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©Rutgers University 2000

SLIGHT CHILL IN THE AIR FOR SOUTH JERSEY ECONOMY

by Mike Sepanic msepanic@crab.rutgers.edu

As 1999 draws to a close, South Jersey's economy is experiencing some mild jitters as it enters the new millennium.

Such is the composite testimony of 10 business leaders from key South Jersey sectors during the quarterly South Jersey Business Outlook Conference on Oct. 21. The executives shared their perspectives on the region's economic performance during the third quarter of 1999 and offered their predictions for the fourth quarter, as well as the start of the new year.

Dr. Milton Leontiades, dean of the Rutgers University School of Business at Camden, moderated the panel; he observed that the audience was participating in "the last economic outlook for South Jersey this century." Commerce Bank hosted the event at its Commerce University location in Mount Laurel.

The following synopses provide the reports of each industry executive:

Banking
Robert Falese, executive vice president for Commerce Bank, observed approaching storm clouds for the banking industry. Recent mergers have failed to deliver the anticipated outcomes, he said. Consumers are carrying heavy debt burdens, which drives some customers to seek increased home equity. Falese suggested that consumer spending is at "an all-time high," and attributed this trend to "euphoria over the stock market." He reported on the reappearance of speculative office construction in southern New Jersey, and termed such activity as "not very healthy" for the area. He predicts tighter credit conditions, a continuation in non-performing assets and a decline in bank revenues. "This is the best stock market of my life, and I'm telling you to be careful," he advised the audience.

Construction
Stuart Richter, senior vice president of Hill International, Inc., observed the interrelationship of the represented industries and their impact upon construction. He reported a lack of qualified workers in his sector at a time when the amount of work is "quite healthy," and noted that the strength of the retail sector is encouraging the construction of such new centers as Marlton Square on Route 73. In southern New Jersey, state infrastructure projects have helped to sustain the construction sector; Richter expressed his optimism that such work as the Admiral Wilson Boulevard renovation and the development of the Delaware River waterfront will continue that trend. He predicts a continuation of this positive environment, but cautioned that "credit worries may cause a down tick."

Economic Outlook
Although Dr. Richard Voith, research advisor for the Federal Reserve Bank of Philadelphia, was unable to attend, he provided the following report: The leading index for New Jersey has lowered, but is still positive. New Jersey's employment advanced slightly behind the .5% national growth rate. In the metro Philadelphia region, there has been no appreciable job growth for the past two quarters. Meanwhile, the New Jersey unemployment rate has inched upwards. Trade and service industries dominate area job growth, while construction remains flat. Voith predicts continued job growth at slower levels.

Gaming
Brian Ford, national director of gaming for Ernst & Young, continued to provide an unabashedly upbeat report on his sector. He asked the audience to recall 1978 -- the opening of the first Atlantic City casino -- and imagine that, 21 years later, this industry would "transform the New Jersey economy." His forecast offers excellent odds for the continuation of good times for this industry.

Health Care
Richard Miller, president of Virtua Health-West Jersey Health Systems, noted that the health care industry remains plagued at the end of 1999 by the same difficulties that greeted the start of the year. Providers lack the funds to reinvest in technology and personnel at a time when competition for nursing staff is fierce and technology advances are costly. Miller predicts hospital closures, which will require New Jersey citizens to travel farther for their health care. He also foresees double-digit increases in insurance premiums. On the positive side, Miller reported that the Balanced Budget Act of 1997, which helped to create the industry's current troubled environment, is coming under closer scrutiny by legislators.

Information Technology
Steve Selfridge, president of Acsis Inc., reported that companies are increasing their investment in information technology. He identified e-commerce as an area of continued growth, and noted the emergence of such new technologies as silicon chips that allow efficient and accurate tracking of merchandise. The metro Philadelphia region spent approximately $7 billion on information technology in 1999. He predicts that technology will replace and/or supplement worker-based systems, and that application software will increase in response to the demand for wide-area networks.

Marketing/Advertising
Isaac Segal, executive vice president of The STAR Group, reported an increase in spending by Internet companies seeking to stake their claim on the market. Political advertising has helped to provide "robust times" for the industry, a climate that Segal expects to continue in 2000 with the advent of the presidential race and the Olympics. He observed that the United States spent more than $200 billion in advertising during 1999.

Port Authority
John Maier, assistant executive director for the South Jersey Port Authority, was unable to attend. He provided his forecast for the continued current economic environment.

Retail
William J. Cariss, executive assistant to the president of Holman Enterprises, reported that distribution remains a key issue among auto dealerships. While manufacturers seek to enter the dealership industry, the stock of publicly held dealerships are lagging. Internet retailing continues to be a hot marketplace. The U.S. market for car sales is up 10% over 1998; Cariss suggested that 1999 will set sales records. He noted that South Jersey is "solid, but not as strong" as the national market; Burlington County sales are down by 1%, while Camden County auto sales are off by 6.5%. Nonetheless, Cariss reported that local sales volumes are near an "all-time high."

Temporary Services
Doris Damm, president of ACCU Staffing Services, stressed the need for more workers in southern New Jersey. She noted that the Camden labor market is creating jobs, and that Atlantic City is seeking 20,000 new workers in preparation for the opening of new casinos. The hi-tech industry also continues to seek workers. Damm reported that recent changes to the ADA allow individuals to keep medical coverage if they obtain employment; she anticipates that this action will help to recruit more workers off of the welfare rolls. She suggested that the temporary services sector will do well during the coming six months.

The next Rutgers-Camden South Jersey Business Outlook will be held in January. For more information, contact Paul Pressley at (856) 225-6216 or pmp41@crab.rutgers.edu.

Previous South Jersey Business Outlook Conferences

• Current Outlook
• Summer 2000
• Spring 2000
• Fall 1999
• Summer 1999