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Attending the Rutgers-Camden Quarterly Business Outlook on July 19 were (l. to r.): Peter Spirgel, partner at Flaster/Greenberg; Doris Damm, president/CEO of ACCU Staffing; John Kyees. CFO of Urban Outfitters; Debra DiLorenzo, president of the Chamber of Commerce Southern New Jersey; Ted Crone, vice president of the Federal Reserve Bank of Philadelphia; guest moderator Gayle Porter, an associate professor of management at Rutgers-Camden; and Mark Baiada, president of Bayada Nurses.

Bullish on a Hot Southern New Jersey Economy

by Mike Sepanic

The bulls were running in southern New Jersey as five prominent business leaders characterized the regional economy in upbeat and robust terms during the third Rutgers-Camden Quarterly Business Outlook of 2005, held on July 19.

More than 275 executives attended the July 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
Ted Crone, vice president of the Federal Reserve Bank of Philadelphia, noted that the area’s growth rate has slowed, but that there was no reason to read this news as negative. “New Jersey simply couldn’t continue to grow as fast as it did,” said Crone. “Now, we’re growing at a sustainable pace. This is just part of the dynamics of a good growth cycle.”

Crone observed that a tight labor market and other factors constrain unbridled growth, but the Burlington/Camden/Gloucester tri-county region “is doing better than the rest of the state.” Although the construction industry remains strong, Crone suggested that the industry is virtually at capacity and unlikely to expand significantly. In the metro Philadelphia region, a recent manufacturing survey conducted by the Federal Reserve Bank of Philadelphia reports “a little weakness” on the Pennsylvania side of the Delaware River.

“New Jersey is on track to grow at a 3% rate during 2005. While that’s down from more than 4% in 2004, that’s still not bad.”

Current conditions: 80
Forecast: Same

Staffing
Doris Damm, president/CEO of ACCU Staffing Services, opened her presentation with the observation that “much of New Jersey’s economy has changed from manufacturing to service-orientation businesses. A lot of sites where manufacturing used to take place in the Mount Laurel corridor now are used as distribution centers, since southern New Jersey has great access to highways and the Delaware River ports.”

This increase in business has spurred regional job growth. Damm reported that several area manufacturers plan to increase capital spending in order to expand plants to meet production demands.

Such activity has diminished the pool of available workers. Damm noted that another challenge for managers and business owners will be the increase in minimum wage planned for October, with another possible increase in 2006.

Nonetheless, employment continues to rise, as noted by the number of requests for temporary-to-permanent job orders to the temporary staffing industry.

Current conditions: 80
Forecast: Better

Retail
John Kyees, CFO of Urban Outfitters, delivered an overview of the retail apparel industry that reported on strength despite an exceptionally cold May, which hampered the sale of warm-weather clothes.

“The consumer is incredibly resilient despite negative news, such as high oil prices and terrorism,” said Kyees, who reported 25% same-store sales increases during the past quarter. Observing that “when merchandise is good, sales are good,” Kyees noted that successful retailers need to differentiate on the basis of the shopping experience as well as merchandise. “Experiential retailing means that the environment of the store needs to be something special,” he said.

Kyees proclaimed retail to be “well and healthy at this point.” He noted that food and clothing are enjoying the fastest growth, while durable goods (such as cars) are moving slower. When asked whether southern New Jersey can sustain its current rate of retail construction, he suggested that the region is

Current conditions: 80
Forecast: Better

Gaming
Robert Boughner, CEO of the Borgata Hotel Casino & Spa, opened with the statement “We are extremely bullish on the future and the present.”

He supported his optimism by noting that the $1.1 billion investment in the Borgata was driven by “an extensive amount of consumer research, which is rare for casinos,” which found that customer experiences at existing casinos were not necessarily optimal. “People just didn’t know what casino they were in,” he said.

While the Borgata was differentiated itself from its Atlantic City competitors, Boughner noted that the property will continue to grow through an additional $500 million investment in a two-phased expansion of hotel, gaming, and restaurant space. Boughner anticipates similar new investment by Harrah’s and Trump in Atlantic City. At the completion of such investments, the Atlantic City gaming industry will have grown by more than $3 billion in property enhancements during a relatively short period.

Acknowledging that proposed gaming outlets in Pennsylvania may have some impact on Atlantic City properties that rely heavily on bused customers from Philadelphia, Boughner does not see a threat from New Jersey’s neighbor. He noted that Pennsylvania’s gross revenue tax rate of 52% will not allow that state’s gaming outlets to compete with New Jersey’s properties, which enjoy an 8% rate that allows them to offer incentives and promotions that will continue to entice customers. “This high tax will be a perpetual disparity between Pennsylvania and Atlantic City,” he said, adding that “In our business, new supply creates new demand.”

Boughner noted that “even with increases at the gas pump, I see no signs of the industry slowing.”

Current conditions: 100
Forecast: Better

Health Care
Mark Baiada, president and founder of Bayada Nurses, Inc., reported continued increase in demand for health care products and employees, as well as continued growth in the costs of those products and services.

“It’s a long-term trend,” he said. “Health care costs are rising faster than everything else.” He noted that pharmaceutical products are helping to drive this trend, as are the costs of hiring nurses in the midst of a nursing shortage and continued decreases in government support for health care. Baiada foresees a “seismic change” in the funding of this industry at some point.

Although industry margins are shrinking, the sector is benefiting from greater portability of technology, which allows more service to patients in their own homes.

Current conditions: 75
Forecast: Same

The next Outlook will be held on October 25 at the Clarion Hotel and Conference Center in Cherry Hill. For more information, contact Samantha Collier.

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