The next two years could be challenging economically for New Jersey but the state will return to modest growth over the long term.
That was the snapshot presented by
Will Irving, Associate Professor,
Edward J. Bloustein School of Planning and Public Policy at Rutgers University, to the Joint
Project Prioritization and
Planning and Economic Development Committees during their April 21 meeting.
Irving presented the
most recent forecast (December/January) from the Rutgers Economic Advisory Service (R/ECON), which typically releases three reports each year.
The December forecast took into account some expected increased tariffs,an extension of tax cuts and more immigration restrictions, though not as extensive as currently underway, said Irving.
A big drop-off in the state Gross Domestic Product (GDP) is expected over the next couple of years, at 0.5 percent and 0.7 percent in 2025 and 2026, respectively, compared to the U.S., which Moody’s had at 2.2 percent this year and 1.6 percent for next year.
In subsequent years, growth in New Jersey is forecast to recover but still lag the U.S. by 1 percentage point annually over the longer term. That lag compared to the U.S. is consistent for the state going back to 1998. “We’ve had a history of a lag, that doesn’t really change over the longer term,” Irving said, and New Jersey has trailed regional peers, like New York, Pennsylvania, and Maryland, which have had a little faster growth.
New Jersey’s employment growth has been characterized by a lot of volatility, with about 1 percent growth, or 40,000 jobs, in 2024, Irving said. The state is moving past the large employment gains of the COVID recovery and settling into a slower trajectory, similar to the past few years before COVID of about 30,000 jobs annually.
The long-term outlook, over 10- and 25-year horizons, is largely unchanged but the outlook over the next two years will decline significantly, with a decline in state GDP forecast this year and a significant jump in unemployment next year to 5.4 percent. Things could also be worse: a change in Federal Reserve policy, stagflation, and entrenchment of more severe tariffs would result in larger and longer lasting effects, he said.
Demographic Outlook
New Jersey has been losing population to other states at a significant rate for at least the past few decades, with domestic out-migration averaging about 50,000 people annually from 2010-2020. Without immigration, New Jersey would have seen a population decline of about 9,000, Irving said.
New Jersey is also affected by slower population growth nationally and a pattern of growth shifting to the South and West at the expense of Northeast.
Forecasts call for about 0.1 percent population growth annually, compared with 0.5 percent over the 2010-2020 period, for the U.S.
This slower growth also reflects a contracting aging population compared to the nation, likely due to retirees leaving the state due to high costs, Irving said. An aging population portends higher costs and further dominance of the healthcare sector in employment growth, he added.
The next forecast, likely out in late June, would include revisions to New Jersey data from last year as well as Q1 data for 2025.
A video recording of the
presentation is available on the NJTPA YouTube channel.