■ Economy
Continued From Page 28 levels . In New Jersey , we recovered 722,500 jobs – almost , but not quite – a full recovery .
“ With recent job history as our guide , it would seem logical that New Jersey will fare about the same as the rest of the nation in terms of the recession ’ s impact .”
However , Hughes predicts New Jersey ’ s recession will impact lower-income families and urban areas harder than wealthier suburbs . “ Lower to middle-income workers will experience the economic pain of this recession , while wealthier neighborhoods will likely see this downturn as more of an inconvenience .”
For example , raising interest rates is making home ownership less affordable . However , higher rates – the government ’ s solution to raging inflation – is a double hit to worker ’ s paychecks . Inflation reduces the buying power for everyone , while higher rates make large ticket purchases , including vehicles and homes , less attainable . Professor Hughes explains that these realities are reducing the value of savings and leading to reduced spending . “ One obvious sign ,” Hughes observes , “ Is when shoppers begin shifting from brand names to house brands .”
What about NJ ’ s Business community ?
“ If we continue to see online retailing slip , that will be bad news for New Jersey ,” Hughes predicts , noting that 13 % of the State ’ s employment is involved in the warehousing and logistics industry .
New Jersey ’ s nonprofit community is another vulnerable sector , even though signs of financial weakness don ’ t seem to be imminent . “ So far , we have not witnessed any of our nonprofit clients experiencing hardship due to the economy ,” notes Kristen E . Crouchelli , CPA , MBA , PSA , Senior Manager for the Nonprofit and Social Services Practice at SobelCo , a Livingston , NJ-based accounting firm . Kristen says that if the state ’ s economy continues to sputter , her clients are well-prepared if forced to make difficult decisions .
“ We may see clients dipping into their rainy day funds , tapping into their lines of credit before they resort to cutting or capping services to their communities ,” Kristen relates .
Another concern for New Jersey , according to Hughes , is any further rise in interest rates . If the Federal Reserve continues to increase rates in order to curb inflation , New Jersey ’ s real estate , construction , and manufacturing sectors , industries that are directly impacted by finance rates , would be hurt .
For small manufacturers like The CLI Group in Paterson , supply chain issues and the impact of experienced craftspeople quitting or retiring remains more urgent than recession fears .
“ As far as the recession goes , who knows ?” says Daren Silverstein , President , and CEO of The CLI Group , a custom lamination service and digital printer of wallpaper and upholstery products . “ At this time , we are not seeing any slowdown , other than being unable to get materials to complete orders . There is no historical data to understand how all the cash the government pumped into the economy and subsequent COVID-related supply chain issues will impact our business in the near term .”
While he feels the pricing issues will work their way down eventually , the shift in the workforce poses a different , perhaps longer-term challenge . “ Industry lost a lot of experienced people — hard to replace people —
during COVID ,” notes Daren . “ We ’ ve seen companies discontinue successful product lines because they have lost expertise . It forces us to qualify new vendors and often pay more .” Daren says .
While supply issues seem to be improving slightly , Daren says that price increases continue . “ Unfortunately , I think we are experiencing a degree of price gouging at this point ,” he suggests .
New Jersey ’ s Economy is Globally Connected
New Jersey ’ s economic fate is impacted as much by global factors as it is by local spending and labor . Specifically , if Europe experiences a cold winter , the ongoing war and Russia ’ s cutoff of fuel supplies may mean higher global costs for fuel in New Jersey . It may also impact supplies as the USA may be forced to send allocations to our European partners .
Another Unknown : China . In spite of China ’ s recent expansionist saber-rattling , their current economic slowdown has curbed their fuel consumption and kept global supplies abundant . An uptick in use by this economic superpower could tighten supplies and hurt domestic growth .
While global actions may negatively impact New Jersey ’ s fortunes , there are other uncontrollable factors much closer to home .
And Then There is NYC According to Professor Hughes , New York City is New Jersey ’ s one of the most important and uncertain economic factors to impact our state ’ s recession economy . “ About 400,000 New Jersey residents work in New York City ,” Hughes notes . “ Work-from-home , while creating problems for New York City ’ s economy , has been good for New Jersey ,” Hughes suggests . The reason is logical : Homebound workers are taking lunch hours eating and shopping in New Jersey instead of on the streets and restaurants of New York City .
Another factor with a great impact on New Jersey is congestion pricing . If New York moves ahead with its proposal , will New Jersey respond with some kind of tax incentive for commuters to offset these higher commuting costs ? Or , will we see large-scale job loss and resignations from lower-wage earning New Jersey workers who simply cannot afford to commute to the city for work anymore ?
Preparedness Tips For NJ ’ s Businesses
What can small businesses do to prepare for this economic downturn ? According to Professor Hughes , the advice is somewhat obvious .
“ The basics still work ,” notes the Professor . “ Keep a close eye on costs . Don ’ t over-expand and definitely anticipate that revenues may be leaner , so spending needs to be adjusted accordingly .”
Not Just a Cycle : Also a Structural Change
Hughes added that during this recessionary period we are also in the process of absorbing structural changes in the economy that create some unknowns .
“ If work-from-home or some hybrid becomes part of the new normal , and online retail continues to overtake bricks and mortar retailers , we will see further structural changes in New Jersey ’ s economy ,” the professor suggests .
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