Attending the Rutgers-Camden Quarterly Business Outlook were (left to right): Milton Leontiades, dean of the Rutgers-Camden business school; Steven Selfridge, president/CEO of Acsis; Ted Crone, vice president of the Federal Reserve Bank of Philadelphia; Lorraine Kay, president/CEO of Kay Construction; Peter Spirgel, partner at Flaster/Greenberg; John Matheussen, CEO of the Delaware River Port Authority; and Michael Quick, chair of Susquehanna Patriot Bank.

Negative Perceptions Don’t Mirror Strong Economic Reality

by Mike Sepanic

Optimism for the future and applause for a career dedicated to helping the region characterized the proceedings of the second Rutgers-Camden Quarterly Business Outlook of 2005.

More than 250 executives attended the April session to gauge the testimonies of five top industry leaders who discussed the strengths and weaknesses in the regional economy.

Prior to the panel discussion, Flaster/Greenberg partner Peter Spirgel and Debra DiLorenzo, president of the Chamber of Commerce Southern New Jersey, took a moment to honor Rutgers-Camden business dean Milton Leontiades on the occasion of his final session for founding the Outlook and his many other services to the Delaware Valley.

“Your efforts have helped our business community understand and increase its knowledge of the regional economy,” said DiLorenzo. Her sentiments were echoed by Ted Crone of the Federal Reserve Bank of Philadelphia: “Thanks to Milt for getting this conference organized. The Outlook is a true public service to the people of South Jersey.”

“This has been a great experience,” said Leontiades. “There had been a real need for the Outlook. South Jersey’s economy and businesses need to be highlighted so that we can understand how many forces interact to affect our own businesses.”

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
Ted Crone, vice president of the Federal Reserve Bank of Philadelphia ddressed the regional perception of slowed economic growth, noting that declines in consumer confidence and retail sales give rise to such concerns.

According to a Federal Reserve Bank of Philadelphia first-quarter survey of southern New Jersey businesses, perceptions of a slowdown are widespread but based largely on anecdote. “Our bottom line here is not as bad as many people think,” said Crone, who observed that New Jersey job growth continues, albeit at a slightly slower rate.

He offered several signs that “the expansion remains on track,” including a month-to-month drop in the quarterly unemployment rate. “New Jersey’s unemployment rate remains one percent below that national rate,” said Crone. Strong housing starts – with permits “at their highest levels since the late 1980s” – are another indication that New Jersey’s economy is faring well.

Crone anticipates that job growth will rise 1.5% and unemployment rates will fall (from 4.2% to 4%) in New Jersey throughout the balance of 2005. “The fundamentals are still good,” he said. “The perception is more negative than the reality.”

Current conditions: 85
Forecast: Better

Banking
Michael Quick, chair of Susquehanna Patriot Bank, recalled his prediction of one year ago that interest rates would rise and the economy would slow down. “Turns out I was half right,” he smiled.

Southern New Jersey’s banking industry faces several key challenges, including the high cost and scarcity of real estate. “The bubble has not yet broken in New Jersey, Pennsylvania, Delaware, and Maryland,” he said, noting that long municipal approval processes and skyrocketing costs in building materials exacerbate the situation. He observed that a lack of buildable lots in New Jersey is leading some developers out of state.

While “2004 was a good year for business,” Quick reported that increased profits and optimism were accompanied by increased commodity prices and interest rates, along with a lack of skilled workers. “We need to find a better way to get skills for our young people,” he said, adding that the general economy needs to create more high-paying jobs.

An increase in state and municipal taxes due to decreased federal support is creating problems for businesses and citizens alike, said Quick, who added that the regulatory burden has become “a real problem for the banking industry. Laws shouldn’t be one-size-fits-all.”

Nonetheless, Quick is optimistic that the balance of 2005 will be good for the banking industry.

Current conditions: 80
Forecast: Same

Construction
Lorraine Kay, president and CEO of Kay Construction, delivered an overview of the commercial construction industry, noting that “interest rates, government regulations, consumer spending, and unemployment rates all affect construction.”

She reported that steel costs have escalated 70% recently due to a burgeoning demand from China, and that supplies for cement, metal, and electrical materials are similarly tight. Major construction in the Delaware Valley is sustaining additional stress from labor and subcontractor shortages.

On the positive side, Kay noted that relatively low interest rates and the availability of funds from lenders help the industry, which is further sustained by continued growth by big-box retailers. She offered a cautiously optimistic forecast.

Current conditions: 80
Forecast: Better

Transportation
John Matheussen, CEO of the Delaware River Port Authority, observed that “transportation is key to South Jersey’s economy.”

He noted that the DRPA offers a barometer of regional economic health insofar as “increased trips over the bridges into Philadelphia mean people are working and contributing to the economy.” He added that those trips continue to increase.

While the region has no plans for major road expansion projects, Matheussen shared insight into upcoming projects that will seek to help existing traffic patterns flow in a more efficient manner. A planned project at the intersection of routes 42 and 295 (the second busiest in New Jersey after the Lincoln Tunnel) will allow traffic to proceed more smoothly, but will not increase the capacity of that area to handle more automobiles.

Referencing a recent study that ranked New Jersey as third in the nation for lost time due to commuting, Matheussen recommended an expansion of regional mass transportation offerings. He noted that PATCO will implement a new fare collection system that will use smart card technology, and that the agency will seek to encourage citizens that their time can be better utilized on a train instead of in a car.

Matheussen reported that the DRPA’s role as landlord for a cruise ship terminal in Philadelphia has added more than 300 jobs to the region since the terminal opened in 1998. He noted that the DRPA seeks to plan better roadway connections with its bridges.

Current conditions: 70
Forecast: Same

Technology

Steven Selfridge, president and CEO of Acsis, Inc., reported “a very gradual increase in information technology investment,” which he termed “a much more prudent approach to buying. Once the return on investment can be substantiated, large amounts of money are invested in IT.”

He discussed radio frequency identification as an emerging niche industry that allows manufacturers and retailers to track their product. Wal-Mart, Target, and the U.S. Department of Defense are among the leaders in utilizing this technology, which is read automatically with no line of sight and provides instantaneous updates on inventory availability. The process allows companies to reduce stock overruns and increase margins.

The challenges to this growth sector are in growing the supply of tags, readers, and software, while also developing unified standards. Nonetheless, radio frequency identification technology represents significant growth opportunity for the technology sector.

Current conditions: 80
Forecast: Better

Previous Quarterly Business Outlooks

• Winter 2005
• Fall 2004
• Summer 2004
• Spring 2004
• Winter 2004
• Fall 2003
• Summer 2003
• Spring 2003
• Winter 2003
• Fall 2002
• Summer 2002
• Spring 2002
• Winter 2002
• Fall 2001
• Summer 2001
• Spring 2001
• Winter 2001
• Fall 2000
• Summer 2000
• Spring 2000
• Fall 1999
• Summer 1999