New Jersey Business and Industry Association's 2006 Business Outlook: Business Confidence Falters, Economic Slowdown Seen

MP3 File Audio features Philip Kirschner, President, New Jersey Business and Industry Association.

New Jersey employers are deeply concerned about the near-term outlook for the State and national economies, and they anticipate a slowdown in economic activity at all levels, the New Jersey Business & Industry Association has found in its 2006 Business Outlook Survey.

“For the State and national economies, a new pessimism has replaced last year’s relative optimism. In 22 years of available survey data, this marks one of the most dramatic shifts from optimism to pessimism in a single year,” NJBIA President Philip Kirschner said.

Thirty-nine percent of survey respondents expect US economic conditions to deteriorate in the first six months of 2006 and only 21 percent anticipate improvement. This is a reversal of last year’s outlook, when 42 percent expected conditions to improve and 16 percent expected them to worsen.

Expectations are similarly downbeat for the New Jersey economy, with 39 percent expecting conditions to worsen and only 18 percent anticipating improvement. The outlook for respondents’ own industries is less negative, with companies more evenly divided between those expecting things to get worse (32 percent) and those expecting things to get better (27 percent).

“Our survey reveals a stunning loss of confidence in the near-term economic outlook,” said NJBIA President Philip Kirschner. “It’s clear that many employers anticipate a slowdown in an already slow recovery here in New Jersey.”

In considering the prospects for their own business activity in 2006, respondents remain more upbeat than they do for the broader economy. More expect their sales, profits and employment to rise than expect them to fall in 2006. Still, they foresee less favorable conditions than did last year’s survey respondents. (See the Business Outlook Summary on page 3 of this news release.)

The 2006 Business Outlook Survey questionnaire was distributed to NJBIA’s 23,500 member companies in September 2005. The survey findings are based on the first 1,850 responses. Respondents came from every industry and every region of the state. Nearly three out of four respondents were small companies with one to 24 employees.

The timing of this year’s survey is significant as it was conducted just as Hurricanes Katrina and Rita were battering the Gulf Coast, dislocating local economies and sending oil and gas prices to record highs. This had an immediate and negative cost impact on businesses and consumers across the country. Survey respondents also expressed a growing unhappiness with the administration of President George Bush, and they remain very unhappy with New Jersey’s business climate, which they view as much more costly and less business friendly than in other states.

Among other survey findings:

Business Cycle—When asked where their industries are in the economic cycle, a growing proportion of companies, 20 percent, said they are “moving from expansion to recession,” up from 8 percent of companies in last year’s survey. Additionally, 22 percent said their industries are in recession, the same as last year. Still, more companies saw their industries to be in the growth phase of the business cycle, either because they are expanding (23 percent) or recovering from recession (36 percent).

Sales & Profits Performance—Survey participants reported that sales and profits activity in 2005 was at the same moderately good levels as reported in 2004, with more companies enjoying sales increases (49 percent) than suffering declines (28 percent). Still, net sales and profits activity over the last two years has remained well below the levels seen in the better years of the 1980s and 1990s expansions.

Sales Outlook—Forty-nine percent expect their sales to rise in 2006, down from 56 percent projecting sales increases last year. At the same time, 25 percent expect sales to slow in the year ahead, compared with 18 percent who anticipated slowing sales the year before. These expectations, while more positive than negative, are well below the sales expectations seen in the better years of the 1980s and 1990s expansions.

Profits Outlook—Forty-three percent anticipate profit growth over the next year, down from 49 percent the year before, and 32 percent anticipate declining profits, compared with 26 percent the year before. These expectations are well below the expectations seen in the 1980s and 1990s expansions.

Employment— More companies than not said they plan to expand employment in 2006, though the percentage expecting to hire more workers has fallen from a year ago. Twenty-four percent of companies said they plan to hire more workers, down from 27 percent last year, ahead and 10 percent said they anticipate cutbacks, compared with 7 percent last year.

NJ’s Business Climate—Survey respondents continue to give New Jersey low marks as a place for business expansion. New Jersey’s favorable ratings have fallen or stagnated for five consecutive years. Only 28 percent said New Jersey is a good place for business expansion, the same as the last two years, but down from 50 percent in 2001.

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November 22, 2005
Contact: Chris Biddle
609-393-7707, ext. 227