In our first episode of EJB Talks for 2025, Stuart Shapiro and Will Irving discuss his journey from Rutgers MPP student to faculty member and economic forecaster. Will talks about his current role with the Rutgers Economic Advisory Service (R/ECON), which uses a complex model of historical relationships among variables like employment and construction to predict economic trends for New Jersey. The latest forecast predicts a sharper economic slowdown in New Jersey compared to the national trend, citing factors like lagging employment growth, slowing GDP, and structural challenges like high taxes, cost of living, and an aging population. Will highlights the state’s strengths, such as its strategic location and industry concentrations, but notes that future policies related to the new presidential administration, particularly around tariffs, immigration, and housing affordability, could significantly influence the state’s economic trajectory.

 

Also in case you missed the R/ECON Winter Forecast, you can read it here and download the full report.

Transcript

Stuart Shapiro
Welcome to the 12th season of EJB Talks. I’m Stuart Shapiro, the Dean of the Bloustein School. And the purpose of this podcast is to highlight the work my colleagues and our alumni in the fields of policy, planning and health are doing to make the world a better place.

To open this 12th season, I am speaking with Associate Professor of Practice Will Irving. Will is a former student of mine from my first year teaching here at Rutgers, and now teaches and produces the Rutgers Economic Forecast for the state of New Jersey, the latest issuance of which just came out last week. Welcome to the podcast, Will!

Will Irving
Thank you! Good to be here!

Stuart Shapiro
So tell me… before we get into the meat of the forecast. Tell us a little bit about your evolution from Master’s of Public Policy student to faculty member and economic forecaster.

Will Irving
Sure. Thank you. Basically, I was subject to a lot of very, kind of, fortuitous circumstances in the in the path that I took that began with coming to Rutgers and being in the MPP program. As you know, when you had started and also when Joe Seneca, who at the time had been the Provost of the University and an economic advisor to many governors, had come to Bloustein to teach.

And I just kind of was lucky enough to be in one of his classes and end up working with him as…. while I was still a student as a research assistant. Which led, eventually, upon graduation, to a full-time job with the school, working on economic impact analysis and all sorts of othe economic studies tracking through the economy and demography of New Jersey. Together with Joe and with Jim Hughes, the demographer and at the time Dean of the Bloustein School. One of your many predecessors.

And through that work I started working with Mike Lahr, recently retired Mike Lahr. And Nancy Mantell who ran R/ECON, the Rutgers Economic Advisory Service, which does economic impact analysis and forecasting and has, over the years, had developed this forecasting model for the state of New Jersey and when Nancy retired, I ended up taking that over for several years. And I had a brief stint outside of academia working for the state treasury doing similar forecasting work. But then kind of got drawn back in with an opportunity to to return to Rutgers about a year and a half ago. And have kind of dived back into into the forecasting again.

Stuart Shapiro
Excellent. Yeah Jim Hughes was the guest on our most recent edition of the podcast and Mike Lahr before he retired did an episode as well. So long time listeners will recognize those names and I’m sure everyone will recognize Jim Hughes’ name.

So, tell us a little bit about how you do the forecast. And obviously you’ll have to dumb it down a little bit. But sort of explain the process. Do these numbers come out of thin air or? If you make them up? Or where do they come from?

Will Irving
Sometimes I would like to make them up. ((laughing))

Stuart Shapiro
Yeah. ((laughing))

Will Irving
But as I mentioned before, they come from a model which is a fairly large assemblage of equations. And what these equations basically do is, they track…. an individual equation will track historical relationships between a variable of interest. Let’s say, employment in a given sector. Let’s say construction employment. And the things that influence construction employment in New Jersey. So that could be the trajectory of construction employment historically. It could be expectations of what’s happening to the industry nationally. It could be what’s happening in the housing market in New Jersey. The forecast for building permits. And any other number of factors that would go into influencing, let’s say, that variable.

Well as I noted, you know, that might include building permits. Well, building permits is another factor that we would then need to be forecasting based on the various elements that go into what influences the number of building permits that are issued at any given time for housing or for commercial building. And so, these… all these different hundreds of variables that interact with one another. So, one thing that is, you know… and sometimes feed back into one another. So the forecast for employment in a sector may feed into the expectation of wages in that sector, which will in turn feed back into expectations for employment in that sector and maybe into several other variables as well.

And so, that whole sort of system of equations comes together and kind of runs at once and is solved simultaneously to produce sort of, end numbers that kind of come out of all those calculations.

Stuart Shapiro
And those equations are based largely on previously demonstrated relationships between these variables.

Will Irving
Yes, based on the sort of historical relationship and how those variables move together.

Stuart Shapiro
Right.

Will Irving
And much…and with state forecasts like this, you know, the common practice for many of the variables, those relationships, include the relationship to a similar or related national variable. And so, we then use an externally generated forecast of variables in the national economy as ways to drive the forecast for the state.

