Why NJ’s Payroll Drop May Matter More Than the Unemployment Dip

The latest NJ Employment report from the state DOL might come across as a bit of a contradiction, showing a drop of over 10,000 payroll jobs while, at the same time, reporting a decline in the state’s unemployment rate from 5.2% in Jan. to 5.1% for Feb.

This gap is actually an important data point to pay attention to.

Payroll employment tells us how many jobs exist in NJ’s economy, while the unemployment rate tells us how many people in the state are looking for those jobs and can change directions when folks stop looking for work, change categories (disability as an example) or move in and out of the labor force.

What’s important to look at in the report is where the jobs were lost.

Almost 60% of the jobs lost (5900) came from construction – that’s over half the entire decline in just one sector. And yes – these are seasonally adjusted numbers. This is important because what happens in that sector can create significant ripple effects and can be a bellwether for fewer projects moving forward and less economic activity feeding into local economies.

Less construction could mean less spending on the consumer side, upward pressure on property values in an already highly priced market, and more pressure on local revenue.

Local revenue is what municipalities might begin to worry about if this continues since, as our 7-Municipality Budget Dashboard already shows, the budgets are going north regardless of what direction revenue ends up trending. It’s important to note here that municipal revenue is a trailing indicator, so the impact we may see on them, if employment numbers keep trending down, will show up later.

And while there were gains in three sectors – leisure and hospitality, private education and health services and other services – the 4k total job growth in those sectors does not match to offset the losses in just Construction.

If the labor market is, in fact, weakening, especially construction, residents and municipalities will have to consider whether municipal budget growth makes any sense.

One final note, this month’s report shows the second straight downward revision released this year. Last week on the 21st Briefing, we reported December’s (2025) job growth numbers were revised down – this report shows yet another downward revision for January, from 6,000 jobs to 3,500.

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