Unemployment Emerging as Major Issue in Governor’s Race

Mark J. Magyar | April 1, 2013 | More Issues, Politics
NJ jobless rate higher than national average and neighboring states still a vulnerability for Christie

Carl E. Van Horn, founding director of Rutgers’ John J. Heldrich Center for Workforce Development.
With New Jersey’s governor’s race already in general-election mode, last week’s 0.2 percent dip in the state unemployment rate to 9.3 percent drew immediate partisan responses.

Charles Steindel, Gov. Chris Christie’s chief economist, gushed that the “solid” month continued “the general, upward trend of growth and progress established under the Christie administration.”

Meanwhile, Sen. Barbara Buono (D-Middlesex), Christie’s Democratic challenger, declared that “the fact that Gov. Christie’s administration calls this ‘another solid month,’ after losing 2,200 jobs in January, just shows how the governor is out of touch with reality.”

In actuality, the February drop continued a slow five-month improvement from a 9.7 percent unemployment rate in September — the month before Hurricane Sandy hit. But New Jersey’s jobless rate is still the fifth-highest in the nation, and the state has only regained about 40 percent of the 250,000 jobs lost during the Great Recession.

The 24-hour news cycle’s focus on relatively minor month-to-month changes in the unemployment rate obscures the fact that New Jersey and the nation actually suffered a “Lost Decade” that began with the Wall Street plunge after 9/11, was followed by the collapse of the housing and financial markets, sank into the worst recession since the Great Depression, and is now in the fourth year of an agonizingly slow “jobless recovery,” according to Rutgers Professor Carl E. Van Horn.

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Globalization, mergers, the shift from a manufacturing to a knowledge-based economy and the decline of unions caused tens of millions of layoffs, flattened wages, and took away the job security and optimism that underlay the “American Dream,” said Van Horn, founding director of Rutgers’ John J. Heldrich Center for Workforce Development, whose new book is called “Working Scared (Or Not At All).”

Older workers who saw their retirement savings eaten away by the collapse of the housing bubble and the Great Recession’s stock market nosedive hold onto their jobs because they cannot afford to retire, young college and high school graduates cannot find jobs in their fields, and laid off workers rarely find jobs equal in pay to the jobs they lost – if they can find any work at all.

“The Great Recession both masked and exacerbated the problems in the economy,” Van Horn said. “For American workers, the future is filled with uncertainty and volatility, and the American people understand that this is the case, even if politicians rarely want to talk about it.”

What Worries Voters

That is why jobs and the economy have pushed taxes aside as the top concern of New Jersey voters heading into the 2013 gubernatorial and legislative elections. It’s also why Christie, Buono, and legislative leaders zero in on the unemployment rate — an often misunderstood statistic that is more comprehensible to the average voter than economic growth and more relevant than stock market indexes, which seem to rise in inverse proportion as jobs and wages are cut.

While President Obama was able to point to a steadily improving national unemployment rate in his winning reelection campaign last November, Christie remains saddled with a jobless rate that was 1.4 percent above the national average last year and higher than neighboring states.

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To Christie’s frustration, it is a rate that does not rise and dip in perfect congruity with the state’s actual employment number.

“Explain the unemployment rate to me,” an exasperated Christie demanded at a Statehouse press conference after the unemployment rate inched down just 0.1 percent after December’s huge gain of 30,000 jobs. “I told you guys this before: I have no idea what the unemployment rate means and I suspect the people who do it have no idea what the unemployment rate means.”

Defining Terms

Put simply, the standard unemployment rate reflects the percentage of the labor force that is actively looking for a job, but unable to find one. The size of that labor force changes from month to month, as some workers retire, die, or lose their jobs, and the number of workers looking for jobs changes. In fact, it may actually grow when the economy improves, as discouraged workers return to the job market because companies have started hiring again — something that New York’s and Connecticut’s Democratic governors have joined Christie in pointing out.

However, the main unemployment rate also underestimates the true depth of the unemployment crisis by failing to include discouraged workers who are not actively looking for work that month, as well as the legions of underemployed workers who are working part-time or in jobs below their education or training levels because full-time or better jobs are not available.

With those categories added in, New Jersey’s percentage of unemployed and underemployed workers would easily top 15 percent — a sizable pool of dissatisfied voters that Buono is looking to tap into with her personal story of working her way up from poverty and her message of restoring the “American Dream.”

Christie and Steindel, Treasury’s economist, like to talk about the 120,000 private-sector jobs added since the Republican governor took office in January 2010.

