A majority of New Jersey employers participating in a recent NJBIA survey say a recession has already descended on their industries or is on the way. A majority also anticipates that economic conditions will stay the same or get moderately worse in the first six months of 2002 before they get better.

Collectively, the 1,600 companies participating in the survey reported a glum outlook for sales, profits and employment in the year ahead, their optimism for the future falling to the lowest levels in at least eight years. NJBIA President Joe Gonzalez released the findings of the Association's 43rd Annual Business Outlook Survey in a November 20 news conference.

"A newfound pessimism has replaced last year's durable optimism," Gonzalez said. "One year ago, a majority of New Jersey employers had every reason to believe that the prosperous 1990s would extend into the first year of the new millennium. Unfortunately, their hopes have been dashed."

The business outlook is in many respects similar to the outlook expressed in the Association's 1989 survey, which was conducted at the start of the 1989-92 recession, and to the surveys of the early 1990s, when New Jersey was emerging, slowly and haltingly, from that recession.

The current survey, which was conducted in the first three weeks of September, also found that the business outlook was largely unaffected by the terrorist attacks on the World Trade Center and Pentagon.

"Our survey provides clear evidence that the business outlook is grounded in disappointing business conditions that were firmly in place before September 11," Gonzalez said. (Details of the survey findings will be reported in the December issue of this newsletter.)

Even before the survey was distributed in September, the state's economic downturn had found expression in mounting job losses through the month. In the first nine months of this year, the state's private sector lost more than 27,000 jobs, according to the latest state Labor Department data.

However, in a peculiar twist of fate, New Jersey recently has benefited from the World Trade Center disaster. The movement of white-collar jobs into New Jersey from lower Manhattan in the wake of the terrorist attacks resulted in a net gain of 10,800 private-sector jobs in the month of October and trimmed the losses seen earlier in September. As a result, the private sector now is down only 16,800 jobs for the first ten months of the year, about half of what the loss otherwise would have been. Rutgers economist Jim Hughes has said the migration of jobs to New Jersey from New York could add 20,000 permanent jobs to the state's employment base.

New Jersey's unemployment rate, reflecting a generally weak labor market (outside of the anomaly created by the Trade Center disaster), rose to 4.8% in October from 4.5% in September.

A good concurrent indicator of labor market conditions is first-time claims for unemployment insurance benefits, which are reported weekly.

In New Jersey, initial claims for unemployment benefits through the month of October were 16 percent higher than they were at this time last year, a very significant increase. In the six weeks following the World Trade Center attack, initial claims were 55 percent higher than in the same period last year. That's a very large jump, and it indicates that growing numbers of people are losing their jobs.

Ultimately, the fate of the New Jersey economy is tied to that of the nation. And the most recent economic data for the nation has been almost unrelentingly negative over the last month. Although many economists say they are confident that a recovery will take shape in the first half of 2002, the outlook is murky at best. After all, these are the same economists who earlier predicted a turnaround in the third and fourth quarter of this year.

The best one can hope is that the recent bad news is a signal that we are near bottom of a short, six-month recession. Mitigating factors that should help pull the nation out of a downward spiral include lower interest rates, courtesy of the Federal Reserve. The Fed has cut rates ten times since January, lowering the federal funds rate by 4.5 percentage points to a 40-year low of 2%. Congress is also considering an economic stimulation package that might include richer unemployment benefits and tax cuts designed to stimulate business investment.

Here is some of the most recent data about the performance of the national economy:

• The US economy contracted, albeit by a less than expected 0.4%, in the third quarter, making the threat of a recession suddenly quite real. If the economy contracts in the fourth quarter, as expected, we will be in an official recession.
• Through the end of October, the total number of US workers receiving unemployment checks had reached an 181/2-year high.
• The US manufacturing sector, already in a severe 15-month slump, took a turn for the worse in October with its worst one-month performance since the 1990-91 national recession.
• The manufacturing sector was pulled down in part by the biggest one-month drop in consumer spending (-1.8%) in almost 15 years.
• The Conference Board's consumer confidence index also took a big hit in October, falling to its lowest level in more than seven years.
• Construction spending declined for a fifth consecutive month in September , the longest string of monthly declines since the 1990-91 recession.
• Sales of existing homes registered their biggest one-month drop ever in October, plunging by 11.7 percent. Hardest hit was the Northeast, where sales fell by 14 percent.

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