NEWARK-While unemployment remains low, and business' output remains high, there are some cracks in New Jersey's economic picture, according to a panel of economists at the Newark Regional Business Partnership's regional economic outlook meeting here yesterday. The story begins with slow employment growth.

Prefacing his remarks by explaining that New Jersey in the past quarter century had transformed itself from a failing manufacturing economy to a knowledge-based powerhouse, James Hughes, dean of Rutgers' Bloustein School of Planning and Public Policy told attendees that, “some of our neighbors are pulling away in employment growth. Employment growth has slowed dramatically in New Jersey.”

Hughes also pointed to a larger issue, borne out in a recent report he co-authored, which indicates that overall population growth has slowed as well. “New Jersey may show an actual decline in population as early as 2008.”

For now, natural growth and immigration from outside of the US are barely exceeding migration out of New Jersey to other states. “The fiscal consequences of out-migration are not inconsequential,” he said. Relating to the economy, “some knowledge-based jobs are moving south, to Georgia and North Carolina, for example, where housing and business costs are lower.”

And relating to commercial real estate, “the office markets remain relatively soft owing to slowed employment growth,” Hughes said. He noted that with rents high and vacancies low in Manhattan, “we're still waiting for the spillover.”

Rae Rosen, senior economist and AVP for the Federal Reserve Bank of New York, concurred that the sectors producing jobs, like finance and information, will continue to do so, “but at a slower rate.” And relative to the rest of the US, “New Jersey continues to have more people in finance, information and business services, especially real estate,” than other states.

But she found the real estate sector jobs situation troubling, citing the residential market's current weakness. “What's the impact if they can't write mortgages?” she asked.

And Joel Naroff, chief economist for Commerce Bank, also invoked real estate from a credit standpoint. Citing a trio of issues–the subprime situation, general credit crunch and the price of oil–he painted a larger national picture of an economy that's “clearly facing a whole series of challenges.”

The heart of the matter, Naroff said, is “will consumers continue to spend to save the economy. High energy prices, for many, could come out of disposable income, which would mean less spending.”

Changing the subject to a real estate-specific issue, “wireless changes everything,” Naroff says. “In terms of cost structure, it changes the difference between class A and lower class space. Older buildings have been too expensive to refurbish using today's technology, but may no longer be so. Older, architecturally interesting buildings in older locations have renewed value. “That adds up to a growth opportunity for a lot of older cities and towns in New Jersey,” he concluded.