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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 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



"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.

Grassroots stimulation. Virtually any folks not stranded

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


The business lag. While John and Jane Consumer are merrily

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.

The job problem. "In 1990," Lang recalls, "we

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


job increases.

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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