The National Bureau of Economic Research finally made it official: the U.S. is in a recession and has been since economic activity reached a peak in December 2007. Since that time, New Jersey’s economy has lost 34,400 jobs, about 1.8 percent of the 1.9 million jobs lost thus far this year in the U.S. Since New Jersey has about 3 percent of the national job base these numbers indicate that the state is doing less badly than the nation. We expect another relatively small decline in the New Jersey job base in 2009, with a turnaround expected in early 2010. This forecast for New Jersey assumes that the U.S. will experience a four-quarter dip in real gross product (GDP) running through mid-2009 and a period of de- clining employment lasting through the end of 2009. The U.S. unemployment rate will peak at 8.7 percent in the first quarter of 2010.

Our forecast indicates that the recession in New Jersey will not be as bad as it is in the nation primarily because of the way its economy is structured. A large proportion of the job losses in the U.S. have been and are likely to be in the manufacturing, construction, and financial sectors. New Jersey’s manufacturing sector comprises only 7 percent of the state’s economy compared to 10 percent in the nation. Transportation equipment manufacturing is likely to lose 1.5 million jobs in the U.S. in the next year and a half. But there are only about 6,000 jobs in the industry in New Jersey. In the unlikely event that the state lost them all, it would mean a direct loss of only 0.2 percent of the employment base. Construction comprises about 4 percent of New Jersey jobs compared to 5.5 percent in the U.S. The U.S. has already lost half a million con- struction jobs and is likely to lose at least that many more in the next year or so—a total of nearly 20 per- cent of its construction job base in 2006. New Jersey is likely to lose less than 10 percent of its 2006 construc- tion job base during the recession. New Jersey does have a slightly greater proportion of its employment base in the financial sectors than does the U.S. However, it has a smaller proportion in real estate—a sector that has been harder hit in the nation than in the state. The state does have a large exposure to the securities industry, and we expect that indus- try will lose nearly 20 percent of its 2007 job base during the recession. Besides New Jersey’s direct exposure to the securities industry it will also feel an impact from the job loss in that industry in New York City, since many employees of the City’s securities industry reside in New Jersey. That impact will be seen in the extremely slow growth in the residence adjustment component of personal income in 2009 and 2010.