Economic Heartbeat Weaker Gains than Meet the Eye

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September’s apparently strong job growth reflected bus drivers returning to workThis 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, and chairman of the New Jersey Council of Economic Advisors.

The September jobs report the state released last week brings to mind an adage about statistics: “What they reveal is interesting, but what they conceal is essential!” While the report showed a healthy gain in September employment, a little digging suggests that much of the increase was illusory.

On the positive side, New Jersey’s nonfarm payroll employment grew by 7,100 jobs in September for a very impressive gain—particularly after the weak growth of previous months. The private service-providing sector of the economy was again the growth leader, netting 3,500 new jobs. The government sector added another 2,100 jobs. Even the goods-producing sector enjoyed growth: Led by gains in construction, it created 1,500 jobs. Manufacturing employment remained unchanged, which was something of a triumph given the long-term hemorrhage of the state’s manufacturing jobs.

Overall, this would appear to have been a good monthly report, even though the public sector accounted for nearly 30% of the job growth. The total net gains put the state on course to add some 45,000 jobs this year, close to the 46,300 new positions for 2004.

Meanwhile, the unemployment rate rose from 4.2% in August to 4.3% in September, as the workforce grew faster than the number of jobs. For the U.S. as a whole, unemployment rose from 4.9% in August to 5.1% in September.

But a closer look at the state’s large trade, transportation, and utilities supersector darkens the picture with regard to new jobs. The category included a 8,200-job gain for the transportation and ware-housing subsector. The great bulk of this increase came in ground transportation: school bus drivers returning to work in September for the start of the fall term.

Looking at the data over the years, the standard pattern is for a loss of about 8,000 ground-transportation jobs in July and a corresponding gain of 8,000 jobs in September. So employment that was lost in July simply returns in September. It thus appears that perhaps more than half the job gains in September were due simply to the seasonality of school-bus driver employment, rather than to real economic growth.

In other respects, the recent pattern of gains in low-paying jobs and losses or slow growth in high-paying ones continued. For example, the “other services” category, which includes personal and laundry service workers, gained 1,000 jobs, while the information sector lost 1,400 jobs. Financial activities and professional and business services gained 200 jobs and 600 jobs, respectively. This is certainly not positive news for the state’s office markets, which rely on healthy increases in the high-paying service sectors to fill vacancies.

Looking ahead, the U.S. employment data will continue to reflect the impact of hurricanes Katrina and Rita, making it hard to compare the national picture with the monthly figures for New Jersey. Drilling down beneath the surface of the state’s statistics will thus prove to be essential. u