R/ECON’s economic forecast for New Jersey at the beginning of 2026 is a mixed bag. The state, like the nation, is likely to finish the year with notably stronger GDP growth than forecast earlier in the year. At the same time, the outlook for 2026 continues to show a slowing trajectory for economic growth, coupled with stagnation and possible contraction in the labor market. GDP growth is projected to decline to 0.8% in 2026, before rebounding modestly to 1% the following year, continuing to lag national growth by about one percentage point.
The forecast for New Jersey’s job market continues to show a weakening outlook for the coming year. In 2025, the state’s payroll employment increased by 0.6% on an annual average basis (prior to annual benchmark revisions). This lagged the pre-revision national rate of 0.9%, which has since been lowered to 0.5% after revisions. The current forecast for 2026 calls for a small employment decline of 0.1%, followed by a moderate recovery the following year and moderate growth slightly outpacing that of the nation in the medium term. The state’s unemployment rate, averaging 5.0% in 2025, is projected to rise to 5.4% through 2027 before stabilizing about a point lower in the longer term.
At the national level, based on the advance estimate for Q4, real GDP grew 2.2% in 2025, down from 2.8% the prior year. Moody’s forecast as of December 2025 projects that growth will further moderate to 1.8% in 2026, continuing a downward trend before leveling off at 1.9% in 2027, slightly below the longer-term growth rate of around 2%. The Fed cut the federal funds rate by 25 basis points in December, and Moody’s forecast calls for three more quarter-point rate cuts in 2026, bringing it closer to its estimated equilibrium rate of approximately 3% by late 2026. Inflation pressures remain notable due to tariff adjustments, with year-over-year growth in the Consumer Price Index expected to peak around 3.4% in the middle of 2026 before easing towards the Federal Reserve’s target of 2.0% over the next two years. Moody’s outlook for national employment growth as of December showed a sharp decline to 0.3% in 2026 and 2027, with the unemployment rate nearing 4.8% by the end of 2026. The outlook for 2026 was unaffected by the somewhat-stronger-than-expected national employment report for January though Moody’s outlook for 2027 has improved slightly to 0.5% as of their February forecast.
New Jersey’s population growth, buoyed in recent years by international migration as well as recent revisions to Census tabulation methodology, is projected to slow sharply over the next several years. This will track the national pattern, as the natural rate of increase will remain low by historical standards as deportations and restrictive border policy restrict international immigration.
Employment growth in the state is slowing, with job gains limited to a few sectors. Recent growth continues to be strongest in the health services sector, with professional and business services also showing some resiliency. The broader picture indicates a weakening job market in the shorter term, driven by slow growth or declines in the leisure and hospitality sector, construction and the public sector. The outlook strengthens over the medium to longer term, with employment growth driven by service-providing sectors and some stability in the construction sector.
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.