key sectors containing above-average-paying, knowledge-based jobs that are mainly housed in office buildings experienced employment losses in the first quarter of 2011: information (-13,000 jobs), finance and insurance (-18,100) and management of companies and enterprises (-800 jobs). Only professional, scientific, and technical services realized a gain (+59,500 jobs). Combined, the four sectors added just 28,400 jobs across the country. That’s just five percent of all the private-sector employment gains in the United States in the first quarter of this year.

The largest employment gains, in contrast, were achieved by administrative support, waste management/remediation services (+113,800 jobs), manufacturing (+101,000 jobs), health care (+96,500 jobs), wholesale and retail trade (+81,000 jobs), and accommodation and food services (+80,300 jobs). With the exception of manufacturing, these are below-average-paying jobs. The vast middle-market white-collar job sector has yet to become a full participant in the overall labor market recovery. This national dynamic has also weighed heavily on New Jersey’s job recovery. A key question in the months ahead is whether the composition of the employment rebound will expand to include the major white collar sectors.

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