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This article by Bart Jackson was prepared for the September 18, 2002 edition of U.S. 1 Newspaper. All rights reserved.

How Far Down? For How Long?

Jersey Goes Jobless," "Venture Capitalism’s Nuclear Winter," "Death of Dot Com" — the headlines go ever on. From the water cooler economist to pundits

of academe, every financial forecaster today vies to outgloom his

fellows in descriptions of our current business downturn. Be they

ever so dire, however, very few of these assessments stand cemented

in fact and hedged in perspective.

James Hughes brings both of these much needed elements to bear

as he outlines "The Garden State’s Economy and Future Prospects"

in a talk sponsored by the Central Jersey Job Developers Association

(CJJDA) on Thursday, September 19, at 10:45 a.m. in the city planning

board offices, 40 Livingston Street, New Brunswick. Free, but registration

requested. Call Darma Silverman at 732-745-5300, ext. 4201.

As dean of Rutgers’ Edward J. Bloustein School of Planning and Public

Policy, Hughes keeps an eye on New Jersey’s employment, growth industries,

consumer spending, and all aspects of the state’s economy as they

compare with the nation and with our historic record. His talk is

designed for anyone seeking to learn in what directions — and how

swiftly — our state will be moving.

The Central Jersey Job Developers Association is a professional association

for all levels of career counselors. While best known for its huge,

annual January Job Fair, the CJJDA also offers a host of other employment

programs and meetings.

Touted as "The Garden State’s Trendiest Couple," Hughes and

his wife, Connie, doubtless have greater knowledge of New Jersey statistics

and what trends they indicate than any other pair from High Point

to Cape May. Connie Hughes, in addition to heading up New Jersey’s

last census count, has served as Deputy Commissioner of Labor, and

president of the state’s Public Utilities Board.

Originally from Elizabeth, James Hughes came to Rutgers in l961 and,

excepting what he calls one brief Forest Gump-style leap into the

service, never left. Collecting a B.A. in Engineering, and a Masters,

Ph.D., and Department Chair in Urban Planning, his experience and

acumen made Hughes the natural choice for dean of the Bloustein School

of Planning and Public Policy, a position he has held for the past

eight years.

"The real truth of the matter," says Hughes, "is no one

has yet invented a recession that lasts forever." While certainly

not blind to New Jersey’s current economic downturn, he refuses to

join the pessimistic chorus of the less-informed majority. "Neither

history, nor our present state bears this out," Hughes insists.

How bad is it? Simply, not as bad as we’ve seen thrice

in the past 20 years. The rocketing inflation of the early ’80s, the

crash of 1989, and the recession of 1992 all hit New Jerseyans harder

than this current recession, whose start Hughes pegs at June, 2001.

This past year, the Garden State lost 31,000 jobs. In l989, we lost

259,000 — nearly nine times as many.

One new concern does mar Hughes’ relative optimism — the debt

bubble. As home equity rates for 15-year fixed mortgages drop to an

abnormal 5.6 per cent, vast numbers of homeowners have leapt into

second and third mortgages seeking quick, easy-term cash. Thus, the

majority of Garden State homeowners now stand straddled with at least

two home mortgages.

What landed us here? "Typically, recessions are driven

by consumer spending and housing," says Hughes. "But this

time we were driven by business investment." From 1997 on, we

just couldn’t pour enough business capital into high tech ventures,

pharmaceuticals, and office construction. New Jersey had ceased to

be a manufacturing state by 1988, notes Hughes, but our telecommunications,

high tech, and service capabilities more than took up the slack. By

1997, already basking in five years of strong growth, the bubble kept

building.

In the Garden State particularly, office space played a major role.

Ever since the S & Ls and like institutions were freed from lending

only to residential builders, loan monies gushed into office and warehouse

construction. Even after the loan spigot turned down to a trickle

in the ’90s, the building went merrily on. Hammers swung frantically

along the Route 1 corridor and elsewhere in anticipation of the office

space crunch of 2001. It never came. Instead businesses leased and

sub-leased old space, leaving the newly built rentals to imprison

old capital and past dreams.

How do we climb back? "It takes a strong locomotive

to pull us out of a recession," states Hughes, "but interestingly,

we seldom predict accurately what that new engine will be."

Many New Jersey business people are currently eying pharmaceuticals

for the crown of economic savior, but that is a market with many of

its own problems and Hughes points out that it just might stop rising

or could even conceivably fail. In the ’80s forecasters bet on energy

as our hope for the future. For various reasons it never emerged.

After the low years of the early ’90s, no one had a clue. The Internet,

which was to prove so vital to our recovery, hadn’t even entered our

lives yet. It came about l996 as a true surprise. "The next locomotive

may not have been invented yet," says Hughes.

However, certain tacks must be taken for recovery, he believes. First,

companies cannot downsize their way out of a recession. Historically,

business has worked to grow its way out of down times, rather than

eliminating products and employees. Certainly increased productivity

is a goal, but is has a very short fiscal lifespan.

One move must be the cleanup of what Hughes calls the telecommunications

debacle. Ninety-seven percent of all fiber optic cable is now dark

— unused. This extensive overbuilding (coupled with over-investment

in unused technologies) will demand a long and slow — but necessary

— regeneration of these vital industries.

— Bart Jackson


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