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©Rutgers University 2000

South Jersey Economy Poised for Growth
by Mike Sepanic

Things are getting better, but by how much? The question dominated the proceedings of the Rutgers-Camden Quarterly Business Outlook on April 16, which found that optimism for an economic rebound in southern New Jersey was high, but the details were not yet in focus.

According to the in-depth testimony provided by a panel that included a vice president of the Federal Reserve Bank of Philadelphia and four prominent business leaders, economic growth for both the nation and southern New Jersey appears increasingly likely. That said, this recovery remains in a fragile state and is not yet firing on all cylinders.

More than 250 executives received a first-hand overview of the region’s economic health and its likely future during the spring and summer. None of the business leaders predicted worsening conditions for the next six months. Dr. Milton Leontiades, dean of the Rutgers University School of Business at Camden

This Rutgers-Camden School of Business event is co-sponsored by the Cherry Hill law firm of Flaster/Greenberg and the Chamber of Commerce of Southern New Jersey.

The following summarizes the report of each executive.

Economic Overview
Dr. Ted Crone, vice president of the Federal Reserve Bank of Philadelphia, offered his perspective that the Sept. 11 attacks had a much less severe impact on the New Jersey economy than anticipated. He noted that the state benefited from the migration of economic activity out of New York City and into New Jersey, which bucked the national trend and gained jobs during the fourth quarter of 2001. “Like most economists, I’m more optimistic than most CEOs,” he said, reporting that a severe reduction in inventories during the last half of 2001 is leading toward manufacturing growth in the first half of 2002. Strong housing and auto sales are also positive signs for the economy, which Dr. Crone anticipates will be stronger still by year’s end. He foresees slight continued unemployed increases before the rate levels off as the expansion takes hold.
Current conditions: 80
Forecast: Better

Banking
William Reuter, CEO of Susquehanna Bancshares, reported that commercial banks “did well” in 2001, when at least half of all U.S. banks earned more than in 2000. Still, the increases did not come to banking’s core earnings. Mr. Reuter highlighted signs of economic recovery in southern New Jersey, including the strength of the region’s banking institutions; strong housing sales; low interest rates; and a more regionalized approach to the economy. Banks will be challenged by a slide in interest margins, which will make profitability more difficult. Nonetheless, he offered optimism for the next six months.
Current conditions: 80
Forecast: Same

Health Care
Richard Murray, president and CEO of Kennedy Health System, opened his comments with the prediction that the next decade will see a doubling of information about human health and longevity. As a result, the aging of America will take on greater significance than ever before. He foresees no relief for New Jersey’s hospitals, which historically lag behind the national averages for revenues by as much as 50 percent. Charity care will continue to bedevil the state’s health-care providers, which also must contend with the inflationary pressures of salaries due to some labor shortages. Without new revenue sources, southern New Jersey’s hospitals will remain in distress.
Current conditions: 50
Forecast: Same

Manufacturing/Retail
Richard Forman, president and CEO of Forman Mills, noted that 2001 was “one of the worst retail years in a decade” for some retailers, although off-price outlets – such as Forman Mills – enjoyed great growth. He suggested that traditional retailers will continue to experience difficulty, while discounters will absorb increased business. Mr. Forman said that current economic conditions present “unbelievable opportunities for the right entrepreneurs,” citing such elements as low advertising costs, an aging population, increased consumer confidence, and a demand for niche retailing. He foresees an optimistic retail environment for southern New Jersey, and suggests that niche retailing in urban areas will be the challenge for 2003.
Current conditions: 75
Forecast: Same

Real Estate
Robert Richards Jr., president of Whitesell Construction Company, offered an overview of southern New Jersey’s commercial/industrial real estate market, noting that the first quarter of the year has offered strong rental rates, which, in turn, strengthen real estate values. The potential for growth along Route 130 in Willingboro offers cause of optimism, as does the construction of two new distribution centers in Burlington County and Logan Township. Mr. Richards predicted that vacancy rates will increase slightly and then reverse course as the economy recovers. New retail stores, such as Home Depot and Lowe’s, help promote this recovery, as do such new projects developed through such corporations as Lockheed Martin.
Current conditions: 75
Forecast: Same

The next Outlook will be held July 16 at the Clarion in Cherry Hill. For more information, contact Samantha Collier.

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