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GSI Analysis: New Jersey’s Economy in a word – Dismal
NJ’s growth ranked 48th in 2nd Quarter of 2019
Neighboring states grew at more than double NJ’s rate
Continues trend of weak performance
Weakness in traditionally strong sectors
Analysis by Charles Steindel, Ph.D. for GSI
The Commerce Department’s Bureau of Economic Analysis (BEA) today announced that New Jersey’s Gross Domestic Product (GDP)—a measure of the aggregate output of all goods and services produced within the state—grew at a meager 0.7% annual rate in the second quarter of 2019. New Jersey’s growth ranked a dismal 48th across the 50 states; only Maine and Hawaii were lower. In the region, New Jersey trailed New York (1.7%), Pennsylvania (1.7%) and Delaware (1.8%) whose economies grew at more than double the rate of New Jersey’s. The only nearby state with second quarter growth in the vicinity of ours was Connecticut, which grew at a 1.0% annual rate.
The second quarter performance sustains a weak trend. Over the last 4 quarters, the state’s economy, by this measure, grew only 1.3%, ranking us 37th (if DC was included in the ranks of states, we would drop by one place, putting us 49th for the second quarter growth rate and 38th over the four quarters). In this instance, though, some other states close to us were also low—we edged out Delaware and Maryland, and New York, at 1.7%, was only modestly higher (the Mideast regional average was also 1.7%. To round out the area, DC was up 1.9% and Pennsylvania grew 2.1%).
State GDP is computed by aggregating estimates of the output of the major industrial sectors. Looking at the second quarter, New Jersey was deficient in almost all of them. For one, mining and oil and gas production, it’s not at all surprising that we badly trailed the nation—Pennsylvania has recently strengthened with the rebound in that sector, but it’s not something that would benefit us or other states in the region. We did trail in sectors that would normally be seen as our strengths, notably wholesale trade and, to a more modest extent, transportation and warehousing. We also lagged in information and finance– skill- and education- intensive areas, which might also be seen as our strengths. On the plus side, though, we did better than the nation in a number of areas normally associated with New Jersey; Professional services, corporate management, and administrative support.
Today’s release also includes other data. Of particular interest may be the figures on current-dollar (nominal) state GDP. This number can be considered a rough estimate of the state’s ultimate tax base. It is a large figure: $641.9 billion is the estimate of the annual rate of New Jersey’s current-dollar GDP for the second quarter—that is, in principle, equal to all income earned by production in New Jersey, including wages, benefits, profits, rents, interest, etc., adding in depreciation (out-of-state earnings are not in this). Revisions of the estimates of real and nominal GDP for the past few years were also released, and here the news was not good: the figures for New Jersey’s nominal GDP were cut 0.7% for 2017 and 0.5% for 2018. New Jersey wasn’t alone here—the Mideast region as a whole was revised down for both years, with Pennsylvania and Delaware’s figures being reduced more than ours— but the national totals were revised up.
In sum, the latest GDP figures for New Jersey were quite disappointing.
About the Author
Charles Steindel is Resident Scholar, Anisfield School of Business, Ramapo College. He was previously Chief Economist of the New Jersey Department of the Treasury and, earlier, a Senior Vice President at the Federal Reserve Bank of New York. He received his Bachelor’s degree from Emory and his Ph.D. from MIT.