newjerseynewsroom.com

Outlook for 2011 mixed

BY TOM HESTER SR.

NEWJERSEYNEWSROOM.COM

While there are indicators that business is improving in New Jersey, nonetheless it remains at recession levels, according to an annual survey by the New Jersey Business and Industry Association made public Tuesday.

Six in 10 companies reported that their industries were in a recession when the survey was conducted in September.

Overall levels of sales, profits, business spending and employment improved for individual companies in 2010, moving off their 2009 lows.

"We've had a good bounce in ground-level business activity," NJBIA President Philip Kirschner said at a press conference in Trenton. "That's the bright spot in this year's survey. Despite improving business conditions, most companies are still struggling to shake off this terrible recession."

The survey also revealed a modest improvement in the outlook for sales, profits and business spending in the year ahead.

However, the near-term outlook for the state and national economies, as well as for companies' own industries, has weakened, falling from last year's improved levels.

The survey found business confidence in the New Jersey economy has weakened and remains negative overall for a sixth consecutive year, with more companies believing conditions will worsen, rather than improve, in the first six months of the year ahead.

The employment outlook of individual companies is flat, with companies more or less evenly divided between those planning to hire additional workers in 2011 (16 percent) and those planning to make workforce reductions (15 percent). The remainder plan to keep employment stable.

Most of the loss of confidence in companies' own industries has come in sectors hit hardest by this recession — namely construction, retail, transportation, and finance/insurance/real estate. The largest reversal of confidence has come in the outlook for the national economy.

Thirty-three percent of respondents believe U.S. economic conditions will be worse in the first six months of 2011 when compared with now, while only 23 percent believe it will perform better. The net outlook for the national economy, at minus 10 percent, is negative and down sharply from a net positive outlook of 23 percent last year.

"Many businesses continue to battle strong economic headwinds, and they face a still uncertain future," Kirschner said. "This does not inspire confidence in a downturn that has already lasted nearly three years."

The NJBIA survey was conducted in September. Thirteen hundred and eleven companies representing every major industry participated in the 52nd annual survey, producing a response rate of 9 percent. Eight out of 10 survey participants were small companies with between 1 and 49 employees.

The survey also found:

Thirty-one percent of companies reported a rise in sales revenues in 2010, sharply higher than the 17 percent of companies reporting increases in 2009. However, because more companies reported a decline in sales revenue (54 percent) than reported an increase (31 percent), overall sales activity remained negative and at a recession level for a third consecutive year.

The survey uncovered a similar story for profits, spending and employment at individual companies in 2010. While markedly improved from 2009's lower levels, these core measures of individual company performance nonetheless remained at recession levels for a third consecutive year.

The outlook has weakened for companies' own industries, moving from somewhat positive last year to somewhat negative this year. Overall, 32 percent of survey participants expect conditions in their own industries to deteriorate in the first six months of 2011, while 27 percent expect conditions to improve, leaving a net negative outlook of minus 5 percent.