But the 4,205,032 New Jerseyans with jobs last month is still 75,000 less than the 4,281,520 who were working in December 2007, the month the Great Recession began.

Christie takes credit for public-sector job cuts because he believes that cuts in government spending spur the economy, but the thousands of public-sector layoffs since Christie took office add to the unemployment rate and reduce consumer spending.

Further, states with populations growing at New Jersey’s rate need to create 20,000 or more new jobs each year just to keep up with the annual net growth in the labor force as new college and high school classes graduate and new people move into the state at a faster rate than others leave.

New Jersey’s labor force in December 2007 was 4,486,573, of whom only 205,053, or 4.6 percent, were looking for work. Last month, the state’s labor force hit 4,636,376, but 431,344, or 9.3 percent, were actively looking for jobs — more than twice the number of unemployed workers as there were at the beginning of the Great Recession.

In fact, more than 400,000 New Jerseyans have been listed as unemployed every month since mid-2009, when the recession ended.

New Jersey’s unemployment rate was lower than the national average and consistently below New York State’s under Democratic Govs. Jim McGreevey and Richard Codey from 2002 to 2006, and even under Corzine through 2008, the heart of the Great Recession.

Pink Slips

It wasn’t until 2009, as the nation was coming out of recession, that unemployment numbers spiked, jumping from 5.8 percent to 9.3 percent nationally, and from 5.5 percent to 8.9 percent in New Jersey. The recession, which is officially defined as two or more quarters of negative economic growth, officially ended in June 2009, but that didn’t matter to the tens of thousands of workers who received pink slips in the months that followed

While the national numbers have dropped steadily to 8.1 percent, New Jersey’s jobless rate rose to 9.6 percent in 2010, Christie’s first year in office, and remained stuck at 9.4 percent in 2011 and 9.5 percent last year — 1 percent above New York, 1.5 percent above Pennsylvania, and 1.4 percent above the national average last year.

New York State not only regained all of the jobs it lost during the Great Recession, but had added 40,000 more by last summer — a neighbor state comparison that is often made not only because of New Jersey’s close ties to the New York City economy, but also because New York Governor Andrew Cuomo and New York City Mayor Michael Bloomberg, like Christie, are nationally prominent.

Van Horn, who has been studying workforce development and job issues since he watched the decline of the steel industry in his native Monongahela Valley, said it is not surprising that New Jersey has been slower than New York to regain the jobs it lost during the Great Recession. New York City remains the nation’s financial center and a world-class destination whose tourism was most likely spurred by the decline of the dollar in the world’s financial markets.

Van Horn’s research focus is on the financial, social, and psychological impact of unemployment on workers, and on the policy options that federal and state government leaders should pursue to guarantee that American workers — not just American companies — can compete in the global marketplace.

Based on interviews with more than 25,000 American workers conducted by the Heldrich Center over the past 15 years, Van Horn concluded that the realities of work in America had fundamentally changed.

Permanent, stable jobs with the expectation of steady advancement had been replaced increasingly by temporary, contingent work on dead-end jobs. Worker loyalty was displaced by disaffection. Healthcare was now a shared responsibility between employer and employee, traditionally defined benefit plans had been replaced by 401(k) programs, and retirement was a thing of the past.

Most important from a policy standpoint, there was now an expectation that workers would have to engage in “lifelong learning,” a continuous program of retraining, to stay competitive in the global marketplace.

“Workers today are responsible for maintaining their own economic competitiveness,” Van Horn said. “This is a fundamental change.”

To help American workers compete, Van Horn, a former senior policy adviser to Democratic Gov. Jim Florio in the early 1990s, recommends a fundamental restructuring of the unemployment insurance system into a “reemployment system.”

Van Horn calls for an increased emphasis on long-term retraining of unemployed workers for new careers, including the part-timers, freelancers and contingent workers who rarely qualify for traditional unemployment insurance programs.

He also calls for increased linkages between both college and secondary education and future career opportunities. And he urges passage of legislation requiring companies to give their employees advance notice of plant closings or layoffs.

Finally, he cites the strong consensus among American workers surveyed that it is the responsibility of government to create jobs in times of high unemployment,

“In times like these, we need to invest in our transportation and energy infrastructure, in higher education and other initiatives that will both create jobs and keep America competitive,” Van Horn concluded. “An emphasis on fiscal austerity will do nothing to put Americans back to work.”