New Jersey’s economy has rebounded well from the COVID-19 pandemic. After losing 717,000 jobs, with employment dropping from 4.2 million in February 2020 to 3.5 million in April 2020, New Jersey’s GDP bounced back to pre-pandemic levels in the third quarter of 2021, with the total level of employment rebounding in the third quarter of 2022.
Despite this rebound, a shortage of skilled labor presents a challenge to the hope of long term, sustained economic growth.
According to NJBIA’s 64th Annual Business Outlook Survey, some 70% of respondents said they were challenged to find appropriate staffing in 2022, with 79% saying there were not enough candidates or applicants to fill open job positions. Additionally, 59% said candidates lacked the required skills or qualifications necessary.
“New Jersey has faced a talent gap – a mismatch between the demand for skilled workers and the supply – since before 2010, but the gap has increased in recent years,” says Aaron De Smet, senior partner in the New Jersey office of global management consulting firm McKinsey & Company. “This talent gap could slow growth because the state’s production of qualified talent is not keeping pace with increased business development and job demand.”
The overall supply of talent within New Jersey is influenced by a number of factors. According to the US Bureau of Labor Statistics (BLS), the labor force participation rate for New Jersey’s working-age population (those aged 16 and above) has declined steadily over the past 10 years, from 66% in 2012 to 63% in 2022, the lowest mark in 44 years.
New Jersey has also struggled to keep its talent, as evidenced from 2011 to 2021, where an average of 20,000 residents (net of inflows) migrated to other states or countries each year, according to BLS. In fact, BLS statistics show that in 2020, New Jersey had a 38% retention rate of newly graduated college students, which trailed New York (52%) and Pennsylvania (45%).
Additionally, the occupations in New Jersey that are expected to experience the highest growth through 2030 require a postsecondary education or higher, including: healthcare practitioners; management; computer and mathematical; and technical, business, and financial operations. All areas that already show talent shortages.
Analysis from McKinsey & Company suggests that properly addressing the talent shortage could increase annual GDP growth by 0.6 to 0.8 percentage points from 2022 to 2030, translating to an incremental $38 billion to $50 billion in GDP in 2030 when compared to a baseline scenario. It represents a total potential increase of $160 billion to $175 billion in GDP from 2022 to 2030.
This data reinforces the importance of doubling down on finding solutions to New Jersey’s labor shortage, as its impact on the future of the state’s economy is tremendous.
At the same time, technological evolution, particularly when it comes to generative artificial intelligence (AI), is at the beginning stages of reshaping the workforce.
“The latest iteration [of generative AI] is as major a step forward as the iPhone or web browser introduction,” says Jack Berkowitz, chief data officer, ADP. “For most professions, you haven’t really seen the impact on jobs yet, but it is coming.”
He points to the advertising world, where we’ve seen big layoffs, as an early example of an industry that has felt the weight of AI.
“Advertising was always data driven, but you would have people who did various tasks, such as building audience segments and SEO, by hand,” Berkowitz says. “What you are seeing now is you don’t need the armies of marketing, advertising and SEO people to [be effective].”
KPMG New York Managing Partner Yessi Scheker says that over time, she expects generative AI to create the need for new roles and skills that act as an enabler to the AI technology.
For example, she cites prompt engineers, who specialize in developing, refining and optimizing AI-generated text prompts to ensure they are accurate, engaging and relevant for various applications.
“Historically, tech disruptions like the one we are seeing right now with AI have the capacity to create more jobs than they replace, and particularly with generative AI, its use is more uniquely suited for augmentation rather than automation,” Scheker says.
She adds that the skills needed for workers to participate in these new jobs would include everything from the aforementioned prompt engineers, to more technical skills like conducting data analysis, generating software code, and managing the risk and overseeing the protection of data.
“Successful implementation and integration of generative AI requires significant training and upskilling programs, and while talent is generally happy with opportunities to upskill in their current roles, there is an exception with AI upskilling,” Scheker says.
She points to KPMG’s US Talent Trends survey, which revealed that just 42% of respondents said their company does a good or excellent job with AI-related upskilling.
With technologies such as AI necessitating additional skills from the workforce, it’s more important than ever to make strides in addressing the labor shortage in New Jersey, a task that De Smet says will require a collaborative effort across all sectors of government, nonprofits, academia, and business.
“Generative AI adds another layer of change to a workplace environment that continues to transform at a rapid pace,” says Sandy Torchia, KPMG vice chair of talent & culture. “During times of rapid change, it is critical that employers listen to their people and act on that feedback, while ensuring they continue to upskill and develop them.”
Berkowitz echoes this sentiment, explaining that companies need to start focusing on investing in helping their employees get the skills and certifications necessary for the roles they need filled. “Hiring people based on skills as opposed to job titles and universities is going to be the focus over the next 15 years,” he says.
De Smet adds that expanding capacity and enrollment in healthcare, IT, and business programs at postsecondary education institutions is vital; and says that employers have a responsibility as well, as redefining hiring and recruiting processes can help to remove barriers for employment and actively tap into often overlooked pools of talent.
Finally, it is imperative that the state continues to take the lead in creating the work environment of the future to improve attraction and retention and keep companies in New Jersey.
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