Housing market will lead us back
– By Matthew Lifson, Cambridge Mercantile Group
September, 2012 – New Jersey is unique. Only four states in the union are smaller in size than New Jersey, yet it has the ninth-largest population in the country and the highest population density of any state in the U.S. These statistics are at the root of New Jersey’s poor economy. We are geographically set between New York City and Philadelphia and many residents find employment in these two cities.
With job consolidation and downsizing of industries in New York and Philadelphia, Jersey residents are feeling the pain. New Jersey unemployment reached a record 9.8 percent in July, as the state lost 12,000 jobs after job growth had been positive in May (14,400) and June (9,900). For August, the state’s unemployment rate rose again to 9.9 percent. In fact, over the last year, the job growth rate of New Jersey had ranked sixth in the United States.
Employers are reluctant to hire due to uncertainty in the business sector as to when the nation will break out of this recession. After the news events of the last few weeks, markets still expect the recovery to take awhile as interest rates may be on hold into 2015.
New Jersey residents await the tax break that they have been promised, but do not see this happening until next year. Gov. Chris Christie was optimistic when the year began and made the case for the income tax cut of 10 percent. But until the Democrats see some sort of recovery, they are blocking this move. The Republicans say that the economy can’t recover without the tax cut, while Democrats counter that until the economy shows signs of recovery, they cannot vote for it. When businesses see these tax breaks, they will become job creators, which will jump-start the economy and reduce the massive unemployment that has engulfed the state.
Christie hasn’t shown much concern regarding the July New Jersey unemployment numbers. He believes the figures will be revised significantly downward. Though the job number was better during the first half of the year, when there was job growth, the unemployment rate remained high. A large component of unemployed New Jersey residents had been employed in New York City and Philadelphia. The jobs they seek are not available in our state, and similar jobs to the ones they had are no longer available in those cities. They remain “unemployable” in New Jersey because they are overqualified for the jobs they apply for.
Job losses in the business and construction sectors continue. The true measure of an improving economy is when consumers are purchasing homes. As the housing market increases, with consumer’s confidence in their employment, the economy grows. This isn’t happening in New Jersey or elsewhere, for that matter. The state is still not on par with the rest of the country regarding job recovery. Fifty percent of the jobs lost during the recession have been recovered nationally. That number is just 36 percent for New Jersey.
I believe the housing market will lead the country back on the right path. This should hold true for the state as well. The tax break will help, if it spurs employment. More employment means more confidence in jobs, which leads to more purchasing since concern over your future subsides. Until that happens, we will continue to struggle.
Matthew Lifson, of Marlboro, is senior analyst with the Cambridge Mercantile Group in Princeton.