How much have Gov. Phil Murphy’s policies to do with the state’s unemployment rate, which recently dropped to the lowest level on record? A whole lot — according to the governor. Critics of the governor’s economic policies have a different take.
Murphy — a Democrat who enacted several tax hikes last year and has been pushing lawmakers for more ever since — took a victory lap following the release of the state’s latest jobs report, bragging that his economic policies were “clearly … paying real dividends.”
“Today, we can say, confidently, that New Jersey is moving in the right direction,” he said during a recent public event in New Brunswick the day the jobs numbers were made public. “It inspires me to continue working hard.”
New Jersey wasn’t the only state to set a record for low unemployment. Alabama, Arkansas and Texas — all states with Republican governors — also scored their respective historic lows in June, according to figures compiled by the federal Bureau of Labor Statistics.
Moreover, the broader trend for New Jersey’s unemployment rate also largely mirrors what’s been happening at the national level during President Donald Trump’s tenure, and even when President Barack Obama was in office. Trump, a Republican, has — like Murphy — not been shy about taking credit for the economic hot streak, which he’s linked to federal tax cuts and regulatory reforms.
‘No smoking gun’
But Charles Steindel, New Jersey’s former chief economist, suggested there is no “smoking gun” that easily ties the recent jobs improvement to a specific policy or event.
“We’ve been on a pretty steady path for about five years,” said Steindel, who is now a resident scholar at Ramapo College’s Ansfield School of Business.
The concerns of business-lobbying groups and many Republicans that Murphy would quickly cripple New Jersey’s economy by hiking taxes on the wealthy appear then to have been unfounded.
But what impact any of Murphy’s initiatives have had on the broader state economy amid a long-running, national economic hot streak that began well before he took office in early 2018 remains a subject of hot debate. Certain economic indicators — that don’t receive as much attention as the unemployment rate — paint a more nuanced picture of the New Jersey economy. And these other datapoints suggest there’s still much room for improvement despite Murphy’s recent boasting.
Economists generally warn against putting too much stock in a single monthly jobs report given they reflect preliminary estimates that are subject to revision. Yet the latest report issued last month was an eye-opener as it showed the state unemployment rate fell to 3.5 percent in June, the lowest seasonally-adjusted jobless rate ever measured in New Jersey since tracking began in the 1970s.
Growing the economy ‘the right way’
“Clearly, our efforts to grow the economy the right way are paying real dividends,” Murphy said during the event in New Brunswick.
During the same event, state Commissioner of Labor and Workforce Development Robert Asaro-Angelo highlighted the Murphy administration’s efforts to boost registered apprenticeship programs as an example of the governor’s approach to growing the economy. The total number of such apprenticeship programs has expanded by more than 30 percent since Murphy took office, Asaro-Angelo said.
“These investments across the state by employers concerned with not just their bottom line, but with the health and security of their workers, their families and their communities, are going a long way to make us a fairer and stronger New Jersey,” he said.
To be sure, Murphy is not the first New Jersey governor to embrace a glowing jobs report, or to go a step further by suggesting the improvement is a result of their own economic initiatives. Former Republican Gov. Chris Christie on several occasions linked the steady drop in the unemployment rate that began during his own tenure to tax cuts and other policies he enacted.
“I don’t think that that is coincidental,” Christie barked at a reporter in 2016 when asked for evidence that backed up his claims. Christie went a step further by declaring the state economy would sour if a Democrat succeeded him in office and immediately raised taxes, as Murphy ended up doing last year. (Among other tax hikes, Murphy increased the income-tax levy on individuals earning more than $5 million annually, and the corporate-tax levy on businesses earning more than $1 million annually.)
Christie’s prophecy notwithstanding
Despite Christie’s prophecy, the state economy has remained on a roll throughout Murphy’s tenure. In fact, total employment in New Jersey has increased by about 60,000 jobs since he took office in January 2018, and the unemployment rate has dropped by a full percentage point over the last year-and-a-half.
The latest jobs report also indicated new hiring occurred in New Jersey in nearly every industry sector, with more than 10,000 jobs added in June alone. Yet it also showed the size of the state’s total labor force dropped slightly in June, which combined with the employment gains to reduce the overall unemployment rate by 3/10ths of a percentage point.
Asked by NJ Spotlight for data that supports Murphy’s claim that his economic policies “are paying real dividends” for the state economy, the governor’s office pointed to figures that show New Jersey’s more recent gains have outpaced regional neighbors like New York, Pennsylvania and Delaware, and the nation itself, in several categories.
“We have invested in our workers by raising the minimum wage to a livable standard, guaranteeing them paid sick days, expanding family leave programs, strengthening equal pay protections, and using government policy and funding to support and grow apprenticeships and other work-based learning,” said Murphy spokesman Darryl Isherwood.
“This commitment to our workers has created a better climate for employees and their families, as well as New Jersey businesses, and that positive environment is evidenced in the jobs numbers,” he said. “Despite the outcries from opponents of the fairer side of our initiatives, our economy is definitely stronger, in large part because it is fairer.”
Criticism of tax hikes
Offering a countering view was Nicole Sandelier, director of economic policy research for the New Jersey Business & Industry Association, an organization that has been critical of the tax hikes and several other of Murphy’s policy changes. While she said his policies “probably do not have a distinct negative impact on businesses, at this point,” she also warned of a more “cumulative impact” on businesses’ bottom line once the next economic downturn hits.
“We feel these policies on the business community will leave New Jersey businesses and employees in a more volatile situation as we near an inevitable recession, which is estimated to occur around 18 months from now,” Sandelier said.
She also pointed to the latest growth rates for the state’s gross domestic product as an area of concern. New Jersey’s real GDP growth has consistently lagged national growth rates in both the near and short terms, according to figures compiled by the U.S. Bureau of Economic Analysis.
“In a bull market, this is cause for an eyebrow raise,” Sandelier said.
Many economists also look closely at changes in personal income as a key economic indicator as they tend to influence consumer spending. The latest 50-state analysis of personal-income figures released by The Pew Charitable Trusts suggested New Jersey has room for improvement in this area. (Pew measures personal income by considering more than just an individual’s wages. It also counts things like benefits, rental income and payouts from government programs like Medicare and Medicaid.)
New Jersey’s inflation-adjusted annual rate of personal income-growth has been 1.3 percent since the end of the Great Recession; that has trailed the national growth rate measured over the same period of 1.9 percent. In addition, income growth in New Jersey over the last year totaled 1.1 percent after adjusting for inflation, lagging the national growth rate of 2 percent, according to the Pew analysis.
The Pew analysis also highlighted a good reason why personal income is an important factor for state policymakers to consider by drawing a link to the annual budget.
“Trends in personal income matter to state governments because tax revenue and spending demands may rise or fall along with residents’ incomes,” the analysis said.