MAIN STREET

Banks fail, but NJ hiring spree continues. How does this make sense? 5 things to learn

Asbury Park Press

New Jersey gained almost 400,000 jobs in the past two years, recovering all the jobs lost to the pandemic.
At the same time, Gov. Phil Murphy was reassuring New Jersey customers of two newly failed banks that they will not lose any money.
The Fed has raised interest rates to tame inflation while not harming job growth. But the rising rates are hurting banks used to cheap lending costs.

New Jersey's economy added nearly 130,000 jobs in 2022, and its labor market got off to a roaring start in 2023, the state reported Monday, in a sign that employers are continuing to hire with abandon to try to meet their customers' demand.

The Garden State, however, had little time to bask in strong job growth. Gov. Phil Murphy and the state's Economic Development Authority Sunday night rolled out an economic package for New Jersey customers of Silicon Valley Bank and Signature Bank, both of which collapsed and were taken over by the federal government.

"Our goal is to ensure that every New Jersey company caught up in this mess is able to keep the lights on, meet payroll, pay rent and continue their day-to-day operations," Murphy said Monday.

The rapid hiring combined with the sudden bank failures added little to clear up a blurry economic picture.

A worker tells people that the Silicon Valley Bank headquarters is closed on March 10, 2023, in Santa Clara, Calif.

Ripple effect:How Silicon Valley Bank collapse is affecting other US banks

The Federal Reserve Board has been increasing interest rates for the past year, hoping to rein in inflation without sinking the economy. But experts said you need to look no further than the past few days to see how tricky the task is. On one hand, employers are continuing to hire. On the other, regulators are trying to contain the damage of two bank failures.

For now, the Fed has managed to reduce inflation without harming the job market. But as Silicon Valley Bank's failure shows, the strategy isn't pain-free.

Interest rate hikes are "kind of the blunt weapon of monetary policy that the Federal Reserve wields to manage the economy," said Michael Ehrlich, a finance professor and director of the Leir Institute for Business, Technology and Society at New Jersey Institute of Technology in Newark. "It's not a rapier, it's more like a cannon. It's big and blunt. The fact that some banks would do worse during a rising interest rate environment is not surprising."

No more banks?'Banking deserts' spread at record rate in NJ

Five things to know:

1. New Jersey's job market continues to roll

The state in January added 24,200 jobs. Its unemployment rate ticked up to 3.4% from 3.3% in December, mainly because more people entered the labor force and actively searched for work, according to the New Jersey Department of Labor and Workforce Development.

The report included an annual revision that showed the state added 395,300 jobs over 2021 and 2022 combined, which was 34,000 more than originally estimated. It meant the state recovered all of the jobs lost during the first two months of the pandemic by April 2022, four months earlier than first thought.

In 2022, all nine sectors in New Jersey added jobs. The biggest gainers: education and health services added 41,400 jobs; trade, transportation and utilities added 29,900 jobs; and leisure and hospitality added 26,900 jobs.

"Entering 2023, we had a lot of growth momentum, a strong labor market, and we were in lockstep with the nation," Rutgers University economist James W. Hughes said. "The labor market is proving very resilient."

Is the office dead?Commvault dumps foosball, slide at Fort Monmouth for remote future

Three years after the pandemic shined a light on a labor shortage, business owners say they continue to have trouble finding workers. Frank Horvath, owner of plumbing, HVAC and electric companies, is trying to hire three or four employees to help his business keep up with demand.

2. Don't put away your help-wanted signs

Employers have spent the better part of three years trying in vain to fill open positions. And they say the hiring landscape remains difficult.

Frank Horvath, owner of Ben Franklin Plumbing and One Hour Heating in Beachwood, Ocean County, said he is trying to hire three or four skilled tradespeople to join his staff of 35. It hasn't been easy; he's looking for people who have technical skills to do the job and interpersonal skills to talk to customers.

He's advertised on Indeed.com, television and radio. He's attended job fairs. But he's had little luck.

"If I could have found those qualified people last year, I could have probably done 30% more in sales revenue than I did (the previous) year," Horvath said. "And we had a good year last year."

