Bleak Economy Won’t Improve Until 2010, ‘11

SWAINTON — “Cheer up, the worst is yet to come,” Dr. James W. Hughes, dean of Rutgers University’s Edward Bloustein School of Planning and Public Policy, told business people Dec 4.
“Only the cosmetic skills of an embalmer could improve the outlook. It’s not been a pretty time, and it’s not going to get pretty any time soon,” he said. “Fasten your economic seat belts, we are in for a very rough ride.”
As nearly 100 members of the Cape May County Chamber of Commerce nibbled bagels and pastries at Sand Barrens Golf Club at the Business and Economic Development Forum, they heard a grim economic forecast.
Hughes projected the economic doldrums won’t depart until March 2010 at earliest of February 2011 at latest.
Hughes, a nationally recognized expert on demographics and economics, recited statistics that showed New Jersey’s lackluster job picture.
“In 2007, New Jersey unexpectedly flat lined,” he said noting just 3,700 private sector jobs were gained in that year. That, he compared to “expansion years” of 2004-2006 when the state gained just 23,000 private sector jobs.
That number was “less than a third of those expected perspective gains made by North Carolina, a key competitor state, which gained 92,000 private sector jobs in that same period.
“New Jersey never did gain economic traction,” Hughes said.
“At the same time, Cape May slipped to modest job losses in 2007.
There have been “substantial private sector job losses,” Hughes said, and cited the loss of 23,000 private sector jobs in the state, while the nation lost over 1 million jobs.
“We are going in the wrong direction at a rapid pace,” he added.
“Economic forecasters not held in high esteem in New Jersey,” Hughes added.
Of the most current data released by the Bureau of Labor Statistics that showed over 500,000 private sector jobs were lost in September and October, and another 300,000 in November, “It appears we are in a full metal jacket national meltdown.”
The national recession, now in its 12th month, is “already longer than the average postwar recession of 10.5 months.
“This is different than any other postwar recession. This is not your garden-type recession,” Hughes said.
Of the incoming Obama Administration plans for a massive stimulus package, Hughes said, “Even if a clash of titanic egos could be avoided, recovery programs crafted would not be like flicking on a light switch.”
He added a “considerable amount of time” would be required before any economic stimulus program could be operational.
“The credit crisis is still in overdrive. It’s still in the damage containment stage,” he said.
Wall Street’s executives, many who call New Jersey home, helped to support the state’s high-end housing market, Hughes said.
Because many of those executives fueled the state’s coffers with real estate and income taxes, their small bonuses and lowered compensation will reverberate to Trenton in the form of less gross income tax.
“Forty percent of New Jersey’s gross income tax is paid by the top 1 percent of tax filers,” Hughes said.
That means the state will feel those “significant hits short and long term,” he said.
“Economic wild parties lead to long economic hangovers,” Hughes stated. “We are not in that stage, and it will take considerable time. The excesses were obscene.”
“The home price correction is in the sixth inning,” Hughes said. Price corrections are a “multiple-year phenomenon and in New Jersey the bubble is even larger and with second homes, larger than that.”
“Carnage in housing will continue,” Hughes said.
“Once powerful locomotive of consumer spending,” has stemmed, he said. “Shopping and consumption is like a drug,” he added. Many households have seen their “balance sheets stretched to the limit with energy and food still a high-priced factor.”
“That’s a bad, bad combination for consumers,” Hughes said.
“The old adage, ‘When the going gets tough, the tough go shopping,’ will change,” he said.
“We are in the first stages in the current holiday (buying) season, and that puts a severe constraint on New Jersey sales tax,” he said.
Of commercial real estate, Hughes said it experienced that “over and under problem: over built, over leveraged and under leased.”
A “potential positive” in the state, since it did not experience the 2003-06 employment boom, as did the rest of the nation, “Our corporate growth was more disciplined. Corporate America did not have overstaffing in New Jersey. We may not have such excesses to expect the collateral damage from New York’s excesses,” Hughes said.
In answer to a question from the floor, Hughes said he doubted the government can “spend its way back to prosperity.” Instead, he said the actions being taken are to “Prevent it turning into something much worse. They are attempting to stop the hemorrhaging.”
Contact Campbell at (609) 886-8600 ext 28 or at: al.c@cmcherald.com