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Attending the Rutgers-Camden Quarterly Business Outlook on Oct. 25 were (l. to r.): Peter Spirgel, partner at Flaster/Greenberg; Debbie Hart, president of the Biotechnology Council of New Jersey; Wachovia economist Jason Schenker; Liz Thomas, CEO of Thomas/Boyd; William Reynolds, interim dean of the Rutgers-Camden business school; Barbara Armand, president/CEO of Armand Corp.; and Paul Riggins, president of Riggins, Inc.

Heat from Energy Costs Cools Economy

by Mike Sepanic

Concerns about energy supplies, state government, and interest rate hikes balanced enthusiasm for a resilient southern New Jersey economy as five prominent business leaders offered their insights during the fourth and final Rutgers-Camden Quarterly Business Outlook of 2005, held in Cherry Hill on Oct. 25.

More than 225 executives attended the October session to gauge the testimonies of five top industry leaders who discussed the strengths and weaknesses in the regional 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
Jason Schenker, an economist with Wachovia Corporation in North Carolina, noted that the 2005 hurricane season "exposed the underbelly of our energy infrastructure."

Suggesting that business leaders look for "a deceleration of growth" during the coming months, Schenker said that job creation in southern New Jersey likely will continue. He noted regional challenges to that progress, including the closing of military bases across the region; the MBNA bank merger in northern Delaware; the restructuring of benefits at GM plants in northern Delaware; and the impact of high energy costs on chemical and pharmaceutical manufacturers.

"Despite such pressures, employers see more job growth," he said. "The question now is the magnitude of that growth."

Schenker reported that natural gas prices will rise this winter, and the falling gasoline prices are more indicative of the normal seasonal drop in prices at the pump than anything else. Despite fuel costs, consumers are still buying SUVs and light trucks at an appreciable rate - 51% of new vehicle purchases in September were such vehicles, according to Schenker, who attributes such activity to the resilience of the American consumer. "Retail went up 1.1% in September, which suggests that, to cope with higher gas prices, consumers went shopping," said Schenker.

A national migratory pattern of workers leaving the northeast in favor of states with lower costs of living likely will continue, although southern New Jersey will continue to benefit from an outmigration of workers from Philadelphia.

Current conditions: 88
Forecast: Better

Construction
Barbara Armand, president/CEO of Armand Corporation, opened her presentation with the observation that the fourth quarter of 2005 "started with a bang due to a healthy backlog of construction orders," but she warned that the bang was more of a bubble ready to burst.

During the first half of 2006, Armand cautions that the New Jersey Transportation Trust Fund will be "completely exhausted" and in danger of losing matching federal dollars. The vital fund could be saved with an additional gas tax and/or toll road increases, but such actions would be unpopular, she said. "This is a serious problem for the construction industry and for safety on New Jersey's roads," she said.

In addition, Armand reported that the New Jersey School Construction Program is on hold due to funding issues. "The new governor must take action" to improve the schools and sustain the construction industry, she said.

Armand additionally noted that the state's disbandment of programs encouraging minority- and women-owned firms to compete in public projects is hurting many companies around the state.

Current conditions: 80
Forecast: Worse

Energy
Paul Riggins, president of Riggins, Inc., suggested that the hurricane season served as a wake-up call to energy distribution problems that have been a long time in the making.

"There are three factors to fuel distribution: sufficient production, an efficient distribution system, and a healthy and competitive marketplace," he observed. "The last U.S. refinery was built in the 1970s, and we need to increase our refining capacity.

"No one wants a refinery in their backyard, and no one wants higher fuel prices. It's time to decide which we want more."

Riggins noted that individual state requirements for clean air issues prevent the transportation of fuel from one part of the country to another in times of shortage or crisis. "The federal government needs to decide on one environmentally responsible specification for gas and one for diesel" in order to alleviate this problem. Another national problem looming in 2006 will occur in May, when oil companies will be required to shift from MTBE fuel additives to ethanol. Since the infrastructure to produce that much ethanol currently does not exist, Riggins anticipates the possibility of fuel shortages in the spring.

Current conditions: 75
Forecast: Better

Media/PR
Liz Thomas, CEO of Thomas/Boyd Communications, opened with the observation that "CEOs now believe that PR contributes to organizational success more than marketing, legal, and many other departments."

Her bullish assessment continued with the report that PR agencies in southern New Jersey are increasing. She anticipates strong business growth in Burlington County, and, indeed, across the entire region.

"With economic growth comes opportunities for growth in PR," she said. In southern New Jersey, agency growth hinges on both local and national contracts.

Thomas also cited the inherent challenge for southern New Jersey PR firms in a state dominated by two external media markets. She cited southern New Jersey's two magazines as an example of how the region is beginning to define its own media outlets.

Current conditions: 80
Forecast: Same

Biotechnology
Debbie Hart, president of the Biotechnology Council of New Jersey, reported that New Jersey is making the most of "a once-in-a-millennium opportunity" for growing its biotech sector.

"We have big pharma in New Jersey, and that's a unique opportunity for a biotech company to partner and grow," she said, also noting that the state's education system - both primary/secondary and higher education - produces highly skilled workers for the biotech sector.

During the past decade, New Jersey's biotech clusters have enjoyed a 60% growth rate, according to Hart. "Companies are being formed and moving to New Jersey," she said, citing "a strong, committed government" as a reason for that growth.

While venture funding remains tight, Hart reported that key successes regularly are posted within the industry. "The future is very bright for biotech in New Jersey," she concluded.

Current conditions: 80
Forecast: Same

The next Outlook will be held on January 24 at the Clarion Hotel and Conference Center in Cherry Hill. For more information, contact Samantha Collier.

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