Job Loss Could Hit NJ During 'Modest' Recession: Ex-Chief Economist

NEW JERSEY — If a recession hits New Jersey, it may not last long. But the state may experience job loss and a sluggish recovery from the financial downturn, according to the state's former leading economist.

Charles Steindel — former Gov. Chris Christie's chief economist for nearly four years — predicted that if New Jersey enters a recession, it "would be relatively modest and short," according to his analysis via Rowan University's Steve Sweeney Center for Public Policy. But Steindel pointed to potentially troubling signs, such as late mortgage payments and struggles in key economic sectors in both New York and the Garden State.

"New Jersey will not be immune from a recession," Steindel wrote. "At the least, the state’s huge logistics sector will be hurt by a softening in demand for goods shipped to the Port of New York and New Jersey. New York City has experienced a subpar recovery, due to ongoing softness in the financial and tourism sectors, which are vulnerable to a national downturn. Weakness in the Big Apple will have some spillovers to New Jersey, in areas such as retail sales and real estate."

Steindel has performed several high-level economic roles, including senior vice president of the Federal Reserve Bank of New York. U.S. Treasury Secretary Janet Yellen has praised him for guiding the Federal Reserve "for decades on the interpretation of U.S. economic statistics." But Steindel left the state government on a low note, resigning in 2014 after his optimistic economic projections missed the mark and led to pension slashes and credit downgrades for the state, Bloomberg reported.

In his recent analysis, Steindel said New Jersey's economy performed well in 2022, with new highs in jobs and personal-income growth that could cushion the state during a recession. In the first three quarters of last year, the state's personal income increased by 3.7 from that period the year prior — a bit lower than the nation's increase of 4.1 percent in that span.

Both state and national income growth fell short of inflation, with the Consumer Price Index advancing 8.3 percent during that period. But Steindel says New Jerseyans saw an 8.9 percent rise in net earnings — a metric of wages and other forms of employee compensation, plus an estimate of the income of unincorporated businesses.

However, nearly 4 percent of all home mortgages were at least 90 days past due in the third quarter of last year, "which could suggest some potential for foreclosures to ramp up," Steindel said.

New Jersey already has one of the nation's highest foreclosure rates, which carried over into January. Last month, 1 in 2,617 New Jersey homes had a foreclosure filing — the nation's fourth-highest rate, according to real estate-data curator ATTOM.

Recovery from a recession could be "fairly sluggish," Steindel warns, with slowdowns anticipated in income growth, spending and real estate transactions. But a return to growth in 2024 will ease the situation, he says.

Steindel projects a mild recession would bring "a modest loss of jobs in 2023, and an uptick in the unemployment rate." New Jersey's unemployment rate fell from 5.1 percent in December 2021 to 3.3 percent in September, before bumping up to 3.4 percent. Steindel projected an uneployment rate of 3.8 percent this year, only dipping to 3.7 percent in 2024 and hitting 4 percent in 2027.

The Federal Reserve has been determined to raise interest rates until inflation moderates, which risks spurring a recession — generally defined as two straight quarters of negative gross domestic product (GDP). Last month, Gov. Phil Murphy told the South Jersey Chamber of Commerce that he expected a "shallow, fairly short-lived recession, and part of the reason I believe that is there’s an enormous amount of liquidity on the sidelines."

The U.S. has a 70 percent chance of entering a recession in 2023, according to a Bloomberg poll of 38 economists conducted in December. In June, poll respondents gave the U.S. a 30 percent chance of a recession for 2023.

Rowan University launched the Steve Sweeney Center for Public Policy last March. The center is named after former State Senate President Stephen Sweeney — a powerbroker among New Jersey Democrats who lost his re-election bid in 2021 against Republican Ed Durr to represent the state's 3rd Legislative District in the Senate.

Read Steindel's full economic outlook.