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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
nor consumers on a spending tear are turning the ship around, as
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 .
online at www.Mercer Chamber.org. Sponsored by the Mercer Chamber
of Commerce, this annual business forum features
New Jersey division president of Sovereign Bank;
executive vice president of the Philadelphia Federal Reserve, and
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
"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
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.’
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.
in underground caves this past 18 months will have noticed the Federal
Reserve’s aggressive low interest, stimulative policy. This program
has been boosted by both state and federal administrations’ pushes
for tax cuts. "And certainly these efforts have had their
says Lang, "particularly on consumer spending for large items
and durable goods."
Offering a view from the trenches, Mack-Cali Realty’s Hersh agrees,
adding, "The housing bubble driven by current consumer activity
can be seen as one of the few positive bastions in this economic
Thus while global threats of terrorism, war, and IT meltdown fill
the news, they still seem very far from John and Jane Q. Public’s
own house. So why not add on that extra sun porch while rates are
seizing the low-interest moment, businesses must seek out a broader,
more stable field of growth before they will spend and expand.
had a long erosion of confidence, with no modicum of hope pictured
on the horizon," says Hersh. "We need to know there won’t
be wild spikes in the cost of energy. We need to know there won’t
be a war. We need a return to some normalcy."
Lang, who says that manufacturing has been the hardest hit during
this latest downturn, agrees that firms need stability before they
invest in equipment. Both men say that corporate capital spending
is a decision based upon global conditions. It is not that the
sector is indifferent to current stimuli, but rather that its
must be made by using a broader yardstick — or perhaps a divining
rod. "I certainly do not see businesses, even in our comparatively
well-off region, investing heavily in new structures," says Lang,
"but hopefully they can invest in equipment. After all, things
wear out and buying demand is up." It is from this trickling up
of consumer demand that most economists are finding hope for business
and the economy as a whole.
began a substantial recovery from a strong recession, with absolutely
no job growth and, in fact, rising unemployment." He foresees
a repeat of this jobless recovery beginning in the new year.
Hersh paints a much less rosy picture. Vehemently, he insists that
if any recovery comes to central New Jersey, it must come via a
increase in our specialized industries: pharmaceuticals, bio-med,
and the financial support systems for each of these industries. Our
current static job growth rate forces rising unemployment as new
enter the market. There can be no recovery, he says, without
When will we turn that much-touted corner onto Recovery Road? Lang
says that a "broadening of growth" has already begun. He
consumer spending as being powerful enough to over ride the small
rise in unemployment. The public’s demand for goods and services has
begun to trickle up into the world of business judgment. How rapidly
will business recovery follow? That will depend on the outcome of
the current global uncertainties and the reduction of the general
malaise at home.
Hersh is less optimistic. He says, "until business can feel that
war is diverted, that our GNP is not being funneled into other
systems, and we can have some predictable energy costs, and get many
more jobs, I see no recovery."
Lang says any expectation of recovery must be reasonable. Do not scan
the horizon for a tidal wave of new business activity, he says. After
all, the downturn has not been that deep here in central New Jersey.
Therefore, can scarcely expect the upcoming peak to be
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