Amid evidence of a weakening economy, business confidence in the State economy and the State’s business climate has fallen to the lowest levels since the early 1990s, the New Jersey Business & Industry Association’s 2007 Business Outlook Survey has found (see full report).

While employers as a group have voiced growing concern about the near-term economic outlook at all levels—from the US economy to their own companies—their bleakest assessment is reserved for the New Jersey economy.

Fifty-one percent of survey respondents said they expect State economic conditions to deteriorate in the first half of 2007, while only 12 percent said they anticipate improvement.  This is the most downbeat assessment since the 1989-92 recession surveys.  However, most respondents who expect a worsening of conditions anticipate that it will be only moderate.

Collectively, the 1,700 employers responding to the survey also expressed less optimism in the outlook for their own sales, profits, and employment than they did last year.  In fact, collective expectations for sales and profits have fallen to the lowest levels since the 2002 survey when the economy was in a recession. Nonetheless, the overall expectation is for continued growth, but at a very slow pace.
                                                                                    
“In the midst of an apparent economic slowdown, our members see more of the same ahead: very slow growth,” said NJBIA President Philip Kirschner. “They are also very concerned about the high cost of doing business in New Jersey, especially health insurance and property taxes.”
                                              
Respondents as a group gave New Jersey the lowest marks on record as a place for business expansion.  Only 17 percent said the State is a good place for renovation or expansion of business facilities, down from 28 percent in the preceding three surveys.

Respondents also gave very low marks to State government for its performance in key areas of fiscal responsibility, including its ability to control government spending and taxes, as well as its ability to control high cost of health insurance, regulatory compliance and energy.  Asked to list their worst problems, respondents said their worst problem was the high cost of health insurance, closely followed by property taxes and the high overall cost of doing business in New Jersey.

Kirschner noted that this year’s decline in confidence follows a sharp loss of confidence found in last year’s 2006 Business Outlook survey.  That survey uncovered one of the most dramatic shifts from optimism to pessimism for the state and national economies in 22 years of survey data.

“In hindsight, it is apparent that our members sensed the onset of the economic slowdown that now confronts us,” Kirschner said.

The economic slowdown can be seen in New Jersey’s slow rate of employment growth. According to State economic data, total private-sector employment in New Jersey grew by just 11,300 jobs in the first ten months of this year, a gain of one third of one percent.  This is less than half the national average rate of private-sector job growth.

The 2007 Business Outlook Survey questionnaire was distributed to NJBIA’s 23,500 member companies in September 2006.  The survey findings are based on the first 1,700 responses.  Respondents came from every industry and every region of the state. Three quarters of the responses came from small companies with one to 24 employees.
           
Among other survey findings (See Table on next page for details):

Own Industry: Respondents as a group are less optimistic about prospects for their own industries than they were at this time last year, with overall confidence falling to the lowest point since the 1991 survey. Twenty-four percent project better times ahead in 2007, compared with 27 percent last year, while 34 percent believe conditions will deteriorate, compared with 32 percent last year. The loss of confidence can be seen across most major industry groups.

Employment: About 21 percent said they expect to hire more workers in 2007, compared with 24 percent last year, while 12 percent anticipate making cutbacks, compared with 10 percent last year.

Fewer employers hired workers in 2006 than had anticipated doing so in the prior-year survey. While 24 percent of companies anticipated expanding their payrolls in 2006, only 18 percent actually did so.  At the same time, 16 percent of companies trimmed their payrolls in 2006, more than the 10 percent that anticipated the need to do so.

Sales:  Forty-three percent of companies expect sales to rise in the year ahead (versus 49 percent in the previous survey), while 29 percent foresee declines (versus 25 percent in the previous survey). 

Profits:  The outlook is even less rosy for profits.  A little over 37 percent said they expect profits to increase in 2007 (versus 43 percent in the previous survey), while just below 36 percent project a decline (versus 32 percent in the previous survey).

Business Climate: When asked how they view New Jersey as a place to expand their business facilities, only 17 percent rated the State to be “good” or “very good.”  This is down from 28 percent during the three preceding surveys and is the lowest rating for the entire 1985-2007 survey period. Thirty-nine percent now say New Jersey is a “poor” place for business expansion, 25 percent rate it “fair” and the remaining 19 percent say it is “average.”