While research from the Federal Reserve Bank of New York presents a positive outlook for the nation’s unemployment rate in 2013, experts in New Jersey said unemployment in the Garden State will stay above federal levels well past that date.
“There’s no one industry sector that I see putting the state above the country,” said Joel Naroff, president of Naroff Economic Advisors. “Employment in the state will grow only because the national economy is growing, but there won’t be anything special in-state to reduce unemployment.”
The Fed’s speculation that the national unemployment rate will fall to nearly 6 percent from the current 8.3 percent by early 2013 is based on patterns in the unemployment rate from the recovery periods following recessions in 1981 to 1982, 1990 to 1991 and 2001.
Naroff said the key factors that lowered New Jersey’s unemployment rates after those recessions — mainly, mass hiring in the pharmaceutical and gaming industries — no longer exist, which will result in an unemployment rate that lags the nation.
“If you go back over a few decades, the pharmaceutical industry had cushioned the state’s downsizing in the past recessions, but now that industry is hemorrhaging jobs, not producing them,” Naroff said.
That view was shared by Debbie Hart, president of the industry group BioNJ, who said the big pharmaceutical corporations that call New Jersey home are downsizing their work forces as their major products go off patent.
“The staff reduction in Big Pharma is setting off growth in smaller biotech companies, but it’s still unclear whether that growth will make up for those corporate cuts,” Hart said.
Naroff said employment within the gaming industry picked up just as quickly as the pharmaceutical industry following the 2001 recession, but with all of the competition the gaming sector faces in neighboring states, it’s not likely that the industry will see the same level of job growth.
“Even with attention on Revel, once the casino opens up, it’s not clear how many jobs will come out of it — and if they’ll be permanent,” Naroff said.
According to Patrick O’Keefe, director of economic research at Roseland-based J.H. Cohn LLP, New Jersey’s unemployment rate tacked closely with the national rate up to the start of the jobs recovery in March 2010, but over the course of the recovery, the gap has widened. O’Keefe said that divergence can be attributed to to the state’s undersized manufacturing sector, which he said is growing robustly nationally, and an overdependence on the shrinking financial sector.
“New Jersey has some significant competitive disadvantages that will bear on its job growth. It is a high-cost, strict-regulation state with a mature development pattern,” O’Keefe said in an e-mail. “Even if there is a commitment to addressing those impediments, they are not susceptible to quick resolution.”