New Jersey’s economy kicked into a higher gear in December as the unemployment rate tumbled to 5.1 percent, but uncertainty over public pensions and a fund to pay for road and bridge work threaten the state’s credit rating, according to a pair of separate reports out Thursday.
The latest preliminary jobs report showed the unemployment rate dropped 0.3 percentage points to 5.1 percent last month; private sector employers added 64,500 jobs in all of 2015. It’s the strongest private sector job growth in 15 years, said Labor and Workforce Development Commissioner Hal Wirths.
“Every number is going in the right direction,” Wirths said.
But the good news arrives at the same time as a warning that the state’s cost for borrowing money could rise. Moody’s credit-rating agency warns that the state’s score — the second lowest among the states — hangs on pending litigation involving the state’s pension and the uncertain future of the transportation trust fund, which runs out of authority to pay for new projects on June 30.
The two reports came as Republican Gov. Chris Christie spends much of his time out of the state competing for the GOP presidential nomination, and just weeks before the annual budget address, set for Feb. 16.
Moody’s warned that a potential plan that assumes growth of existing revenues as a way to help pay for the transportation account could pressure the general fund or lead to higher debt levels.
It also flagged a case pending before the state Supreme Court that revolves around frozen cost-of-living adjustments for public pensioners that stems from a 2011 law. If the court overturns the freeze, the state’s liabilities could skyrocket from $40 billion to $53 billion, Moody’s said.
The agency also pointed out that if the state adopted the recommendations from a panel Christie appointed, including a 401(k)-style retirement system, the state’s credit profile would improve.
“This report from Moody’s affirms what the Administration has repeated for years: Comprehensive pension and health benefits reform is the key to improving New Jersey’s credit profile,” said acting Treasurer Ford Scudder.
New Jersey currently has a negative credit outlook.
In an interview, Wirths declined to say whether transportation or the pension case could be a drag on the state’s economy, but credited Christie’s policies with helping create favorable conditions in the labor market.