Third Quarter 2016: 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 2016 is 52. That indicates that the environment in the State has been close to average for wealth creation as of the second quarter of 2016.

index 1

index 2

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 52 since then has been very rapid, and it continues to become broader in 2016.

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. With stock returns flat since late 2014, other factors have begun to take up the slack.

The strongest positive developments of 2016 so far have been an increase in employment and very robust growth in incomes. Since hitting a low point in early 2010, the number of workers in NJ has increased by over 250,000. This is significant progress, and puts the number of workers in the state at a new all time peak as of June 2016.

In the 12 months ending 12/31/15, personal income in New Jersey grew about 4.2%, which was well ahead of the inflation rate of just 1.0%. New Jersey’s workers are benefiting from two trends – rising wages boosting their pocketbooks and a recent decline in energy prices making their money go farther. Early indications suggest that workers throughout the country, including New Jersey, have been successful in securing better wage growth in 2016, so this trend could continue to improve.

Values for NJ homes have increased about 2.5% over the past year, this is a slowdown relative to last year. Overall, 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 Executive Officer, and Chief Investment Officer
Andy Kapyrin

Andy Kapyrin

CFA
Partner and Director of Research

Trends to Watch:

  • Employment in New Jersey has turned around since last year. The state’s current unemployment rate of 5.1% and close to the national average. This is a marked reduction from the peak unemployment rate of 9.7% that we hit in 2012. The state has added over 250,000 jobs since the start of the recovery.
  • Personal Income grew 4.2%, beating inflation by a large margin. NJ workers are enjoying better than average growth in their paychecks.
  • New Jersey has lagged behind in the national home price recovery. Home prices around the country, as measured by the FHFA, rose 5.4% over the past year. New Jersey home prices are up only about 2.5%.  Nationally and in New Jersey, home prices peaked in 2007.  In most areas, prices are approaching or hitting new peaks.  The average New Jersey home is still 15% below its value in 2007.
  • One of the factors keeping New Jersey from higher rates of growth is uncompetitive tax policy, including some of the least advantageous estate tax rates.  As of August, state politicians are debating the merits of introducing estate tax reform as part of a package that would fund the state’s road building projects with a higher gasoline tax.