Last year began with high expectations for the New Jersey economy as the state was just coming off its best year for job growth in more than a decade. But this year there seem to be few reasons to justify the same type of optimism following what turned out to be a mostly uneven 2016.
Official employment figures for December have yet to be released, but the pace of job creation in 2016 in New Jersey was already running well below the average for the state’s current economic expansion heading into the final month of the year.
State revenue collections, though up slightly compared to the year before, were also trailing expectations through November, another possible sign of trouble coming into 2017. And while economists aren’t projecting an imminent recession in New Jersey, they also point to structural changes in the broader economy — like millennials’ rejecting their parents’ predominantly suburban lifestyles for more urban environments — as reasons to expect only continued slow economic growth in the state as a new year begins.
“We again appear to be lagging behind the nation,” said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, during a recent legislative hearing in Trenton that was convened to evaluate the state of the state’s economy as 2016 came to an end.
“It has been an elusive recovery, an expansion which really has not shed its training wheels,” Hughes went on to say.
More than 80,000 jobs were created in New Jersey in 2015, making it the state’s best year for job growth in more than a decade. That job creation also nearly doubled the state’s average for adding new jobs since the Great Recession began in 2010, which has been roughly 42,000 annually, according to Hughes. The success in 2015 also fueled reasons for optimism at the start of 2016 as the state finally appeared to be putting setbacks like Hurricane Sandy and Atlantic City’s casino closures in the rearview mirror.
But 2016 started with two straight months of job losses, and after enjoying an early dip, the state’s unemployment rate rose steadily over the next several months. It dropped again slightly in November, landing at 5 percent, but the unemployment rate was at 4.5 percent when 2016 began.
In all, the state had more months in 2016 where it lost jobs than gained them heading into December. Still, state officials cast the overall job figures in a positive light in their official report for November, which showed a net gain of just under 4,000 jobs for the month.
“The unemployment rate fell to 5.0 percent in November, and private-sector employment is up by 23,300 jobs over the past year,” said James Wooster, the state Department of Treasury’s chief economist. “The New Jersey economic recovery continues.”
But the same report also showed job losses recorded in October were actually higher than the initial estimates, and the year-to-date growth, not counting gains recorded in late 2015, was a more modest 9,000 jobs heading into December.
Economists like Hughes warn against putting too much stock in monthly job reports, saying to look instead at broader trends. The most definitive job figures for 2016 won’t be available until March or April, when the federal government completes a thorough “benchmarking” of the New Jersey data.
But state revenue collections as of November were also running just over 2 percent ahead of the same period during the prior year, according to Treasury’s latest official revenue report. Though 2 percent is better than no growth at all, Gov. Chris Christie’s budget for the current fiscal year counts on tax collections increasing by 3.6 percent by the time fiscal 2017 closes at the end of June.
State Treasurer Ford Scudder declined an invitation to appear before lawmakers during last month’s legislative hearing, and Treasury officials have not yet sounded alarms about the lagging revenue collections since much of the state’s taxes are collected later with income-tax returns due in April. Still, Treasury officials have also indicated the state started out the fiscal year in July with a smaller surplus account than was originally estimated, meaning there is a smaller margin for error if tax collections ultimately don’t catch up to projections.
Hughes suggested New Jersey could now be locked in a “new normal” of slow growth as the current economic expansion moves into 2017. He also warned lawmakers that millennials — a group loosely defined as those born between 1980 and 2000 – have become the new dominant group shaping the economy. They prefer more urban environments where work and recreational opportunities are located in close proximity to where they live, citing as an example Brooklyn, which after several decades of decline has been enjoying a renaissance in recent years.
“The bottom line in brief is millennials now rule,” he said.
New Jersey once bested New York City when it came to job creation, but that trend has been completely reversed over the last decade as jobs have shifted from the suburbs back into the city, Hughes said.
“One of the tasks for New Jersey is to make New Jersey a fashionable location for millennials,” he said.