Regional Review: Recovery lies ahead for New Jersey as labor market loosens up
Regional Review is a year-end series from Capital Analytics that looks at key developments throughout the year and sets the stage for what’s to come in the near term.
3 min read December 2024 — Despite labor-related challenges, New Jersey is headed for a year of recovery in 2025 as sustained growth across key sectors are expected to upset short-term economic losses and reverse the effects of a job market slowdown.
The state’s major sectors by employment — which include healthcare, drugs and cosmetics, life sciences, professional services, and real estate — generated a combined total of $332 billion in revenue in 2024 (39.9% of the GDP). Healthcare and social assistance alone employed 737,880 workers this past year. Retail trade and professional services, together with scientific and technical services, employed 569,691 and 513,257 people, respectively.
Over the past five years, however, New Jersey’s annualized employment rate (1.1%) has grown below the national average of 1.2% — which points to signs of a slowing down economy. High levels of inflation in the state and other major U.S. cities stunted labor force growth throughout the year as employers laid off thousands of workers between April and September.
The professional and financial services sectors were among the most severely impacted by staff reductions due to the burdens of elevated financing costs. Garden State hospitals, schools, and universities, on the other hand, saw substantial job and payroll gains this year with the addition of 160,000 health-related jobs and $31.4 billion in direct economic benefits, according to findings from the 2024 Economic Impact Report released by the New Jersey Hospital Association (NJHA).
“As health care providers, our hospitals deliver high quality healthcare on more than 18 million occasions annually,” said NJHA President and CEO Cathy Bennett, as cited by ROI-NJ. “As employers, they’re providers of opportunity for their 158,800 employees. Hospitals’ economic impact ripples all across New Jersey through support of other businesses, taxes and contributions to local communities.”
Despite their sizable contributions to the economy, Jersey-based pharmaceutical and healthcare corporations remained susceptible to the ebbs and flows of the labor market. For instance, CarePoint Healthcare, a major state employer, confirmed the dismissal of 2,602 employees across its medical centers before the end of the year — contributing to overall marketplace volatility as the state alternated between adding and shedding jobs on a month-to-month basis.
Labor cuts across all sectors of the New Jersey economy this year consequently led to a swollen unemployment rate, which jumped from the previous year’s average of 4.3% to 4.9%. Compared to the national average — which posted net positive gains throughout the year— New Jersey’s unemployment rate ranked amongst the bottom ten states in the country.
Population growth also remained strong throughout 2024 with the state reporting an annualized growth rate of 1.0% in the last five years (9th in the country). This sustained migration trend further compounded labor market shortages, as the number of workers outpaced the number of new jobs added to the economy. According to economists, New Jersey’s population density — the highest in the country — may be to blame for recent hiring freezes.
“There are a lot of people looking for jobs, and if companies stop hiring and lay some people off, it’s going to be felt pretty immediately,” said Chris Hayes, a labor historian at Rutgers University, as cited by North Jersey.
Layoffs in the state’s private sectors followed a period of unprecedented job growth experienced over the last couple of years, which saw the addition of 200,000 jobs to the regional economy in 2022 and 2023. New Jersey’s labor market reported overall growth over the past twelve months despite a noticeable slowdown in private sectors.
The state also added a total of 58,600 nonfarm jobs from August 2023 to August 2024, with 83% of these gains belonging to the private sector (namely education, healthcare, trade, transportation and utilities), according to a press release from the Department of Labor & Workforce Development. The public sector similarly recorded stabilized gains over the one-year period with the creation of 10,100 jobs.
Additionally, New Jersey currently tops other Northeastern markets in average annual wage for workers employed in the life sciences, medical devices, and biopharma workforce, according to the LifeSciences 2024 Report. As a result, the state holds the highest concentration of scientists and engineers in the country (National Science Board).
By focusing on growth in these key industries, the Garden State is on a solid path towards recovery after a year of decelerated growth. New Jersey’s economic growth is, in fact, expected to outpace the national average at 2.1%, according to TD estimates, as the market trends towards correction.
In addition to this adjustment — which offers a more positive outlook for the near-term — some of the companies that handed out discharge papers shared plans to rehire demobilized employees. For instance, the YMCA in Wayne, which dismissed 155 workers in August of this year, expects to rehire as many of them as possible, as the township will be taking over the property.
Heading into 2025, the outlook for the state is promising. New Jersey’s outsized impact in healthcare, life sciences, and education is expected to continue to push the local economy, while labor market headwinds recede.
