Economic Heartbeat Time will tell if epic job gains are too good to be true

Economists recommend caution on figures before hailing improved numbers as a trendThis monthly report was prepared for NJBIZ by James W. Hughes, dean of the Edward J. Bloustein School of Planning & Public Policy at Rutgers University; Nancy H. Mantell, director of the Rutgers Economic Advisory Service; and Joseph J. Seneca, university professor, Edward J. Bloustein School.

While one swallow does not a summer make, July’s large gain of 13,000 private-sector payroll jobs in New Jersey, reported by the New Jersey Department of Labor and Workforce Development, is absolutely remarkable, particularly at a time when the state’s public sector lost 7,100 jobs. Forget looking for signs of “green shoots” of an economic recovery — if this number holds up after revisions, it would represent an economic bumper crop.

July’s large job gain halts 17 consecutive months of private-sector job declines in the state, and stands in stark relief compared to the loss of 254,000 private-sector jobs in July for the nation as a whole. While data for July for the other states are not yet available, New Jersey’s gain of 13,000 private-sector jobs will surely rank at or near the top of the 50 states, since in June the largest private-sector employment gain of any state was just 3,900 jobs (Mississippi). New Jersey’s gain would be more than triple that, just one month later.

Of particular note is the increase of 3,100 manufacturing jobs and 3,400 jobs in construction, two sectors that have been at the epicenter of the jobs losses nationally. Those sectors have accounted for nearly half of all private-sector job losses in the nation since December 2007. Nationally, the construction and manufacturing sectors lost 128,000 jobs in July. In contrast, New Jersey’s manufacturing gain of 3,100 jobs is the state’s largest monthly increase in 20 years. If sustained, this could lead to a manufacturing turnaround of epic proportions, reversing 39 straight years of decline. Also, the addition of 6,200 jobs in the leisure and hospitality sector is noteworthy since, nationally, this sector had been affected by retrenchment in consumer spending, as job losses and plunging home prices restrained spending and caused a sharp increase in the savings rate. That sector did add 9,000 jobs nationally in July. So, New Jersey’s gain of 6,200 jobs, if accurate, is more than two-thirds of the national total. Perhaps New Jersey is now becoming the new leisure and hospitality state of America. Significant private-sector job losses only occurred in the trade, transportation, and utilities sector (down 4,500 jobs).

Thus, July’s combination of significant private-sector job growth, together with public-sector job retrenchment, may point to a sharp and dramatic threshold change for the state’s labor markets. However, before economic victory can be declared, it should be remembered that one month’s data does not a trend make. And to be cautious in our assessment, the data will be subject to revision next month, and then will be re-benchmarked early in 2010. It should be recalled that the re-benchmarking of 2008’s employment totals significantly increased the state’s job losses for that year.

Time will tell if this good news is too good to be true.