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©Rutgers University 2000

SOUTH JERSEY ECONOMIC GROWTH EXPECTED TO CONTINUE SLOWLY

by Mike Sepanic msepanic@crab.rutgers.edu

As the weather warms, South Jersey's economy will continue to do likewise, but don't be surprised if signs of a cooling front start to appear on the horizon.

Such is the testimony of six leading executives who offered their perspectives on seven industry sectors during the Rutgers-Camden South Jersey Business Outlook on April 5. These business leaders rated current conditions as a 76.4 (out of a possible 100) and predicted improvement as the region heads into the summer.

Dr. Milton Leontiades, dean of the Rutgers University School of Business at Camden, welcomed the Chamber of Commerce of Southern New Jersey as a new partner in the Outlook. He also introduced new panelists Dr. Joel Naroff (chief economist, Commerce Bank) and Dr. Richard Klein (president/CEO, Sybron Chemicals).

The following summarizes the testimony of each executive. Dr. Naroff delivered thoughts on both general economic issues and the banking/finance industry.

Economic Overview
Dr. Joel Naroff, chief economic of Commerce Bank, observed that the South Jersey economy is "growing modestly, not going gangbusters." Regional employment growth continues to lag behind the national average, although Dr. Naroff noted that "there isn't a whole lot of labor out there." Southern New Jersey's unemployment rate of 4% is par with the national average, although that number is higher in the Vineland and Atlantic City areas. Despite some positive indicators, Dr. Naroff suggested that the economy "seems to have peaked six months ago" and added that unemployment no longer continues to trend downward. He predicts "reasonable stability" for the next six months.
Current conditions: 70
Forecast: Same

Banking
Dr. Naroff reported intense competition in the banking industry, which is causing an increase in non-performing loans and assets. As consumers slow their purchasing, financial institutions are becoming more aggressive in their collection efforts. Interest rate hikes and deterioration in such industries as health care also are causing stress on the banking industry.
Current conditions: 70
Forecast: Worse

Construction
Stuart Richter, senior vice president for Hill International, Inc., reported that the construction industry is enjoying a healthy outlook at the moment. He quickly cautioned that this should not be interpreted as a trend, however, citing such concerns as tightening interest rates, the gas crunch, and an industry-wide problem in getting materials and workers. Richter said that Gloucester County displays the greatest growth in construction, with Burlington County also doing well; due to overpopulation and scarcity of land, Camden County is not doing as well. Richter suggested that new commercial construction projects will be driven by the construction/rehabilitation of schools and other infrastructure projects, such as the Route 130 revitalization and the Camden Waterfront. He reported that the Internet is being used increasingly as a tool to monitor projects.
Current conditions: 70
Forecast: Worse

Gaming
Brian Ford, national gaming director at Ernst & Young, offered an optimistic outlook for the casino industry. "Atlantic City has no problem attracting customers," he said, noting that casinos have increased their business every year even though no new outlets have been built since 1989. Given that surrounding states also have introduced casinos, Ford said that "it's unbelievable that Atlantic City continues to set records." The industry is challenged by a lack of qualified workers, which will be exacerbated when the new casinos open. He noted that the proliferation of Internet gaming is causing concerns due to the inability to regulate the service. "The industry is concerned about an overall backlash if something goes wrong," said Ford. "It's possible that when something goes wrong with Internet gaming, someone will lose their life savings."
Current conditions: 100
Forecast: Better

Health Care
Richard Miller, president/CEO of Virtua Health, reported that the health care industry in southern New Jersey continues to battle simply to sustain a margin. "Nearly 60% of New Jersey hospitals are losing money, and that number continues to grow," he said. Miller reminded the audience that these problems originated in 1993, when the state deregulated the health care industry. This act led many hospitals in enter into contracts with managed care providers that shifted income from per case to per day basis which, in turn, has led to dramatic decreases in the length of patient stays. "Hospitals signed below-cost contracts with managed care, thinking that volume would make up for the shortfall," he said, adding that the contracts now are being renegotiated. In the short term, the governor has added $30 million in charity care and $80 million for child health, which Miller expects to help the situation. He questioned whether the state had too many hospital beds or not.
Current conditions: 65
Forecast Same

Manufacturing
Dr. Richard Klein, president/CEO of Sybron Chemicals, noted that his industry doesn't generate the bulk of its revenue from region; instead, the national and global markets are of great significance to manufacturers. He said that South Jersey manufacturers lost 20% of their workforce (18,000 jobs) between 1990 and 1999; he also reported that each manufacturing job represents $128,000 in value to the state. "The state economic plan doesn't really address manufacturing," said Dr. Klein. "The regulatory climate in the state is difficult to deal with." He added that new material costs are increasing. "South Jersey is a good location for exporters, with its major ports and good transportation hubs," he said. "We need to find ways to encourage research and development in order to keep competitive."
Current conditions: 70
Forecast: Better

Temporary Staffing
Doris Damm, president/CEO of ACCU Staffing Services, reported difficulty in attracting and retaining good workers. She said that many temporary workers often receive raises while on their assignments, although fewer companies are hiring temp workers onto their full-time payrolls. She observed a trend toward retirees pursuing temp jobs and noted that the senior citizens represent a conscientious workforce. "It's amazing how many college students are concerned about finding employment," said Damm. "They fear that their lack of experience will hurt them. Education majors seem the most apprehensive." She reported difficulty in filling job orders at the shore, noting that residents of eastern Camden County travel to fill those positions. "I don't know what will happen when the new casinos open," she said.
Current conditions: 90
Forecast: Better

Customers of Comcast/Garden State Cable can view the Rutgers-Camden South Jersey Business Outlook on channel 2 during the following dates and times:

April 26 8 p.m.

April 30 6 p.m.

May 1 8 p.m.

May 14 6 p.m.

May 17 8 p.m.

May 21 6 p.m.

For more information on future Outlooks, email here.

Previous South Jersey Business Outlook Conferences

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