Updated Census Numbers Deliver Mixed Message to NJ

September 18th, 2007 by Tim Evans

New Jersey has lost its No. 1 status in terms of median household income. The Garden State was the wealthiest in the nation as of the 2000 Census, but Maryland has now surpassed it (and leaped past former No. 2 Connecticut in the process), according to statistics released last week from the 2006 American Community Survey.
Maryland’s median household income jumped by 3.9 percent (in real, inflation-adjusted dollars) between 1999 and 2006, while New Jersey’s declined by 1.4 percent. New Jersey continues to outperform the rest of the nation, however; nationally, median household income declined by an even larger 2.7 percent.
Surprisingly, Newark is outperforming the rest of New Jersey—and by a wide margin. The city’s median household income increased by 8.2 percent in real terms between 1999 and 2006, also placing it ahead of most of its fellow large cities. Among New Jersey cities with populations of 65,000 or more, only Union City bested Newark’s performance, with median household income growing by 8.4 percent.
The rest of the state’s large cities saw their median household incomes decline over the same period after adjusting for inflation, with Passaic, Paterson, East Orange, Clifton, and Trenton posting double-digit losses.

Uncertain Link Between Income, Unemployment

Something seems to be going right in Newark, with recent Census Bureau data showing median household income in the city growing much more rapidly than in the state as a whole, as well as in most of the state’s other large urban centers. What is not clear is how or why this has happened.

One potential explanation is a drop in Newark’s unemployment rate, which fell from 9.7 percent in 1999 to 8.5 percent in 2006. Lower unemployment would tend to produce higher median incomes. But Jersey City’s unemployment rate declined even more dramatically over the same period, from 9.0 percent to 6.0 percent, and other large cities—Camden, Passaic, Elizabeth, Paterson, East Orange—also saw their rates drop, while the statewide rate stood at 4.6 percent in both years. Yet despite outperforming the state on this measure, these other cities saw their median household incomes decrease.

Another possibility is that Newark is gentrifying, attracting people who have been priced out of Hoboken, Jersey City, or New York City and displacing lower-income residents into neighboring towns (like East Orange, whose median household income did indeed drop significantly). Replacing lower-income households with higher-income ones will obviously raise median household income. (This could also explain Newark’s falling unemployment rate.) Newark’s population has been growing since 2000, reversing decades of sustained loss, but more detailed investigation is needed to determine the incomes of the in-migrants as compared to the out-migrants. Also, the displacement theory fails to explain why median household income in Jersey City—one of the newly thriving places from which people of more modest means are purportedly migrating to Newark—slipped by 3.3 percent, failing to keep pace with the state as a whole.

Whatever is responsible for Newark’s rebound in household income, it is taking place in the face of continued job loss. Newark lost 5,500 private-sector jobs between 1990 and 1999, and lost another 2,700 between 1999 and 2003 (the last year for which municipal-level figures are available from the New Jersey Department of Labor). Paterson, Clifton, Trenton, and Camden also lost jobs between 1999 and 2003, while Jersey City, Union City, New Brunswick, Passaic, and Elizabeth all posted healthy gains over the same period.

State Should Capitalize on Positive Trend

Why aren’t other cities’ job gains translating into increased median household incomes? And what is responsible for Newark’s increasing household income, in spite of job losses? These questions warrant further inquiry. In the meantime, it is clear that some progress is being made in bringing jobs back to some of the state’s urban centers. State agencies should try to capitalize on this positive trend, since shoring up a city’s commercial tax base is a critical step in raising the money to restore quality public services and repair aging infrastructure.

At the same time, revitalizing New Jersey’s cities must be done in such a way as to ensure that any improvements in a city’s fortunes are shared by longtime residents as well as new arrivals. An increase in a city’s income or a decrease in its unemployment rate rings hollow if it is accomplished merely by elbowing out lower-income residents.

If you have any questions about this issue of Future Facts, please contact Tim Evans, Research Director.