New Jersey’s economy expanded very slowly in 2006, with the addition of only 34,600 jobs. The state’s job growth, at 0.9 percent, was half a percent slower than that of the nation whose employment base increased by 1.4 percent. The state’s job growth weakened over the course of the year. The state added over 40,000 jobs in the first quarter of 2006 (at an annual rate), but less than 25,000 in the fourth quarter. The state’s performance was also lackluster when compared to its historical record. Over the 60 year post-World War II era, New Jersey added jobs at an average annual rate of 1.6 per- cent, or about 40,000 jobs. During the past 30 years the number of jobs added annually continued to vary around 40,000, although the annual growth rate dipped toward 1.3 percent as the job base rose. Unfortunately we expect that New Jersey will continue to underperform the nation in terms of job growth again in 2007.

While weak job growth is a concern, the distribution of growth across industries is also a problem. Nearly a quarter of the state’s new jobs in 2006 were in the public sector, clearly a problem when the state is trying to lower the tax burden on its residents. Further, of the three-quarters of new jobs in the private sector, most were in the relatively low wage administrative support and food service industries, while high wage sectors like manufacturing and information continued to decline.