New Jersey jobs:Employers can't bite into paychecks of NJ's 127,000 temp workers under new law

Three years after the pandemic shined a light on a labor shortage, business owners say they continue to have trouble finding workers. Ed Anderson, director of sales for Benjamin Franklin Plumbing, One Hour Heating and Air Conditioning and Mr. Sparky Electricians, holds up literature the business hands out in an effort to get orders.

3. What isn't there a shortage of? Job fairs.

Employers, business groups and government agencies are hosting job fairs to try to connect with workers. Last week, northern New Jersey law enforcement agencies hosted a job fair at Kean University. And Wakefern Food Corp., the operator of ShopRite stores, also had job fairs at its stores.

More are on the way. Among them:

The Monmouth County Board of Commissioners has scheduled its spring job fair at Brookdale Community College on March 28.
Ocean County Vocational Technical School will host a job fair for students on May 3 at Jersey Shore BlueClaws Stadium in Lakewood with some companies offering on-site interviews.
The Long Beach Island Chamber of Commerce will host its summer job fairs from 10 a.m. to 2 p.m. on March 18 and April 15 at St. Francis Community Center Gym in Long Beach Township.

Despite the abundance of jobs, some experts say employers are beginning to get choosier on who they hire.

"I feel like something is changing a little bit in the market, but it's good," said Anna Santucci-Braun, owner and general manager of Express Employment Professionals in Howell. "I feel like there's still hiring going on, but employers are being more specific about what they need, which is healthy."

Bring your baby to your office?See what some working parents do for child care

4. Soft landing gets bumpy

Silicon Valley Bank, which specialized in serving technology startups and grew to be the nation's 16th-biggest bank, failed after it didn't have enough money on hand to cover customers' withdrawals, prompting a run on the bank.

New Jersey's own technology and life sciences sector wasn't immune, although it isn't clear how many local companies were counted as customers.

A man walks out of a Manhattan branch of Signature Bank which was closed by bank regulators on Sunday on March 13, 2023 in New York City. The move by the state's Department of Financial Services seeks to prevent a banking crisis spurred by the failure of Silicon Valley Bank.

LIve updates:Silicon Valley Bank, Signature Bank failures explained, learn new developments here

Federal regulators took over the bank, along with New York-based Signature Bank, and said all of their customers' deposits — including above the Federal Deposit Insurance Corp.'s limit of $250,000 — would be covered.

In New Jersey, the EDA said it would provide a total of $35 million in short-term assistance to entrepreneurs affected by the bank closings.

"Given that the Garden State is an industry hotbed, New Jersey companies will clearly be among SVB’s clients," Debbie Hart, president and chief executive officer of BioNJ, a life sciences trade group. The government's measures "are critical steps in lessening the potential harm to companies."

5. What comes next?

New Jerseyans are noticing a mixed bag. Consumers with rising interest rates are in line to pay more for mortgages and auto loans. But they also might get more interest in their savings accounts and, if inflation falls, cheaper products.

Still unknown is whether the banking fallout be contained.

Real estate:Why South Jersey beats North Jersey in ZIP codes with biggest, smallest home price rises

Silicon Valley Bank and Signature Banks are considered mid-level banks that aren't subject to financial stress tests faced by bigger banks like JPMorgan Chase and Bank of America that were famously deemed "too big to fail" during the 2008 financial crisis.

Other regional banks were hit hard by investors on Monday.

But some observers said Silicon Valley Bank was at particular risk. It was flush with deposits during the technology boom in 2020 and 2021. It invested some of the money in long-term Treasury bonds that offered a steady, but low, interest rate.

When venture funding slowed last year, more startups, needing money, made withdrawals. To pay them back, Silicon Valley Bank sold some of its bonds. But by then, the interest rate had risen sharply. The bank was forced to sell its old bonds, now at a discount, leaving it without enough money to cover its expenses. Word spread quickly through social media, causing a run on the bank.

"Companies that had money there were relying on it to pay for payroll and all the other expenses, the day-to-day cash flow for everything from taxes to employees to utility bills and stuff like that," said Robert Scott, an economics professor at Monmouth University in West Long Branch. "Just like regular folks have checking accounts to pay for mortgages and electric bills, companies have the same obligations. And if their checking account is all of a sudden not accessible, they're in deep trouble."

Michael L. Diamond is a business reporter who has been writing about the New Jersey economy and health care industry for more than 20 years. He can be reached at mdiamond@gannettnj.com.