N.J. economic outlook sinks as joblessness rises

[Press of Atlantic City]

N.J. economic outlook sinks as joblessness rises
By KEVIN POST Business Editor, 609-272-7250
Published: Tuesday, July 01, 2008

PHILADELPHIA - The Federal Reserve's forecasting gauge for New Jersey's economy has turned negative for the first time in 17 years.

The leading index of the Fed's Bank of Philadelphia predicts the state's economy will shrink 0.2 percent during the next nine months.

Jason Novak, senior economic analyst for the Philadelphia Fed who oversees the forecast, said Monday the outlook has dimmed mainly due to joblessness.

While the index includes information on housing permits, interest rates, business delivery times and more, the labor component is driving the decline. Joblessness in New Jersey jumped from 4.9 percent to 5.4 percent in May.

"It's just this unemployment rate issue, that's what concerns me," Novak said. "It looks a lot like Pennsylvania and Delaware do."

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The weaker economies in those states turned their forecasts negative last year. He said New Jersey's worsening outlook could be a blip that might be reversed next month or the start of a prolonged slowdown similar to neighboring states.

Building permits fell sharply in the state in the May index, released Friday, and delivery times turned negative. The most positive measure for the month was a slight increase in payrolls, Novak said.

A highly respected forecast for the U.S. economy also worsened Friday.

The Weekly Leading Index of the Economic Cycle Research Institute predicted economic contraction of
6 percent, down from the prior week's minus 5.8 percent.

This forecast has been negative since last fall, reaching a low of minus 11 percent at the end of March. If that remains the forecast's low point, it would suggest the U.S. economy is hitting bottom now.

Philadelphia Fed Vice President Herb Taylor and other panelists will discuss the economic forecast for southern New Jersey at the July 15 Rutgers Quarterly Business Outlook in Cherry Hill.

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