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Mixed Signals at the Start of 2005

by Mike Sepanic

Optimism and caution in equal parts were offered during the first Rutgers-Camden Quarterly Business Outlook of 2005.

Approximately 250 executives listened as four top industry leaders delivered reports that highlighted strengths and weaknesses in the regional economy. Rutgers-Camden business dean Milton Leontiades moderated the discussion, and noted the exceptionally high level of distinction represented on the panel.

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
John McCormac, treasurer of the State of New Jersey cited “very, very strong job growth in New Jersey” with 71,500 jobs added in 2004 across all industries, and with manufacturing and telecommunications as the only lagging industries.

“New Jersey continues to outperform our peers in job growth,” he said, adding that the Garden State has “picked up 100 percent of the jobs lost during the recession” and continued to add jobs for “19 straight quarters” of rising employment. McCormac credits this bullish perspective on job growth to the state’s business incentive programs, strong labor training programs, schools and road construction, and targeted investments (such as in the City of Camden) as factors promoting this growth.

While 2004 was “a record year for new business growth” in the state, McCormac characterized that FY2005 as “a mixed year so far.” Sales tax revenues are on target, but a better gauge of corporate business tax and “millionaries’ tax” revenues won’t be available until later in January. He acknowledged the challenges that the state will face in constructing its FY2006 budget.

“It is very difficult to forecast the future until we see how 2004 finishes,” said McCormac. Still, “we remain confident about our future.”

Current conditions: 80
Forecast: Better


Banking
John McWeeney Jr., market president of Bank of America/southern New Jersey, offered a description of general economic trends as stable, not spectacular.” He offered the expectation that the Federal Reserve will raise rates incrementally throughout the year as the economy continues to expand and the Fed closely monitors inflation.

Noting continued strength in consumer confidence and employment trends, McWeeney predicts that the banking industry will see rising demand for commercial loans. He said that the industry “will be under continued pressure from Wall Street to show top and bottom revenue growth.” Increased competition within the industry will benefit the consumer as banks become much more relationship driven. “Those (banks) who add value will survive. Trying to compete on price alone is a slippery slope,” he said. Consolidations likely will continue as the economy hits speed bumps.

Current conditions: 80
Forecast: Same


Healthcare
William Haggett, president and CEO of AmeriHealth New Jersey HMO, reported that $1.8 trillion will be spent on health care in the United States during 2005. He further observed that New Jersey has the highest coverage cost at $7,670 per worker, with the national average at $6,700.

“Yearly trends in this market are above national trends,” he said and cited such contributing factors as technology, lifestyle drugs, consumer advertising, an aging population, litigation, and cost shifting within the industry. “Until these issues are addressed, the cost of health benefits will continue to escalate.”

As a result, “employers are finding it increasingly difficult to provide an employee health benefit, with many downgrading coverage and/or passing along increased costs to employees. The structure of our health care system insulates folks from the true cost of the service or product.”

Haggett anticipates that costs will continue to shift to New Jersey consumers, who “will be hit at the point of service, not in paycheck deductions.” Emerging data suggests that patients with more of their personal finances invested in their health care will “access the system more appropriately.”

“The problems we face are not subject to any simple solution,” he concluded.

Current conditions: 50
Forecast: Same


Gaming
Timothy Wilmott, COO of Harrah’s Entertainment, Inc., offered an optimistic overview of the Atlantic City gaming industry’s “continued evolution into a regional destination location.”

Currently, Atlantic City resorts fill their existing rooms and turn away business due to lack of space. Wilmott reported that Harrah’s will add rooms at its Showboat and Harrah’s properties. He further predicted that Harrah’s will complete its merger and acquire Caesars and Bally’s by the middle of 2005, making Harrah’s the nation’s largest gaming company.

“The Borgata has shown us that new customers will come to Atlantic City for a new, fresh product,” he said, and cited The Quarter as an example of Atlantic City’s future: high-end retail, food, and beverage that “will continue to create a fuller experience that will make Atlantic City less dependent on day-trip customers.” Toward that vision, Wilmott announced that Harrah’s will bring the House of Blues to Atlantic City.

Upon completion of the merger, Harrah’s will have 20,000 employees in Atlantic City alone. “Harrah’s believes that Atlantic City is a vibrant, robust market for continued investment,” he said. “Such growth will minimize the impact of convenience gaming in southeastern Pennsylvania.”

Current conditions: 80
Forecast: Same

The next Outlook will be held on April 19 at the Clarion Hotel and Conference Center in Cherry Hill. For more information, contact Samantha Collier.

 

 

 

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