The recent pullback masks the 39,800 jobs gained since employment in the Garden State, which is the official nickname of the state of New Jersey, bottomed in early 2011, but does it portend a trend? To answer this question, we can examine the employment growth drivers thus far, said Mark Vitner, an economist at Wells Fargo Securities.
While recent growth hardly makes a dent in the 265,700 jobs lost since employment peaked in January 2008, job gains in professional and business services, trade and transportation and healthcare continue to make the largest contributions, Vitner explained.
In particular, computer system design and management, scientific and technical services should continue to drive job growth in professional and business services in the coming years, the analyst said.
Vitner said that according to the Job Openings and Labor Turnover Survey, the jobs opening rate (job openings as a percentage of total employment) for professional and business services remains at a relatively high hire rate. Fortunately, New Jersey's workforce is well placed to benefit, as the percentage of the state's population with a Bachelor's degree or higher is the fifth highest in the country, he added.
New Jersey's position as a key transport center for the Northeast has helped to support trade and transportation employment over the past year.
Furthermore, Vitner's data said employment in the transportation and warehousing industry had risen 1.5 percent over the past twelve months and should remain strong as economic activity in the United States continues to increase over the next year.
Wholesale trade employment has also picked up over the past year as activity in the Garden State has steadily improved, while retail employment has seen a recent bounce from the anticipation of a strong holiday shopping season, according to the Wells Fargo Securities report.
Healthcare, another boon for New Jersey's employment hopes, added a cumulative 168,000 jobs in the last two expansions but could come under pressure in the coming years. The rising cost of medical care will likely continue to be a burden on states as one-time federal aid to help augment the rise in Medicaid spending is no longer available, said Vitner.
With the percentage of New Jersey's population on Medicare up to 12.6 percent in 2010 from 8.5 percent in 2007, Medicaid spending is estimated to account for 12.6 percent of total spending in fiscal 2012, a 1.6 percentage point increase over the last fiscal year.
Vitner said New Jersey will not be alone in combating this challenge and, like other states, could turn to pulling back on reimbursement rates to doctors and hospitals and some services covered by Medicaid.
Consistent with national trends, job growth will continue to be constrained in manufacturing, construction and local government. Manufacturing employment has declined by nearly 50 percent over the past two decades, and with manufacturing productivity at such high levels, we do not expect many of these jobs to come back, said Vitner.
Growth in nominal income remains relatively weak in the Garden State largely due to the slow pace of employment growth. Nominal income was up only 4.0 percent over the past year, while income in the United States improved 5.4 percent.
With such weak income growth in New Jersey, Vitner does not expect income or sales taxes to relieve the state's budget pressures in the coming fiscal year. In fact, with personal income taxes making up 39 percent of total tax revenue and sales taxes accounting for 30 percent, revenue growth for the state is expected to remain weak.
The analyst also said that the largest component of income, wages and salaries increased only 2 percent on year-ago basis, and, consistent with employment, continued to be held back by government, real estate, construction and manufacturing.
Vitner said wages and salaries in construction fell at a 6.5 percent annualized rate in the first quarter and are down 6.2 percent over the past year.
New Jersey's economy continues to show improvement, but at a moderate pace. While hiring has stalled in recent months, we do not think the trend will be sustained. Employment growth in sectors such as professional and business services, education and healthcare and trade and transportation will likely continue to add jobs in the near term. Longer-term employment prospects in healthcare may be constrained, said Vitner.