Stuart Shapiro
Gotcha. Okay, so let’s tackle this latest forecast that you issued. If you had to sort of pick the sort of big take home finding from it, what would it be?

Will Irving
I think it’s primarily that we continue to expect, at the state level, a more significant slowdown than we’ve seen thus far following the COVID recovery, which has kind of drawn on, has lasted longer, I think than a lot of people expected. You know, at the national level, there’s long been talk of the soft landing that the Fed was trying to engineer and seems very successfully to have to have done.

At the same time, we’ve seen signs throughout New Jersey kind of, starting to lag a little bit and sort of…we’ve been pushing that forward. You know, we’ve continued to expect to see a dropoff, a sharper dropoff in employment and productivity growth, excuse me in output growth, GDP growth that hasn’t really hit yet. But over the next couple of years, I think we are going to start to see that. We’ve already seen signs of slowing in the labor market, particularly in hiring. As you may be aware, you know, unemployment had already sort of ramped up. Over about a 12-month period ending in in late 2023. But as we sort of expected that then largely plateaued. And we started to see some other states kind of catch up to us. And I think that slowdown is going to sharpen over the next couple of couple of years.

Stuart Shapiro
Why was New Jersey ahead of the curve? Why did labor slow more, unemployment go higher here first? And what does that mean going forward?

Will Irving
You know that’s, you know, one of the million-dollar questions.

Stuart Shapiro
That’s why I asked it! ((laughing))

Will Irving
You know, part of that may have to do with coming out of COVID a little bit stronger than some other states. And having sort of, you know, sort of gotten out over our skis a little bit hiring wise, employment wise. Before things started to slow down a little bit. It’s difficult to say. You know, this expectation of kind of continued slowing has its components, you know things that we are seeing,, or expect to see that kind of tell us somethings slowing. For example, you know, we’re expecting GDP growth to slow rather sharply. And that’s driven by an expectation of slowing in financial services that has to do with expectations of lower corporate profits at the at the national level.

But what makes it so that this is happening in New Jersey? You know, there’s long been sort of discussion of slow growth in New Jersey having to do with high taxes, with high cost of living, high costs of doing business. And now, you know, you have an aging population and slowing population growth. All of these things coming together. You know, the argument would be, are leading people and businesses to choosing to locate and grow outside the state?

At the same time, you know, New Jersey has its strengths, has concentrations of employment in some in some key industries you know. Is an important corridor between, you know, for the Northeast and for shipping and a number of other industries, transportation. And while we expect, you know, a slowdown, New Jersey does still have, you know, a number of underlying strengths.

Stuart Shapiro
It was this… was it this week? I think it was announced that New Jersey does lead the Northeast in population growth? So, we’re not losing people as quickly as we used to, I guess.

Will Irving
Well, I think what’s interesting, what happened. And so that was about a month ago. The Census released its 2024 population estimates which showed much stronger growth for New Jersey than we have seen in, I believe, decades. So, in 2024, I think a gain of about 120,000 people.

But what’s interesting is that is almost completely driven by international migration. In other words, an influx of immigrants. And I was looking recently… and that seems to have to do with a change in the way that they are calculating international migration. They usually base it on results of the annual American Community Survey, which is used then as a sort of underlying piece of data for creating this estimate. And they are now starting to incorporate, I believe, administrative data from other agencies.

That allows them, they say, to come up with sort of more accurate representations of international immigration. And so what you still have is a net outflow, a net domestic out migration, but a much higher level of international in-migration that is overwhelming that. And that has resulted not only in that big jump in 2024, but then also an upward revision, I believe, to about 90 thousand, a growth of 90,000 in 2023.

I don’t know… you know, you may be aware that they also had, over the course of the previous decade from 2010 to 2020, the estimates from the census annually had had significantly underestimated New Jersey’s population growth. So that when you got to the 2020 census, it turned out that from 2010 to 2020, I believe the growth was actually about 350,000, something like that. In any case, much higher than what had been reported on a year-to-year basis, on the basis of the annual estimates in that intervening period between the decennial censuses.

I don’t know if that had as well to do with a change in the way that they look at…I mean, that’s just the counts. The difference between the counts. And I think maybe what they’re trying to do now is to correct for whatever that miss was. What they don’t do with that intercensal sort of correction…so now we have new annual estimates from 2010 to 2020. But they don’t tell you the components. Like what the revised components would be. I think the assumption would have to be that if now we are assuming that there is much, perhaps, much higher international immigration into the state than we had previously assumed, that may account for why there was such a significant underestimate over that previous decade.

Stuart Shapiro
Gotcha. Well, that leads very nicely into my next question. As you know, I’m generally a federal person in terms of where I study, and obviously we have a new president coming in on Monday. And I think the two things we can be most certain that he does are, impose tariffs and restrict immigration. Because they are pretty much within the province of the executive branch, he doesn’t need Congress to do either. Does your forecast think about this at all? And if not, what do you think? Especially given what you just said about much of New Jersey’s population growth does come from from international in-migration.

