How Far Down? For How Long?

Jersey Goes Jobless," "Venture Capitalism's Nuclear Winter," "Death of Dot Com" -- the headlines go ever on. From the water cooler economist to pundits of academe, every financial forecaster today vies to outgloom his fellows in descriptions of our current business downturn. Be they ever so dire, however, very few of these assessments stand cemented in fact and hedged in perspective.

James Hughes brings both of these much needed elements to bear as he outlines "The Garden State's Economy and Future Prospects" in a talk sponsored by the Central Jersey Job Developers Association (CJJDA) on Thursday, September 19, at 10:45 a.m. in the city planning board offices, 40 Livingston Street, New Brunswick. Free, but registration requested. Call Darma Silverman at 732-745-5300, ext. 4201.

As dean of Rutgers' Edward J. Bloustein School of Planning and Public Policy, Hughes keeps an eye on New Jersey's employment, growth industries, consumer spending, and all aspects of the state's economy as they compare with the nation and with our historic record. His talk is designed for anyone seeking to learn in what directions -- and how swiftly -- our state will be moving.

The Central Jersey Job Developers Association is a professional association for all levels of career counselors. While best known for its huge, annual January Job Fair, the CJJDA also offers a host of other employment programs and meetings.

Touted as "The Garden State's Trendiest Couple," Hughes and his wife, Connie, doubtless have greater knowledge of New Jersey statistics and what trends they indicate than any other pair from High Point to Cape May. Connie Hughes, in addition to heading up New Jersey's last census count, has served as Deputy Commissioner of Labor, and president of the state's Public Utilities Board.

Originally from Elizabeth, James Hughes came to Rutgers in l961 and, excepting what he calls one brief Forest Gump-style leap into the service, never left. Collecting a B.A. in Engineering, and a Masters, Ph.D., and Department Chair in Urban Planning, his experience and acumen made Hughes the natural choice for dean of the Bloustein School of Planning and Public Policy, a position he has held for the past eight years.

"The real truth of the matter," says Hughes, "is no one has yet invented a recession that lasts forever." While certainly not blind to New Jersey's current economic downturn, he refuses to join the pessimistic chorus of the less-informed majority. "Neither history, nor our present state bears this out," Hughes insists.

How bad is it? Simply, not as bad as we've seen thrice in the past 20 years. The rocketing inflation of the early '80s, the crash of 1989, and the recession of 1992 all hit New Jerseyans harder than this current recession, whose start Hughes pegs at June, 2001. This past year, the Garden State lost 31,000 jobs. In l989, we lost 259,000 -- nearly nine times as many.

One new concern does mar Hughes' relative optimism -- the debt bubble. As home equity rates for 15-year fixed mortgages drop to an abnormal 5.6 per cent, vast numbers of homeowners have leapt into second and third mortgages seeking quick, easy-term cash. Thus, the majority of Garden State homeowners now stand straddled with at least two home mortgages.

What landed us here? "Typically, recessions are driven by consumer spending and housing," says Hughes. "But this time we were driven by business investment." From 1997 on, we just couldn't pour enough business capital into high tech ventures, pharmaceuticals, and office construction. New Jersey had ceased to be a manufacturing state by 1988, notes Hughes, but our telecommunications, high tech, and service capabilities more than took up the slack. By 1997, already basking in five years of strong growth, the bubble kept building.

In the Garden State particularly, office space played a major role. Ever since the S & Ls and like institutions were freed from lending only to residential builders, loan monies gushed into office and warehouse construction. Even after the loan spigot turned down to a trickle in the '90s, the building went merrily on. Hammers swung frantically along the Route 1 corridor and elsewhere in anticipation of the office space crunch of 2001. It never came. Instead businesses leased and sub-leased old space, leaving the newly built rentals to imprison old capital and past dreams.

How do we climb back? "It takes a strong locomotive to pull us out of a recession," states Hughes, "but interestingly, we seldom predict accurately what that new engine will be."

Many New Jersey business people are currently eying pharmaceuticals for the crown of economic savior, but that is a market with many of its own problems and Hughes points out that it just might stop rising or could even conceivably fail. In the '80s forecasters bet on energy as our hope for the future. For various reasons it never emerged. After the low years of the early '90s, no one had a clue. The Internet, which was to prove so vital to our recovery, hadn't even entered our lives yet. It came about l996 as a true surprise. "The next locomotive may not have been invented yet," says Hughes.

However, certain tacks must be taken for recovery, he believes. First, companies cannot downsize their way out of a recession. Historically, business has worked to grow its way out of down times, rather than eliminating products and employees. Certainly increased productivity is a goal, but is has a very short fiscal lifespan.

One move must be the cleanup of what Hughes calls the telecommunications debacle. Ninety-seven percent of all fiber optic cable is now dark -- unused. This extensive overbuilding (coupled with over-investment in unused technologies) will demand a long and slow -- but necessary -- regeneration of these vital industries.

-- Bart Jackson

Previous Story Next Story

Corrections or additions?

This page is published by PrincetonInfo.com -- the web site for U.S. 1 Newspaper in Princeton, New Jersey.