For many areas of the country, the first five years of the 21st century may well be remembered as a period of dramatic economic transformation, or the beginning of one as the rate of change continues at a fast clip. Having statistics for the five-year period of 2000-2005, however, provides the first opportunity for policymakers and academic researchers to look for meaning in the trends. The previous Digest included an article on a Brookings study looking at manufacturing losses in the Great Lakes region (see the July 24 issue of the Digest). This week, our attention is turned to New Jerseys New Economy Growth Challenges, the July 2006 Rutgers Regional Report written by James Hughes and Joseph Seneca at Rutgers School of Planning and Public Policy.
Where the Brookings paper examined the rate of advanced service jobs replacing manufacturing jobs for its selected states, the new Rutgers Regional Report considers the recent loss of New Jersey jobs in manufacturing and high-wage service sectors, such as information, financial activities and professional/business services. In other words, during the opening years of this decade, New Jersey is experiencing significant transformations of its traditional economic base as well as its more diversified, knowledge-based New Economy sectors.
Key parts of the core economy including the states unique concentrations of technology-based economic specializations have not only stopped growing in the 2000s but, in a number of important areas, have started to contract, the authors write.
Hughes and Seneca caution the pattern of New Jerseys loss is shared with its advanced-economy peers of New York, Connecticut and Massachusetts. The Rutgers profs note, however, that the losses of these states were more than made up by gains in states such as Florida, Maryland, North Carolina and Virginia.
That southern migration of employment is a cycle often repeated throughout the nations economic history, beginning perhaps with the shift of textile jobs, which are now moving rapidly from the southern states to other countries. With each past shift, the northern states have adapted through new innovations and new industries.
But with the trends emerging over the past five years, particularly that the jobs of the New Economy such as information technology and biotechnology are already shifting, several policy questions arise: If the New Economy is already acting old, then what is next for the economies of states like New Jersey? How long will the southern states enjoy the recent increases in advanced service sectors before those jobs move to other countries? What policies and investments should all states make now?
Hughes and Seneca point to three challenging trends for New Jersey trends that should resonate in other areas of the country: 1) employment growth has been mostly limited to below-average-pay job sectors; 2) once-unique core science and tech assets have started to erode; and 3) mergers and acquisitions have resulted in headquarter losses and the accompanying civic leadership and responsibility.
Without high priority policy intervention by the state, the authors contend, the relative standard of living enjoyed by New Jersey residents can only decline over time. The authors applaud the positive directions of the New Jersey Commission on Science and Technology and the New Jersey Economic Development Authority while outlining broad, but fundamental, recommendations to advance the state: Develop and implement the necessary policy changes, as led by the governor; centralize the economic development functions of the state government under the governor; dedicate state budget expenditures more consistently to growing income rather than redistributing it; invest in research enhancements to higher education institutions; and evaluate and revise the state's business cost structure.
New Jerseys New Economy Growth Challenges is available at: http://www.policy.rutgers.edu/news/reports/RRR/RRR_July_2006.pdf
