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©Rutgers University 2000

Economic Disconnect Offers Hope and Pessimism

by Mike Sepanic

Don’t believe everything you read in the newspapers.

The bottom-line message that emerged from the Rutgers-Camden Quarterly Business Outlook on July 16 underscored a disconnect between widely reported stock market drops and the relative health of the overall economy. While news of market gyrations and corporate wrongdoing rattles investor confidence, consumer purchasing seems to be sustaining a fragile economic recovery.

According to the in-depth testimony provided by a panel that introduced the pharmaceutical industry to the Outlook, the economy is in decent shape and could gain strength, although a continued deluge of bad news can cloud that forecast.

More than 250 executives received a mid-year overview of the region’s economic health and its likely future during the summer and fall. 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 moderated the discussion.

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

The following summarizes the report of each executive.

Economic Overview

Dr. Joel Naroff, chief economist of Commerce Bank, suggested that current conditions represent a “very, very strange time for an economist.” The markets no longer mirror economic data, which raises the prospect that the markets could be the factor that derails an economic rebound.

Noting that the first and second quarters of 2002 offered reasonable growth, accelerated manufacturing orders, job gains, and record-setting home sales, Naroff observed that the impact of such non-economic forces as corporate mismanagement could have a real impact on business borrowing and consumer confidence.

The southern New Jersey region has yet to see an appreciable impact from the national economic rebound, but “we did relatively well during this downturn,” says Naroff. “Since New Jersey didn’t fall a whole lot, we won’t surge a whole lot, either.” Overall, Naroff forecasts a solid economy for the region.
Current conditions: 70
Forecast: Better

Gaming

Timothy Wilmott, eastern division president of Harrah’s Entertainment, observed that the Atlantic City gaming industry enjoyed a robust three quarters since September 11, with an increase of 3.5% in revenue and 4% in visitors. The bottom-line growth for Atlantic City will only improve with increased efficiencies brought on by mergers and acquisitions among the gaming properties, and the launch of new venues during the next two years. The new properties will deliver 4,000 more rooms to the market, which Wilmott anticipates will be absorbed swiftly. The $1.5 billion investment in Atlantic City represents the highest level among the nation’s gaming markets.
Current conditions: 80
Forecast: Same

Pharmaceuticals

Marvin Samson, president and CEO of SICOR, delivered a report on the health of New Jersey’s pharmaceutical industry, which earns the state the nickname of “the nation’s medicine chest.” He discussed the increased demand for generic drug products, and the need for developing more research-intensive branded products. Samson anticipates that the generic industry will continue to grow, especially with the expiration of such important patents as Claritin.
Current conditions: 80
Forecast: Better

Construction

Barbara Armand, president and CEO of Armand Corporation, reported that private sector construction currently is fueled by low interest rates, but restricted by state land-use laws and residential resistance to new projects. She predicts that the rate of development will remain level during the third quarter, when some projects will engage in late starts due to slow approvals caused by the change of administration in Trenton. While construction labor remains adequate overall, the industry suffers from shortages in qualified architects and engineers. She noted that the revised corporate business tax will have an impact on construction companies in New Jersey.
Current conditions: 80
Forecast: Better

Retail/Food

Jeffrey Brown, president and CEO of Brown’s Super Stores, spoke of disinflation among the nation’s food retailers since September 11 and a general slowing of retail growth. He said that deep discounters are realizing a good business, but that most stores suffered slight reductions in their margins during the first half of 2002. Channel blurring was offered as a concept to explain the decline in specialty outlets in favor of the Wal-Mart effect, in which large retailers offer a wide scope of products. Factors expected to negatively impact the industry include double-digit increases in health insurance.
Current conditions: 75
Forecast: Same

The next Outlook will be held Tuesday, October 22, at the Clarion Hotel and Conference Center in Cherry Hill. For more information, contact Samantha Collier.

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