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Optimism for Slow Growth Prevails

by Mike Sepanic

The economy is gaining traction, but when will the figurative rubber meet the road? Soon, advises a panel of top executives who offer a now-familiar refrain that southern New Jersey's economic rebound is right over the horizon.

During the Rutgers-Camden Quarterly Business Outlook for the third quarter of 2003, panelists offered strong optimism for better times in terms of economic and job growth.

More than 300 executives received an overview of the region's economic health during the July 15 session, where none of the panelists predicted worsening conditions for the next six months; in fact, three individuals suggested improvement. Dr. Milton Leontiades, dean of the Rutgers University School of Business at Camden, moderated the discussion.

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
Dr. Ted Crone, vice president and economist for the Federal Reserve Bank of Philadelphia, reported that the economy is improving, although more slowly than originally anticipated. "It's no secret that the U.S. economy is having trouble getting traction," he said, citing across-the-board weakness with specific trouble in the manufacturing sector.

Crone offered good news for the Garden State. "New Jersey is doing better than the nation as a whole," he said, noting that the state's recession was "less severe," and its recovery "slightly better" than the national average. Preliminary findings from a regional survey conducted by the Federal Reserve Bank of Philadelphia shows marked improvement in perceptions of the economy, with more respondents looking forward to better conditions for the first time since early 2000. Despite increased expectations for growth, few employers are adding workers, and capital expenditures are not strong.

Current conditions:    82
Forecast:    Better

Retail/Food
William Eubanks, president and CEO of Eubanks Enterprises, delivered an overview of the retail dining industry. He observed that the fine dining sector has been hit hard since Sept. 11, while the casual dining sector is experiencing flat to slightly negative growth. The fast food sector continues to grow, as the difficult economy drives more consumers to low prices. Eubanks noted that the fast food sector is bolstered by men in the 18-35 age group, and that a new sector, fast casual, appears to be emerging.

The retail dining industry faces legal challenges brought on by obesity lawsuits in much the same way that the tobacco industry was sued for health concerns. Animal rights activists also are attacking the industry in court. Nonetheless, Eubanks is "bullish on the back half of '03," and foresees moderate growth in the range of 3 or 4 percent.

Current conditions:    90
Forecast:    Same

Health Care
J. Mark Baiada, founder and president of Bayada Nurses, testified that the demand for health care is increasing, particularly in the areas of service, pharmaceuticals, and home care. The industry is beset by a scarce supply of qualified nurses and other health care workers, which is fueling higher wages and greater pressure on employers. Medical inflation outpaces the rate of insurance reimbursements while, at the same time, liability insurance costs increase. Combined with a large uninsured population, the health care industry confronts a number of issues.

Baiada reported on a New Jersey bill to deprivatize home health services and offer those services through state agencies, a proposal that he suggested could increase cost and diminish quality.

Current conditions:    60
Forecast:    Same

Construction
Lorraine Kay, founder and president of Kay Construction, prefaced her comments by thanking the Rutgers-Camden business school for providing the Outlook as a regional forum. She delivered a wide perspective on the construction industry, noting that developers are preparing for a market rebound by securing construction approvals now, enabling them to "hit the ground running" when needed.

She observed that "virtually no office development to speak of" currently exists in southern New Jersey, which has a 12 percent vacancy rate compared to the regional average of 20 percent. The industrial construction market is flat, but looks promising. Kay characterized the housing market as "on fire," and anticipates that 2002's numbers will be replicated in 2003. She cited senior housing as a growth area. Other hot construction sectors include schools, defense, financial institutions, and retail, although she offered her belief that the booming business in retail renovations is unlikely to continue. "There's a bright horizon out there," she concluded.

Current conditions:    75
Forecast:    Better

Gaming
Robert Boughner, CEO of the Borgata Hotel Casino and Spa, reported that Atlantic City's newest resort opened on time and budget, and that the $600 million property now is a major entertainment, retail and dining destination. The resort invested much of its construction costs in New Jersey businesses, and now employs 4,500 people, culled from 61,000 applications. Boughner said that the Borgata's philosophy of treating employees with trust and respect attracted the attention of 47 percent of Atlantic City's existing resort employees, who applied for positions. The Borgata has an annual payroll of $120 million.

He expects to see "a significant increase in investment in non-gaming amenities" among Atlantic City's casino resorts, although government taxation could be the industry's "most serious challenge," with the potential to reduce investment in the properties.

Current conditions:    70
Forecast:    Better

The next Outlook will be held on Tuesday, Oct. 21, 2003, at the Clarion Hotel and Conference Center in Cherry Hill. For more information, contact Samantha Collier.

 

 

 

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