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Economy 2012:
Grow and Rebalance


James W. Hughes  Joseph J. Seneca
By James W. Hughes
Professor and Dean
& Joseph J Seneca
Professor, Edward J. Bloustein
School of Planning and Public Policy
blue bar graph with upward sweeping arrow
After a deep recession, New Jersey has now finally achieved economic “lift-off.”

New Jersey has now reached private-sector job growth levels not seen in 11 years. This growth has led to high expectations for 2012 (assuming the national economy cooperates). However, total employment growth will be constrained by a rebalancing between the private and governmental sectors. During the past decade the state’s public sector expanded beyond the levels that a contracting private sector could support. Consequently, a rebalancing is now taking place, and it will continue in 2012. Nonetheless, after a deep recession lasting more than two years New Jersey has now finally achieved economic “lift-off.”

Re-growing the Economy In 2009, the state was still hemorrhaging private-sector jobs (-117,000 jobs) and still feeling the shocks and aftershocks of the Great Recession. Employment stabilization and slow growth were then achieved in 2010 (+5,200 jobs). Employment growth then accelerated in 2011, when New Jersey added 28,700 private-sector jobs (through October). When the full-year counts for 2011 are finalized, it is likely that the private-sector employment increase will have exceeded 30,000 jobs; more than six times greater than in 2010. In fact, job growth in 2011 will be stronger than any other year in more than a decade.

Thus, the state has substantial employment growth momentum entering 2012. New Jersey has transitioned from a “no-go” economy to a “slow-go” economy to a “go-go” economy. Unless the national economy falters, the outlook is for employment growth levels in 2012 to return to the heady years of the late 1990s.

Graph of private sector employment change showing recovery

Rebalancing the Economy Between 1990 and 2000, New Jersey added 359,400 total jobs (+ 9.9 percent), as shown above. The gains were largely concentrated in the private sector, where employment increased by 347,300 jobs (+11.4 percent). In contrast, total government employment increased by just 12,000 jobs (+2.1 percent). However, the governmental total was negatively affected by the loss of 12,500 federal government jobs (-15.5 percent), a disturbing long-term trend. State and local (including local education) government combined actually grew by 24,600 jobs.

Thus, for every state and local government job added between 1990 and 2000, there was a corresponding increase of 14.1 private-sector jobs. This was certainly a sustainable private-public pattern of employment growth: 14.1 to 1, or +347,300 new private-sector jobs supporting +24,600 new government jobs.

However, between 2000 and 2010, a much different pattern emerged. Total employment actually declined in the state by 140,000 jobs (-3.5 percent). This stands in sharp contrast to the final decade of the 20th Century when New Jersey added 359,400 jobs; then, in the first decade of the 21st Century, it lost 140,000 jobs. What a difference a decade makes—and certainly not a great way to begin a new millennium.

All of the losses of the 2000-2010 decade accrued to the private sector (-193,700 jobs) as total public-sector employment expanded at a vastly accelerated pace (+53,600 jobs)! Again, the latter figure includes losses in the federal-government sector (-6,900 jobs). Thus, state and local government employment actually grew by 60,400 jobs between 2000 and 2010. This was approximately two and one-half times the size of its increase of the 1990-2000 period (24,600 jobs). So, for every state and local government job gain between 2000 and 2010, New Jersey lost 3.2 private-sector jobs. This was not a sustainable pattern of growth: -3.2 to 1, or 193,700 fewer private-sector jobs to support an additional 60,400 government jobs.

Another way of looking at the transformation between the decades: between 2000 and 2010, New Jersey lost more than half (-55.8 percent or -193,700 jobs) of the private-sector employment gains (+347,300 jobs) that it had achieved in the 1990-2000 period. While this was happening, growth in the state and local governmental sector surged: +60,400 jobs between 2000 and 2010 versus +24,600 jobs between 1990 and 2000—a more than doubling.

What is now happening in the New Jersey—and the national—employment markets in the second decade of the twenty-first century is a rebalancing of the public and private sectors. Government employment has started to contract while the private sector has started to grow again. In the first 10 months of 2011 (December 2010 to October 2011), private-sector employment in the state has increased by 28,700 jobs, as noted earlier. However, during this same time state and local government employment declined by 4,400 jobs, while the federal sector lost an additional 300 jobs.

The full readjustment or resizing of the public sector is going to take a considerable amount of time before a sustainable private-public balance is achieved. The result should be a more cost-disciplined state and local government sector which will ultimate contribute to a more competitive New Jersey.

 

 

First published in New Jersey Municipalities, Volume 89, Number 1, January 2012

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