An improving jobs climate buoyed New Jersey’s fledgling economic recovery in the first half of 2013, though significant headwinds persist, ranging from a below-average housing market to long-term damage caused by Hurricane Sandy, according to a new report.
The Wells Fargo New Jersey Economic Activity Index said the state’s rebound is aided by a hiring boost that has reduced unemployment nearly a full percentage point over the past year, to 8.7 percent. The trend coincided with rising home sales and apartment leasing.
“After four years of a mostly meager recovery, New Jersey’s economy finally seems to be gaining momentum,” Wells Fargo said in its biannual report.
Wells Fargo said that New Jersey manufacturing, an industry that has downsized for more than two decades, has ceased shedding jobs, and is even increasing employment in certain spots.
The report cites Metem Corp., a maker of turbine engine parts that announced plans to expand its Parsippany plant this summer. In addition, Wells Fargo said life sciences, health care, logistics, professional and business services, and retail are expanding.
Construction employment also has turned around, reflecting increases in apartment building and public works projects, plus a temporary boost stemming from repairs from Sandy.
“We expect New Jersey’s economy to gain momentum during the second half of this year as hiring continues to ramp up and residential and commercial construction gradually regains its footing,” the report said.
But the Wells Fargo report cautions that parts of New Jersey’s economic recovery is traceable to storm relief, which cannot be sustained as rebuilding winds down and consumers replenish savings to make up for extra money spent on reconstruction.
On the downside, decimation caused by the storm is hurting New Jersey tourism despite aggressive marketing by government and business.
Just before Memorial Day, Wells Fargo said the Cape May County Department of Tourism found nearly one in four survey respondents were concerned about beach conditions, and were changing vacation plans as a result.
“A reduction of tourists on the coast translates into fewer hotel stays, less gambling and shopping, and thus lower income for businesses and weaker tax revenues for governments,” the report said. “This is in addition to potential property tax losses that will occur as homes are reassessed at lower values and the drop in energy tax revenue from supply disruptions.”
Even with the employment uptick, Wells Fargo said New Jersey’s jobs recovery lags the national pace. Nonfarm employment in New Jersey is still 3 percent below its pre-recession peak; by contrast, national employment is 1.6 percent off its peak.
Wells Fargo also said New Jersey’s housing industry, though improving, is behind the nation because higher-than-normal foreclosures continue to clog the market.
New Jersey has the second-highest share of foreclosure inventory — 6 percent of mortgaged homes in May — ranking behind Florida at 8.8 percent. The national average is 2.6 percent.
Home price appreciation, a major market driver for many areas across the country, also is relatively slow in New Jersey, Wells Fargo said.
Reporter Tom Zanki is @BizTZanki on Twitter.