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©Rutgers University 2000

Moderation is the watchword for 2003

by Mike Sepanic

On the morning of New Jersey Governor James McGreevey’s State of the State address, a panel of prominent business leaders delivered a message of their own to the region:

Things may get worse before they get better, but there’s cause for optimism visible on the horizon.

During the first Rutgers-Camden Quarterly Business Outlook for 2003, panelists cautiously suggested that emerging trends and indicators could help to lead southern New Jersey out of the economic doldrums by the third quarter of the year. The panel suggests some improvement for the coming six months, while noting that current conditions leave room for improvement.

More than 225 executives received an overview of the region’s economic health during the Jan. 14 session, when New Jersey State Treasurer John McCormac delivered a special economic overview . One business leader predicted worsening conditions for the next six months; that prediction was offset by two individuals suggesting improvement. Dr. Milton Leontiades, dean of the Rutgers University School of Business at Camden moderated the discussion, and noted that the Outlook had entered its tenth year of providing a unique economic forum for southern New Jersey’s economy.

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
John McCormac, treasurer of the State of New Jersey, described a mixed picture for the Garden State in 2003. Noting that state revenue collections were largely on target (including the corporate business tax, which is slightly ahead of year-to-date projections), he expressed concern that estimations for the balance of the fiscal were not certain, and that diminished sales tax revenues would adversely affect the state budget.

During 2002, New Jersey lost 22,000 jobs during the first three quarters, but regained 11,600 during the closing quarter; the unemployment rate remained flat at 5.6% in November. McCormac reported relative strength in the financial, real estate, and service areas.

He anticipates “moderate growth” in 2003. “Don’t expect a strong pick-up until midyear,” he says. “New Jersey’s economy went down faster than most, and we expect it to rebound faster.” First, however, the state will need to get through the “very challenging” balance of the current fiscal year.

Current conditions: 55-60
Forecast: Better

Temporary Staffing
Doris Damm, president and CEO of ACCU Staffing Services, reported a surge in job seekers looking for work in the temporary staffing sector. While many businesses are reducing staffing for the first quarter of 2003, Damm notes that indicators point toward a rise in staffing demands for the second quarter, particularly in manufacturing call centers and the technical sector. “One person today is probably filling two or three positions from years ago,” she said, adding her prediction that a “big turnaround” in the economy likely will not occur until midyear.

Current conditions: 70
Forecast: Better

Health Care
Alexander Hatala, president and CEO of Lourdes Health System, offered the observation that health care is a lagging economic indicator, since federal programs (such as COBRA benefits) tend to mask the impact of general economic conditions affecting health care financing. During 2000, two out of every three hospitals in New Jersey operated in the red; according to Hatala, that ratio dropped to one of out three during 2001-02. The federal government predicts a 7% annual increase in patient demand during the coming decade, and hospitals are undergoing a “mini construction boom” to prepare.

The industry is challenged by unprecedented worker shortages, particularly among nurses, lab technicians, radiologists, and pharmacists. Sharp increases in medial malpractice rates also threaten the region’s ability to deliver quality health care, and proposed Medicare reforms could result in larger debts for hospitals.

Current conditions: 70
Forecast: Same

Supply Chain Management
Sidney Brown, CEO of NFI Industries, described his sector as the continuum of warehousing, distribution, and transportation. Rising insurance and fuel costs have placed a “huge squeeze” on the industry, which has yielded “a slew of consolidations.” The uptick in business enjoyed by the surviving companies does not present an accurate picture of the low product tonnage being supplied across the nation. He noted that corrugated box shipments – an indicator for the industry – are not increasing, which suggests low optimism among manufacturers who would need the boxes for their products. Brown offered his opinion that the economy may have reached the “low end of the cycle,” but added that companies are cautious in planning for increased production.

Current conditions: 80
Forecast: Same

Mortgage Market
Terence Edwards, president and CEO of Cendant Mortgage, reported on a record year for mortgage closings, thanks largely to a 40-year-low for interest rates. Economists predict that the $2.5 trillion in business done during 2002 will drop to $2 trillion in 2003, as rates are expected to rise. Still, such activity would make 2003 the third-best year in the history of the mortgage industry.

Current conditions: 100
Forecast: Worse

The next Outlook will be held on Tuesday, April 15, 2003, at the Clarion Hotel and Conference Center in Cherry Hill. The 2003 schedule of Outlooks also includes July 15 and Oct. 21. For more information, contact Samantha Collier .

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