Schaffler: This is “NJ Business Beat with Rhonda Schaffler.” Hello. I’m Rhonda Shaffler. Thanks for joining us this week. After writing the rent check, paying for groceries, and shelling out money to commute for work, there’s not much left in the bank for most of us. this is the sting of inflation and prices for all sorts of products and services are still rising sharply. Inflation is so strong, that this week, the social security administration decided to give recipients an 8.7% cost of living adjustment, the biggest in more than 40 years and concerns about inflation and the economy is front and center in midterm campaigns. Inflation is measured by the CPI index, up 8.2% over the past year. Food prices are up 11% and the price of gas is up 18% since last year, although we did see lower prices at the pump last month. Meantime, core inflation which measures prices of everything else is also marching higher by 6.6%. It is not a pretty picture. U.S. policymakers like to see an inflation rate of just 2%. when are things going to become more affordable? Experts can’t say for sure when inflation will be stopped, but even with these rising costs, New Jersey’s economy has been holding up. That could be about to change, according to Rutgers University professor James W. Hughes, Dean Emeritus of the Bloustein School.
Schaffler: It’s nice to see you on “NJ Business Beat” and talk about an issue we can’t seem to escape – that is inflation. The latest numbers out this week show more pain for consumers. First of all, why are we seeing inflation continuing to surge at this very strong pace?
Hughes: Basically, even though energy costs are coming down, past increases have started to filter through the economy as a whole. Even though we may see slightly cheaper gas at the gas station and the like, we have many other forces pushing up prices throughout the economy, sort of an after effect of what we had earlier in the year. We still have issues with very, very strong job market, even though the federal reserve has been increasing interest rates in order to combat inflation. We keep adding jobs and as we keep adding jobs we keep adding to demand. It’s those demand forces that are pushing up inflation across the board.
Schaffler: How detrimental is inflation to New Jersey residents and the economy here? We know to start with, New Jersey can be an expensive place to live.
Hughes: The nation has recovered 102% of its employment losses. New Jersey has actually accounted for 103% or recovered 103%, so we’re slightly ahead of the nation. Yes, we are more expensive, but we’re still applying the same percentage increases to our basic costs in the state. But what is happening is, every time we have high inflation, every time we have a recession, it’s the lower income sector of new jersey that gets hit the worst.
Schaffler: Do you think New Jersey is in a recession right now or will be soon?
Hughes: Not right now. Our job growth has been unusually strong. It’s actually been stronger than the nation as a whole, so that’s a real positive. So we are sort of in unchartered territory. There are a lot of negative indicators out there in terms of gross domestic product decline, but we still have a very robust, strong labor market which is really carrying the economy right now.
Schaffler: The last time we saw a severe recession, 2008-2009 period, New Jersey was hit harder because it was very much concentrated in the financial industry to start. Is our economy in better shape in New Jersey to weather a recession should it come?
Hughes: As we move into 2023, we’ll probably have a recession. Hopefully it’s just a recession and not a full-blown recession, but it is coming and there’s no way to avoid that given the pace of increases by the federal reserve in terms of interest rates and the like. But ’07, the great 2007 to 2009 recession, really was the bursting of the credit bubble that existed between 2000 and 2006, so it was uniquely concentrated in the financial sector. This time it’s going to be a broad-based recession not tied to any unique excess in the economy linked to New York or New Jersey.
Schaffler: So some positives for sure even as we navigate through whatever is ahead. Thank you so much for your time and for joining me.
Hughes: My pleasure.