New Jersey employers tamped down their hiring in May and are growing more pessimistic about their outlook, a series of reports released this week shows.

The New Jersey Department of Labor and Workforce Development reported Thursday that New Jersey lost 7,600 jobs in May. Its unemployment rate dipped to 3.8 percent — the lowest level since April 2001. But the jobless rate's decline was due in part because fewer people were in the labor force.

Meanwhile, the New York Federal Reserve Bank reported that service sector growth in the region that includes northern New Jersey and New York fell in June to its lowest level since January.

And the Federal Reserve Bank of Philadelphia reported that manufacturing sector's growth in the region that includes southern New Jersey and parts of Pennsylvania fell in June and showed muted optimism for the rest of the year.

Analysts hope it is simply a spring slump. But the state might be starting to feel the impact of higher tariffs.

"Tariffs obviously affect us," said Paul Ruitenberg, co-founder of Babo International Trade, a Kearny-based company that has partnered with a Chinese business to sell bamboo paper products.

"We’re a premium product because it’s a stronger paper, it's softer than traditional paper, it costs us more money to make. When you're hit with a 25 percent tariff, it was not something we really wanted to see on top of that."

Watch a video at the top pf this story on Babo's attempts to deal with tariffs.

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Among the issues facing businesses: Locally, the New Jersey Legislature is pushing back over Gov. Phil Murphy's desire to increase taxes on millionaires. And nationally, the Trump administration is continuing its tariff war with China.

Experts say the tariff could hurt New Jersey's economy particularly hard. The state is the sixth-biggest importer nationwide, and China is its biggest supplier, according to government statistics.

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Tariffs could cause businesses to either raise prices or cut expenses to stay competitive.

"New Jersey is a state that depends heavily on international trade and trans-shipment of goods," said Joel Naroff, an economist based in Holland, Pennsylvania. "The extent that’s affected by trade issues, tariff wars, that’s also going to hurt the state."

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The jobs report was a preliminary look that will be revised next month.

It showed professional and business services lost 3,500 jobs in May; trade, transportation and utilities lost 2,300 jobs; and education and health services lost 1,900 jobs.

Financial activities, construction and the public sector added 800 jobs apiece.

Not everyone exuded pessimism. Invonto, a Bridgewater technology company, recently expanded into a bigger office and is hiring up to 10 employees to help keep up with demand it is seeing in new breakthroughs, from virtual reality to artificial intelligence.

"We needed extra room to hire new talent as well as research space for us because some of the technologies were experimental," said Maulik Shah, the company's chief executive officer.

But both the U.S. and New Jersey economies are banking on the expansion to continue.

A report released Thursday by CBRE Group Inc., a commercial real estate company, said slightly more than 70 percent of warehouse space under construction is speculative; developers don't have tenants yet.

Northern New Jersey and New York have 7 million square feet under construction, making it the seventh-biggest market nationwide, CBRE said.

At least one company might need more warehouse space soon. Or, it might not.

Paul Ruitenberg, his daughter, Kaitlyn, and his business partner, Gustavo Avila, teamed with a Chinese company six months ago to start Babo and sell paper towels, tissues, straws and more made from bamboo.

They have been signing contracts with local supermarket distributors, hoping consumers will flock to what they say are more environmentally friendly options.

Still, a 25 percent tariff on many Chinese imports hangs over its head. The tariff could have made the bamboo products too expensive, but its supplier agreed to absorb the cost to get a foothold in the market, Paul Ruitenberg said.

"They’ll take the hit with the hope in the next six months that the Chinese and U.S. governments will hopefully work it out," he said.

Michael L. Diamond is a business reporter at the Asbury Park Press who has been writing about the New Jersey economy for 20 years. He can be reached at 732-643-4038; mdiamond@gannettnj.com; and @mdiamondapp.