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 in

any business expansion, Scarry feels, is the lack of highly skilled

personnel. "The numbers speak for themselves," he says. This

past year, 80 percent of New Jersey businesses surveyed had trouble

finding skilled technical and laboratory employees. In 1999, 78

percent

held the same complaint. Finding professional people was a major

problem

for 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 to

rise steadily, but benefits are the real soaring factor in the cost

of putting an employee into the work force. "We are now in . .

. and face more years of double digit increases in health care

costs,"

says Scarry. "Combined with the labor shortage, costs spiral."

Benefits become a competitive tool to lure the needed upper level

employees. If employment costs rise faster than the rate of

production,

growth could be limited.

Scarry points out that "the technology that is boosting many

businesses

and 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 may

increase

your productivity and be beneficial to your company, but for now it’s

expensive.

Rising entitlements. Wheel chair cuts in all the

sidewalks,

all those empty bike racks and kneeling steps on buses, and

prescription

drug costs are just some of the government expenditures that worry

Scarry. Having the state shell out for all these, he feels, will cramp

business growth.

Surplus dependency. "We seem to be dwelling under

the illusion of — rather the prayer for — an eternal

surplus,"

says Scarry with a shake of his head. "We have state government

leaders and political candidates wanting to, for instance, lower

property

taxes. When asked how, they point to the surplus as an endless well.

Debts incurred must be paid for. In truth, any government surplus

is a shallow bucket whose bottom government shall all too soon hit

with a thump, bringing a heavy blow of taxation to all business."

Interestingly, three much publicized factors seemed missing

from Scarry’s potential growth-pinching list. What about our new

president,

for instance?

Scarry grants that the federal administration does play a role in

our state economy. One positive factor in our last eight-year boom,

for example, was the Clinton/Greenspan agreement that the White House

would work to balance the budget, if the Feds would keep interest

rates down. But he sees President Bush having a major economic effect

only if he is able to induce a substantial tax cut.

Spiraling gas and energy costs, Scarry also foresees, will be less

of an economic threat than we may fear. Even though energy costs make

every item more expensive, this expense puts more money out in the

market, "so we are just dealing in higher figures."

Third, the whole E-commerce downturn is less of a disaster than a

sorting out. "It is a new technology, filled with inexperienced

investors," says Scarry. "The pattern is historical; there

will be lots of quick starts and lots of failures. But E-commerce

will play a huge part in our business future." That will be true

not only for the high tech end, but for the old standbys such as

Federal

Express and United Parcel Service, and every aspect of fulfillment

enterprise. So in the long term, E-commerce will prove an economic

expander.

Doctor Scarry’s medicine for the small business folk in the Garden

State: "Hang in there." Don’t fall victim to crisis rumors.

Interest rates will most likely drop, increasing spending. The current

market mess will indeed clear up and we will probably hold onto good

growth "for at least another 10 months." If afterwards the

market plummets like Hephaestus from its current lofty peaks, we may

wake up temporarily lamed. But we will stagger back to the forge and

produce. We will keep going, investing, and bounce back.

— Bart Jackson


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