TRENTON-When the most recent round of federal income tax cuts was enacted, the President's Council of Economic Advisors made a bold prediction: the new tax policy plus already expected economic growth would create 5.5 million jobs across the nation over 18 months.

The clock started ticking on this prediction in July 2003. Now that the figures are available for the full year-and-a-half period, a verdict can be rendered on the prediction and the economic usefulness of the tax cuts. The verdict: failure.

For the U.S. as a whole, new job creation was 3.1 million below the prediction. Approximately 2.4 million jobs were created.

Working with the Washington-based Economic Policy Institute, New Jersey Policy Perspective has kept tabs on how this state was performing relative to the job-creation predictions out of Washington. While the percentage of new jobs in New Jersey over the 18-month period exceeded the national average, reality still fell well short of the tax-cutters' expectations.

New Jersey saw 107,000 jobs created over a year and a half, compared to the 161,000 that would have been realized if the tax-cut predictions were accurate. That's a shortfall of 54,000 jobs.

"They called it the 'Jobs and Growth' tax cut, said NJPP President Jon Shure. "It was named for what people were supposed to think it would do, not what it actually would do. A more honest name would have been 'Redistribute Income-from the Bottom to the Top.'"

The JobWatch analysis takes into account differences that can be expected among states in terms of job creation. EPI used state-by-state employment forecasts from Economy.com, a leading forecaster of regional economics. Economy.com provided employment projections for each state for the fourth quarter of 2002 to the fourth quarter of 2004. Using this data, EPI calculated each state's share of the total employment growth and applied it to the projected 306,000-jobs-per month growth rate nationwide to calculate how much employment growth each state should experience if the federal government's employment projections were realized. That worked out to an average of 9,000 new jobs per month for New Jersey. Instead, New Jersey gained jobs at a rate of just under 6,000 a month.

On the seemingly bright side, the unemployment rate in New Jersey continues to decline. But it is important to point out that it is still not back down to the level of 3.5 percent where it stood when the recession started.

And since the recession started in March 2001, job growth in New Jersey has been two percent, while the working age population has grown by 3.4 percent. If job growth since the recession began had kept up with working-age population growth, New Jersey would have 56,000 more jobs than it has now. Forty-seven other states are also in this predicament: population growth exceeding job growth.

Since the recession began, the U.S. has lost 15 percent of its manufacturing jobs. New Jersey has seen a decline of 17 percent in the number of manufacturing jobs. The trend continued in December with the loss of 300 such jobs.

And, although 2004 was the first year since 1999 with U.S. job growth in every month, the Economic Policy Institute has found that wages grew more slowly in 2004 than in 2003. The 2.1 percent growth rate for nominal hourly earnings among blue-collar manufacturing workers or non-managers in services in 2004 is the lowest since data began being collected on this in 1964.

While wage growth was slow, inflation was not. It grew 2.7 percent in 2004 compared to 2.3 percent in 2003. The combination of decelerating wage growth and accelerating price growth led to the first real decline in hourly wages for this group since 1993.

For more on JobWatch, go to http://www.jobwatch.org.

Economic Policy Institute's JobWatch tracks current trends in the U.S. labor market and offers up-to-date readings on its status. New Jersey Policy Perspective is a nonprofit, nonpartisan organization that conducts research and analysis aimed at providing information to help inform debate in New Jersey.

TAX REFORM

WORK & WAGES

BUDGET & FISCAL POLICY

TRANSIT ISSUES

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