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©Rutgers University 2000

South Jersey Economic Growth Expected to Continue Slowly

by Mike Sepanic msepanic@crab.rutgers.edu

As national political power transitions, the economy shows strong signs of shifting gears into a slower growth mode.

In other words, the economy won't stall; it'll just drive with the brakes on.

Such is the composite testimony of five business leaders from key South Jersey sectors during the quarterly South Jersey Business Outlook Conference on January 16. The executives shared their perspectives on the region's economic performance at the close of 2000 and offered their predictions for the first half of 2001

Dr. Milton Leontiades, dean of the Rutgers University School of Business at Camden, welcomed the law firm of Flaster Greenberg as a third partner in the Outlook, along with the Chamber of Commerce of Southern New Jersey . He also introduced a featured guest speaker, New Jersey Senator William Gormley (R.-2), to the audience of 250.

The following summarizes the testimony of each executive. Senator Gormley delivered a special legislative overview for the new year.

Legislative Insights

New Jersey Senator William Gormley noted that business in South Jersey often is paralleled by politics. He recalled his recent campaign for the U.S. Senate, and observed that recognition for the southern part of the state typically is scarce in North Jersey. Sen. Gormley discussed his plans for a voluntary casino tax that would allow this economic engine to adopt blighted areas around the state; he envisions tax credits for the casinos that, in turn, would benefit local businesses. "I want to send a message of urban renewal," he said. The senator noted that the state will invest funds in school construction, observing that New Jersey "must have great schools to be a great state." Sen. Gormley said that Acting Governor DiFrancesco "will be responsive to all sectors of the state." Regarding the power crisis in California, Sen. Gormley said that New Jersey's safeguards against such a situation will need to be continuously monitored. He credited Rutgers for "being a leader in generating sound ideas for the region."

Economic Overview

Dr. Ted Crone, vice president of the Federal Reserve Bank of Philadelphia, noted that while the economy is slowing, there is some uncertainty as to the rate of decline. He reported that New Jersey rebounded from a decline in employment during the summer to growth in the fall, adding that job growth has "slowed to a sustainable pace." Dr. Crone observed that, despite non-threatening data, pessimism prevails due to such factors as reduced stock prices, higher inventory levels, and the closing of major companies. "one sense, the official data may not have caught up with reality," he noted, adding that the current slower growth "may seem like no growth at all" when compared to previous rates. He reported that holiday sales, while not as great as planned, were not as bad as feared. He predicts "slower growth, but growth nonetheless" for southern New Jersey during the coming six months.

Current conditions: 75
Forecast: Worse

Banking

J. William Mills III, president of The PNC Financial Group, Philadelphia/Southern New Jersey, reported concern within the banking industry that the long economic expansion is ending. He noted that the definition of "recession" is dependent on several factors: if one defines a recession as "zero growth for consecutive quarters," then he anticipates that the economy will not be recessionary. "We will see a definite slowdown," he said, adding his belief that the Federal Reserve will cut rates in an effort to mitigate a slowdown. Overall, Mills reported that the banking industry is strong, with the highest rate of capitalization ever. The industry in southern New Jersey is "extremely competitive," due to diversification of services, technology to enhance customer service, and the demand for qualified employees.

Current conditions: 70
Forecast: Worse

Housing

Bruce Paparone, executive vice president of the Paparone Corporation, predicted a decline in new home sales, but noted that the slump "won't be overly severe." While the Paparone Corporation recently experienced its largest backlog in years, new home sales in southern New Jersey decline 24% in 2000. Paparone cited the lack of developable land and an increase in statewide population for this difficulty. He reported that the average cost of a new home in New Jersey is more than $275,000; in the Burlington/Camden/Gloucester tri-county region, an average new home sells for $215,000. Low mortgage rates will encourage new home purchases. Paparone also cited increased state spending on new schools and roads as positive factors.

Current conditions: 80
Forecast: Worse

Technology

Steven Selfridge, president of Acsis, Inc., predicted that U.S. spending on supply-chain software will expand 40% in the next year or so, with an expenditure of $51 billion in 2001. "No other country will come close to the U.S. (in terms of such spending)," he said, adding that the Asian and European collectives would be second and third, respectively. Selfridge suggested that process manufacturing and the federal government would be the sectors to spend the most in a quest for greater efficiency. Supply-chain execution software will increase in demand due to its ability to reduce the cost of organizational processes and inventory, while increasing cash flow.

Current conditions: 85
Forecast Same

Temporary Staffing

Doris Damm, president/CEO of ACCU Staffing Services, reported an increase in workers seeking employment through temporary services. She noted that rumored and actual layoffs are releasing more individuals into the workforce. "As a whole, many full-time workers are worried when they hear that a company like Montgomery Ward closes," she observed. While the labor market remains tight nationwide, with an increased demand for office/clerical assistance and health-care workers, Damm anticipates that companies will increase temporary hiring over full-time employment.

Current conditions: 80
Forecast: Better

The next Outlook will be held Tuesday, April 17.

For more information on future Outlooks, email here.