The labor market may look solid on the surface, but economist Matt Colyar of Moody’s Analytics told attendees at the recent NJBankers Annual Economic Leadership Forum that the reality is shakier.
Monthly job gains are still coming in at what most people would call “pretty good” levels, he said. And the unemployment rate is holding in the low‑to‑mid 4% range. But Colyar urged the room to look past the top‑line numbers and focus on where those jobs are being created: Health care.
“All of the job growth of the past year in the United States has come from one sector,” he said.
If you take the health care sector out of the data there is no job growth, Colyar said.
Now, there is good news in this: You can’t remove health care. Or even predict that it will slow down. Health care is growing because the population is getting older and needs more services, not because businesses are suddenly optimistic and ramping up production.
That doesn’t hold up in other sectors.
Colyar mentioned construction and manufacturing. These industries typically expand when confidence is strong. They are not doing so right now, he said.
Then there’s this: The supply of workers itself is shrinking, too.
Colyar pointed to slower population growth and weaker immigration as underappreciated forces shaping the labor market. There are simply fewer people looking for work, which holds back both hiring and long‑term growth potential.
New Jersey, he said, feels this even more than others because the state has historically relied more on international migration.
What does this all mean?
Like any talk on the economics, there is a good, bad and ugly.
For the bankers in the room, Colyar’s overall message was that a “good” labor market can still be fragile. Whether you feel that’s “bad” or “ugly” is up to you.
Here are five other topics Colyar detailed in his presentation (presented by someone with a history degree):
1. Tariffs turned into a huge tax on the U.S. economy
Colyar said the average tax on goods coming into the U.S. has climbed from roughly 1–2% a decade ago to around 10–11% today. Of course, a recent court ruling found that roughly half of those tariffs were collected improperly, which could mean as much as $175 billion in refunds flowing back to businesses.
That’s real money that could help firms pay down debt, hire or invest. When it may be returned (the White House is fighting the ruling) isn’t as clear.
2. Inflation has cooled, but “easy” progress is over
Prices aren’t rising at 2022’s scary pace anymore, but Colyar said the improvement has basically stalled around the 3% mark, a bit above the Federal Reserve’s 2% goal. Colyar said that puts the Fed in a tricky spot: Inflation is no longer a pressing emergency, but it still needs to be watched.
For everyone from households to business owners, that likely means borrowing costs stay higher for longer than people might like — and rate cuts come more slowly than markets once hoped, he said.
3. AI could be a game‑changer, but not in a sci‑fi way
Colyar walked through three broad AI futures, ranging from “overhyped chatbots” to “mass job loss” to a more balanced middle ground. (None of those scenarios made the room feel any better).
Colyar said his team leans toward that middle scenario, where AI steadily makes workers more productive without wiping out entire professions overnight. In their models, that kind of shift nudges long‑term productivity meaningfully higher — a quiet but powerful boost to growth and living standards over time, he said.
In the meantime, the most visible impact may be the surge in spending on data centers and digital infrastructure.
4. The U.S. economy looks OK, certainly not spectacular
Colyar’s forecast was neither doom‑and‑gloom nor wildly optimistic. (He predicted 2.2–2.3% real GDP growth for those who love/understand the numbers).
Some of the strength we’re seeing now comes from temporary supports, such as bigger tax refunds and favorable rules that let businesses write off investments more quickly, he said. Those boosts will help in the first half of the year, he said. Longer term, slower population growth and tighter immigration policy could act as a drag on how fast the country can grow.
5. New Jersey has real strengths — and real constraints
Colyar said New Jersey has solid fundamentals but some stubborn headwinds (this is more of the good-bad-ugly thing). Job growth has lagged the national average, in part because the state depends more on international migration at a time when those flows have slowed. Yet New Jersey also sits on powerful engines in health care, life sciences, and pharmaceuticals — industries that support high‑skill, high‑wage jobs and a deep ecosystem of related services.
Home prices, he said, are likely to keep rising a bit faster than the U.S. overall for one key reason: There just isn’t enough new housing being built. (Economist Jeffrey Otteau had an interesting take on outmigration during another keynote at the event.)
And finally, here’s one topic no one can be sure of: Energy.
The event was held on March 5, or five days after the U.S. and Israel began bombing Iran. The price of oil already had jumped from $71 a barrel to $89. Today, it is more than $100 a barrel.
How long the war will last — and how long it will take for prices to go down — remains to be seen. As is its impact on energy costs in the state and country.