Will Irving
So the forecast does, to some degree, take these factors into account to the extent that the national forecast that we use from Moody’s accounts for these factors. Which, at this point, it has incorporated some of the tariffs, some of the tariff expectations and immigration expectations. Not to the full extent that they might be implemented. I think it’s all kind of a waiting game and it’s very speculative. Sort of how much you can expect these things to take hold. The degree to which those policies will be implemented is difficult to say.

In terms of the way that they will affect New Jersey, you know, I think you know the most obvious that everyone knows, there’s different timelines, right. So, for New Jerseyans, you think about higher prices, right? Tariffs are, in the end, going to be paid by the importers and then passed along to the consumer, right? And that’s going to be on all sorts of imported goods and that’s going to be felt nationwide.

And so for New Jersey, more specifically, to the extent that this will hamper imports and trade. And if there are retaliatory tariffs from other countries, you know hamper exports as well. Well, New Jersey has a big port. And the effect it certainly on shipping and the shipping industry and employment in that industry in cargo handling, in warehousing, and in those sectors in New Jersey could certainly be significant. If you see sort of full implementation of these of these tariff policies, you know, at the same time, you know, you at least should mention… I think that’s, sort of, more the the shorter to medium term effects.

You know the ostensible goal of these tariffs, longer term, is to protect domestic industries and even, in theory, to to revitalize some domestic manufacturing, which New Jersey, you know, has lost half, more than half of its manufacturing base over the past 35 to 40 years. And so sort of in a longer term effect, you know, I think that’s ostensibly hoped for would be, you know, some revitalization reshoring of jobs and industry. How realistic that is? I’m not really sure.

Stuart Shapiro
Yep, yep.

Will Irving
You know, and then on the immigration side, certainly you know it’s, you know, to the extent that New Jersey’s population growth appears to have been, for quite a long time now. I mean, not just appears, even prior to these recent sort of revisions of methodology by the census. One thing that was very clear was that New Jersey’s population growth was being sustained, you know, to a degree, certainly by natural increase. Births minus deaths ((laughing)). But primarily…but that domestic out migration was being outweighed by international migration and a, you know, a severe crackdownon immigrants, both documented and undocumented, would, you know, could have significant effect for New Jersey. You know, a stagnant or declining population can have significant economic implications.

Stuart Shapiro
Well,we’re gonna find out soon. ((laughing))

Will Irving
((laughing)) Yes, we’re going to find out soon.

Stuart Shapiro
There’ll be less, less forecasting and more experiencing on that particular note, although obviously forecasting will still be important. Let me end with, we have a gubernatorial election this year. First time there’s an open seat in eight years. There’s a dozen legitimate candidates spanning the ideological spectrum.

If you could get the dozen or so of them in a room and tell them to focus on an economic issue. What would it be? What should they be worried about?

Will Irving
Well, I mean, the first thing that comes to mind, just based on the conversation we’ve just had is, you know being prepared to take whatever measures at the state level one might be able to take to alleviate some of the the pain in the shorter term that could be caused by higher tariffs and their effect on consumers. On industry. You know the immigration policy and crackdowns on immigration and what that could mean for residents of the state.

I think you know the gubernatorial candidates and whoever the next governor is, going to be faced with a, you know, a set of challenges that arise. Of economic challenges that may arise from the policies of the incoming administration. And I think they need to be sort of, cognizant of and prepared to deal with those, you know. And the other issue that sort of kind of jumps to mind. Looking at, sort of, the current forecast and then just some of the more recent trajectory, is housing costs. You know, there’s so many things that surround housing in the state. You know there is something that we don’t address directly in the forecast, you know. But I think it’s well acknowledged, that there is a shortage of affordable housing. But also, you know, the northeast and New Jersey in particular have maybe just now started to see a little bit of easing in house prices compared to  their peak as things really ramped up over the last couple of years. But where they’ve seen some, you know, more easing in other other regions of the country in New Jersey house prices have been very sticky and have remained very high. And so sort of from, you know, from the bottom to the top of the markett it’s been very stifling. You know, you have shortages of affordable housing on one end and then when it comes to sort of middle market buyers of existing homes, prices are becoming more and more unattainable. And I think that’s something that that the next governor is certainly going to have to be thinking about.

Stuart Shapiro
Yeah, we could do an entire episode just on housing, I think. And we certainly have plenty of people here in the Bloustein School to talk about those issues.

Will Irving
That’s right!

Stuart Shapiro
Will, thank you so much for coming on the podcast. It’s been a great conversation!

Will Irving
Thank you!

Stuart Shapiro
And also a big thank you to our producer, Tamara Swedberg and to Karyn Olsen. We’ll be back in a week or two with another episode of EJB Talks. Until then, stay safe.