Third Quarter 2015: New Jersey Wealth Index

The RegentAtlantic New Jersey Wealth Index (RANJWI) is a proprietary index that measures the health of the wealth in New Jersey. RegentAtlantic developed the index which is based on four major components: Employment, Home Values, Personal Income, and Stock Performance. It can range from 0 to 100, with values above 50 indicating that the State has experienced an above average environment for wealth creation.

The RANJWI’s value for the third quarter of 2015 is 51. That indicates that the environment in the State has been close to average for wealth creation as of the third quarter of 2015.

New Jersey Wealth Index 2015

New Jersey Wealth index components chart

The financial crisis and associated recession from 2007-2009 took the RANJWI to record lows. Falling home prices, a weak stock market, high unemployment and slow income growth created a very adverse environment for wealth creation. The index hit an all-time low in mid-2012 at a value of just 17. The recovery to 51 since then has been very rapid, and it has become broader in 2015, with more components of the index showing improvements.

The recovery in the health of New Jersey’s wealth was limited at first – it was mostly driven by a buoyant stock market, especially in the stock prices of some of New Jersey’s largest businesses, which include major pharmaceutical firms such as Johnson and Johnson and Merck. Starting in 2014 and continuing into this year, other components of the index have become more supportive of wealth in the state.

The strongest positive development of 2015 so far was an increase in the number of workers in the state. Since hitting a low point in early 2010, the number of workers in NJ has increase by about 170,000. This is strong progress back to normal, though it’s important to note that NJ employment peaked in 2008, with approximately 4.1 million workers statewide. The state is still about 100,000 workers short of that high point, so it is lagging the rest of the country which has recovered all the recession’s losses.

In the 12 months ending 3/31/15, income in New Jersey grew about 3.7%, which was well ahead of the inflation rate of just 0.1% It is likely that New Jersey’s buying power will increase further as a result of the drop in the price of gasoline, which has given N.J. shoppers a much needed boost. Early indications suggest that workers throughout the country, including New Jersey, have been successful in securing better wage growth in 2015, so this trend could continue to improve.

Values for NJ homes have increased about 3.4% over the past year, which is the strongest showing in ten years. Overall, though, home values are about unchanged from their levels in 2004 and New Jersey home prices continue to lag gains in the rest of the country. They are one of the weakest links in the state’s economic conditions.

 

Important Disclosure Information

Please remember that different types of investments involve varying degrees of risk, including the loss of money invested. Past performance may not be indicative of future results. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments or investment strategies recommended or undertaken by RegentAtlantic Capital, LLC (“RegentAtlantic”) will be profitable. Please remember to contact RegentAtlantic if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and services, or if you wish to impose, add, or modify any reasonable restrictions to our investment management services. A copy of our current written disclosure statement discussing our advisory services and fees is available for your review upon request. This presentation is not a substitute for personalized advice from RegentAtlantic. This information is current only as of the date on which it was sent. The statements and opinions expressed are, however, subject to change without notice based on market and other conditions and may differ from opinions expressed in other businesses and activities of RegentAtlantic. Descriptions of RegentAtlantic’s process and strategies are based on general practice and we may make exceptions in specific cases.The Index was launched on June 30, 2013 with scores calculated and filled back to March 31, 1995. All Index calculations are based on twenty quarters (five years) of trailing data, so the earliest data in the March 31, 1995 score calculation is from March 31, 1990.

Source for the data for the Employment, Housing, Personal Income and NJ Stock Performance Scores: Bloomberg.

RANJWI Authors

Christopher J. Cordaro

Christopher J. Cordaro

CFP®, CFA, MBA
Managing Partner, Chief Investment Officer, and Wealth Advisor
Andy Kapyrin

Andy Kapyrin

CFA
Partner and Director of Research

Trends to Watch:

  • Employment in New Jersey is mixed. The state’s current unemployment rate of 6.1% is above the national average, but has dropped markedly from its highest point of 9.7% in 2012.
  • New Jersey has lagged behind in the national home price recovery. Home prices around the country, as measured by the FHFA, rose 5.5% over the past year. New Jersey home prices are up only about 3.4%.
  • Personal Income grew 3.7%, beating inflation by a large margin, with potential to do better still as a result of falling prices for gasoline and growing wages.
  • Employment has been New Jersey’s weakest link, though there is potential for the State to do better.  JP Morgan recently announced a move that would bring over 1,000 workers to offices in Jersey city.  If NJ can continue to appeal to businesses both large and small, it can help to improve our numbers.