New Jersey's Economic Recovery Still Wobbly

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    NEWSLETTERS

    TK
    AP
    Generic image of money

    The New Jersey economy has so far replaced just about 40 percent of the jobs it lost from the recession.

    In contrast, Connecticut has replaced 55 percent, Pennsylvania has replaced nearly all, and New York had done so by late 2012, adding 150,000 jobs since.

    So how does New Jersey's lackluster job creation square with figures released by the federal government last week that showed the state's economic output grew faster last year than any of its three neighbors?

    Economists tell The Record that the longer-term trend shows that New Jersey's GDP and job growth — as well as those of some nearby states — still clearly trail the nation's. And the state's recovery remains stymied by a lack of room for growth and the declines of key industries.

    These issues are central to New Jersey's economic picture as the state struggles with a jobless rate that — at 6.9 percent — is worse than those of all but eight states.

    Because the GDP figures released by the U.S. Bureau of Economic Analysis will be revised, economist say the difference between New Jersey and its neighbors is not very meaningful. The state's GDP grew 1.1 percent in 2013, while Connecticut's grew 0.9 percent, and New York and Pennsylvania's grew 0.7 percent. GDP represents the monetary value of all finished goods and services produced.

    Yet the three-year trend, from 2011 to 2013, also shows New Jersey's output was stronger than its employment performance would suggest. The trend shows that New Jersey's output growth — about 3.2 percent over the period — was only slightly behind Pennsylvania's growth of 3.3 percent and New York's 3.7 percent. All three outpaced Connecticut's growth of 1 percent over three years.

    That doesn't convince Joel Naroff, chief economist at Naroff Economic Advisors of Pennsylvania, who said the figures merely show that the states are all behind the nation, which had GDP growth of 1.8 percent in 2013. The national GDP grew by 6 percent from 2011 to 2013.

    New Jersey and Pennsylvania in particular are "underperforming," he said.

    "Jobs are being created, but at a very disappointing pace in both," he said. "It is just a weak economic recovery, both in absolute terms and in comparison with the nation."

    Patrick O'Keefe, director of economic research at CohnReznick in Roseland, said New Jersey's weakness is demonstrated by the state's faltering GDP growth since the start of the recession, at the end of 2007.

    New Jersey's inflation-adjusted GDP is still slightly below the 2007 figure, while the U.S. GDP is 4.7 higher than the pre-recession peak, O'Keefe said. New York's also is higher than the pre-recession figure, by 5.9 percent, as is Pennsylvania, which is 3.5 percent higher. Connecticut, meanwhile, is 5.2 percent below the 2007 level.

    The figures also showed that New Jersey's GDP in 2012, 2.6 percent, matched the national growth of 2.5 percent, but when the U.S. GDP declined to 1.8 percent in 2013, New Jersey's plunged faster, to 1.1 percent.

    "Objectively, there is no question that in 2013, New Jersey grew at a faster pace than Connecticut, New York and Pennsylvania," O'Keefe said. But, he added, "cumulatively, one year is not a trend."

    New Jersey and Connecticut's poor performance stems in part from their being high-income, high-cost states that have little easily developable land available, and that makes it tough to attract new businesses, O'Keefe said.

    The two states had the same jobless rate in April, compared to New York's rate of 6.7 percent and Pennsylvania's rate of 5.7 percent.

    New Jersey this year has added just 3,600 jobs, an increase of less than 0.1 percent, a performance that among the four New York-area states was better than Connecticut, which has lost 3,300 jobs this year, for a decline of 0.2 percent. New York has added 17,000 jobs and Pennsylvania has added 10,900, an increase for both of nearly 0.2 percent. New Jersey's job report for May is scheduled to be released on Thursday.

    New Jersey also is suffering because it's formerly signature industries — pharmaceutical, telecommunications, casinos and government — are all on the decline, OKeefe said.

    The state output increase in 2013 was fueled in large part by a rise in the professional, scientific and technical services, and management of companies and enterprises, the GDP figures show. The state construction sector also rose.

    Yet government output declined, and several other sectors had little or nor movement over the year — among them manufacturing, transportation and warehousing, information and arts, entertainment and recreation.

    Output in the finance and insurance industry in New Jersey increased, by 0.17 percent, the same amount as it did in Pennsylvania. Yet the region's two financial hubs, New York and Connecticut, both saw output fall in the finance and insurance sector. Economist Naroff suggested that may be the result of banks and other institutions cutting back on their operations in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    For both New York and Pennsylvania, the 2013 GDP figure was the worst in four years. New York's decline was partly fueled by a decline in government, and slight declines or no growth in construction, transportation and warehousing and durable goods manufacturing. The largest gains came in the information sector, likely the result of high-tech industries like software development, gaming design and Internet services moving into the state.

    Pennsylvania's GDP growth was held back by a shrinking in the construction industry, educational services and manufacturing of non-durable goods. The strongest sectors included health care and social assistance, which grew 0.18 percent, finance and insurance and mining, driven by the natural gas extraction in the state.

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    Information from: The Record (Woodland Park, N.J.), http://www.northjersey.com