Corrections or additions?
This article by Bart Jackson was prepared for the February 5, 2003 edition of U.S. 1 Newspaper. All rights reserved.
The Trickle Up Recovery
The economy is not bouncing back. Neither war
preparations
nor consumers on a spending tear are turning the ship around, as
unemployment
climbs, factory production idles, and the stock market refuses to
pull out of its slump.
“The Forum on Business and Economic Trends: Mercer and Beyond”
looks at the challenges. It takes place on Tuesday, February 11, at
8 a.m. at the Green Acres Country Club in Lawrence. Cost: $20 .
Register
online at www.Mercer Chamber.org. Sponsored by the Mercer Chamber
of Commerce, this annual business forum features Warren Taylor,
New Jersey division president of Sovereign Bank; Richard Lang,
executive vice president of the Philadelphia Federal Reserve, and
Mitchell Hersh, CEO of Mack-Cali Realty. The forum looks at
national trends and how they affect central New Jersey.
Lang of the Federal Reserve says the Mercer County area has weathered
this recession far more successfully than most of the nation. For
decades, Lang has been studying how the supply of money, regulated
by the government, affects businesses across the country. A graduate
of St. Olaf’s College in Minnesota, who holds a Ph.D. in economics
from Ohio University, Lang grew up in Wisconsin, where he enjoyed
fishing the state’s many streams. He began his career with the St.
Louis Reserve, and then moved east in 1980 and took over the
Philadelphia
Reserve.
“Had you told people in our region a year ago that by 2003 we
would have a 3 percent growth with a relatively stable unemployment
rate, they would have greeted this as great news,” says Lang,
“but instead, both business and consumers are claiming to be
stricken
with a general malaise which is stifling market confidence.”
He puzzles over this ironic economic mix. The president has announced
the greatest deficit since his father held office, the possibility
of war looms over the nation, and yet consumers are saying `Boy, this
is frightening, I’d better go out and buy a car, or a house.’
Consumers’
sentiments are not backed up by their spending patterns.
In a further financial twist, business investment has not responded
to consumer cravings. Supply lags demand. The reasons for this are
several, Lang says, and they point to an optimistic future.
Grassroots stimulation. Virtually any folks not strandedin underground caves this past 18 months will have noticed the FederalReserve’s aggressive low interest, stimulative policy. This programhas been boosted by both state and federal administrations’ pushesfor tax cuts. “And certainly these efforts have had theireffect,”says Lang, “particularly on consumer spending for large itemsand durable goods.”Offering a view from the trenches, Mack-Cali Realty’s Hersh agrees,adding, “The housing bubble driven by current consumer activitycan be seen as one of the few positive bastions in this economicpicture.”Thus while global threats of terrorism, war, and IT meltdown fillthe news, they still seem very far from John and Jane Q. Public’sown house. So why not add on that extra sun porch while rates arelow?The business lag. While John and Jane Consumer are merrilyseizing the low-interest moment, businesses must seek out a broader,more stable field of growth before they will spend and expand.”We’vehad a long erosion of confidence, with no modicum of hope picturedon the horizon,” says Hersh. “We need to know there won’tbe wild spikes in the cost of energy. We need to know there won’tbe a war. We need a return to some normalcy.”Lang, who says that manufacturing has been the hardest hit duringthis latest downturn, agrees that firms need stability before theyinvest in equipment. Both men say that corporate capital spendingis a decision based upon global conditions. It is not that thebusinesssector is indifferent to current stimuli, but rather that itsdecisionsmust be made by using a broader yardstick — or perhaps a diviningrod. “I certainly do not see businesses, even in our comparativelywell-off region, investing heavily in new structures,” says Lang,”but hopefully they can invest in equipment. After all, thingswear out and buying demand is up.” It is from this trickling upof consumer demand that most economists are finding hope for businessand the economy as a whole.The job problem. “In 1990,” Lang recalls, “webegan a substantial recovery from a strong recession, with absolutelyno job growth and, in fact, rising unemployment.” He foreseesa repeat of this jobless recovery beginning in the new year.Hersh paints a much less rosy picture. Vehemently, he insists thatif any recovery comes to central New Jersey, it must come via asubstantialincrease in our specialized industries: pharmaceuticals, bio-med,and the financial support systems for each of these industries. Ourcurrent static job growth rate forces rising unemployment as newworkersenter the market. There can be no recovery, he says, withoutsubstantialjob increases.When will we turn that much-touted corner onto Recovery Road? Langsays that a “broadening of growth” has already begun. Heforeseesconsumer spending as being powerful enough to over ride the smallrise in unemployment. The public’s demand for goods and services hasbegun to trickle up into the world of business judgment. How rapidlywill business recovery follow? That will depend on the outcome ofthe current global uncertainties and the reduction of the generalmalaise at home.Hersh is less optimistic. He says, “until business can feel thatwar is diverted, that our GNP is not being funneled into othergeopoliticalsystems, and we can have some predictable energy costs, and get manymore jobs, I see no recovery.”Lang says any expectation of recovery must be reasonable. Do not scanthe horizon for a tidal wave of new business activity, he says. Afterall, the downturn has not been that deep here in central New Jersey.Therefore, can scarcely expect the upcoming peak to bedisproportionatelylarge.Previous StoryNext StoryCorrections or additions?This page is published by PrincetonInfo.com— the web site for U.S. 1 Newspaper in Princeton, New Jersey.
