Corrections or additions?
This article by Bart Jackson was prepared for the January 3, 2001
edition of U.S. 1 Newspaper. All
rights reserved.
Soft Splashdown In 2001
When the big money boys from Atlantic City’s casinos
need a financial forecast, they don’t want to hear some airily erudite
economist frothing scholarly hypotheses. Instead, they call for
Donald
Scarry, a nuts and bolts veteran who can tell them just how much
cash will be flowing around New Jersey in the near future, for how
long — and why.
Right about now, as all the financial indicators are creaking death
rattles, many are asking those same questions. Some of the answers
will come when Scarry discusses “Is New Jersey’s Economy headed
for a Soft Landing?” at the Princeton Chamber of Commerce luncheon
on Thursday, January 4, at 11:30 a.m. at the Doral Forrestal. Cost:
$33. Call 609-520-1776.
Analysts now warn that the growth boom we have been giddily riding
is about to become but a fond memory of the Clinton years. While
Scarry
admits that nothing lasts forever, he’s still insistent on one point:
it is foolhardy and inaccurate to tar New Jersey’s economic picture
with the national brush. “New Jersey faces its own growth
controlling
limits, beyond global and national trends.”
New Jersey bred, Scarry began his education in night school at Rutgers
in Newark. “I’m darn proud of that degree,” Scarry says.
Later,
on the Rutgers New Brunswick campus, he earned his PhD in economics
and a law degree. His nine-year-old Mount Laurel-based company, New
Jersey Economic Policy Consultants, takes him into the heart of the
state’s business. Boat builders, lobbyists, Mercer and Ocean counties,
law firms, casinos, and the City of Newark all count on Scarry for
financial forecasts.
And for the upcoming year, Donald Scarry predicts four major factors
that might in all likelihood limit New Jersey’s economic growth.
Labor shortages. The primary pinch New Jersey faces inany business expansion, Scarry feels, is the lack of highly skilledpersonnel. “The numbers speak for themselves,” he says. Thispast year, 80 percent of New Jersey businesses surveyed had troublefinding skilled technical and laboratory employees. In 1999, 78percentheld the same complaint. Finding professional people was a majorproblemfor 72 percent of our state’s companies, up from 65 percent last year.Managers were hens-teeth scarce for 60 percent of New Jersey firms;up five per cent from 1999.Skyrocketing wage and benefit costs. Wages continue torise steadily, but benefits are the real soaring factor in the costof putting an employee into the work force. “We are now in . .. and face more years of double digit increases in health carecosts,”says Scarry. “Combined with the labor shortage, costs spiral.”Benefits become a competitive tool to lure the needed upper levelemployees. If employment costs rise faster than the rate ofproduction,growth could be limited.Scarry points out that “the technology that is boosting manybusinessesand giving us new medical machinery is raising the cost of healthcare(and business costs) all around on the short term.” For instance,when a doctor orders a CAT scan of your spine, the diagnosis mayincreaseyour productivity and be beneficial to your company, but for now it’sexpensive.Rising entitlements. Wheel chair cuts in all thesidewalks,all those empty bike racks and kneeling steps on buses, andprescriptiondrug costs are just some of the government expenditures that worryScarry. Having the state shell out for all these, he feels, will crampbusiness growth.Surplus dependency. “We seem to be dwelling underthe illusion of — rather the prayer for — an eternalsurplus,”says Scarry with a shake of his head. “We have state governmentleaders and political candidates wanting to, for instance, lowerpropertytaxes. When asked how, they point to the surplus as an endless well.Debts incurred must be paid for. In truth, any government surplusis a shallow bucket whose bottom government shall all too soon hitwith a thump, bringing a heavy blow of taxation to all business.”Interestingly, three much publicized factors seemed missingfrom Scarry’s potential growth-pinching list. What about our newpresident,for instance?Scarry grants that the federal administration does play a role inour state economy. One positive factor in our last eight-year boom,for example, was the Clinton/Greenspan agreement that the White Housewould work to balance the budget, if the Feds would keep interestrates down. But he sees President Bush having a major economic effectonly if he is able to induce a substantial tax cut.Spiraling gas and energy costs, Scarry also foresees, will be lessof an economic threat than we may fear. Even though energy costs makeevery item more expensive, this expense puts more money out in themarket, “so we are just dealing in higher figures.”Third, the whole E-commerce downturn is less of a disaster than asorting out. “It is a new technology, filled with inexperiencedinvestors,” says Scarry. “The pattern is historical; therewill be lots of quick starts and lots of failures. But E-commercewill play a huge part in our business future.” That will be truenot only for the high tech end, but for the old standbys such asFederalExpress and United Parcel Service, and every aspect of fulfillmententerprise. So in the long term, E-commerce will prove an economicexpander.Doctor Scarry’s medicine for the small business folk in the GardenState: “Hang in there.” Don’t fall victim to crisis rumors.Interest rates will most likely drop, increasing spending. The currentmarket mess will indeed clear up and we will probably hold onto goodgrowth “for at least another 10 months.” If afterwards themarket plummets like Hephaestus from its current lofty peaks, we maywake up temporarily lamed. But we will stagger back to the forge andproduce. We will keep going, investing, and bounce back.— Bart JacksonNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
