By Will Irving
R/ECON’s economic forecast for New Jersey as of June 2024 continues to show a slowing trajectory, though the decline in annual GDP growth is not as pronounced as in the prior forecast. The anticipated slowdown has also been deferred from 2024 to 2025, consistent with expectations for the nation following stronger-than-expected GDP growth at the end of 2023. As before, real state GDP is then expected to resume a steady but low rate of increase in 2026. The employment picture for 2024 has also improved following data revisions that resulted in lower employment totals, but stronger gains in 2023 than originally reported. However, the State’s elevated unemployment rate is expected to persist as employment growth slows in subsequent years.
At the national level, Moody’s May forecast calls for moderating but steady growth both in the near and longer term. Strong real GDP growth in the third and fourth quarters of 2023 (up 4.9% and 3.4%, respectively at an annual rate) gave way to a slower pace (1.6%) in the first quarter of 2024, in part reflecting a deceleration in consumer and government spending. GDP should perform more strongly for the remainder of the year, equaling the 2.5% growth rate of 2023, followed by slower growth in subsequent years.
The May forecast called for two 25-basis point cuts in the federal funds rate in September and December; however, at its June meeting, the Fed held rates steady at the 5.25%-5.5% range and called for only a single rate cut this year. Moody’s forecast calls for a subsequent 0.25 percentage point rate reduction per quarter to a range of 3-3.5% in 2026.
Employment in New Jersey is expected to remain relatively strong this year, before slowing sharply over the next two years, consistent with the national trajectory. Population in the state rebounded in 2023 after three years of decline, returning to its 2020 level, and is projected to continue a pattern of slow growth over the medium to long term. Labor force is down slightly through the first quarter of 2024 and is projected to decline this year and the following two years of strong growth. A relatively high unemployment rate is also forecast to persist as employment growth slows.
As of Q4 2023, high interest rates had yet to tame climbing prices for both new and existing homes in New Jersey. Sales of existing homes were down on a year-over-year basis, while sales of new homes have rebounded somewhat. Nationally, existing new home sales were up slightly over the year, and while average and median new home prices dropped nationally, they continued to spike in the northeast.
The R/ECON forecast for New Jersey utilizes the Moody’s economy.com national forecast as of May 2024, along with New Jersey quarterly GDP data and quarterly personal income data through Q4 2023 and New Jersey employment and unemployment data through Q1 2024. The Rutgers Economic Advisory Service (R/ECON) was created with the mission to improve the quality and accessibility of tools for economic forecasting and policy simulation. With the support of the New Jersey Policy Lab, R/ECON employs a comprehensive set of tools to provide accurate and timely assessments of the New Jersey economy.
The R/ECON economic forecast is part of a larger economic report available to subscribers. If your organization would like to subscribe to the full economic forecast report, please contact Will Irving at will.irving@rutgers.edu.