Articles Posted in Economic News

Seaside Heights boardwalk looking toward Funtown PierTourism is the third-largest industry in New Jersey, and it is on the rise, with $38 billion in revenue in 2011. This represents a seven percent increase from 2010, but it is still not at the level of 2007. Tourism brought in $39.5 billion that year, the highest amount in New Jersey history. The total number of visitors to the state increased eighteen percent over 2010, to eighty million in 2011. In a speech on March 15 to the New Jersey Tourism Industry Association in Atlantic City, Lieutenant Governor Kim Guadagno expressed optimism that tourism will continue to grow and bring additional revenues to the state.

According to state officials, the warm winter brought people to the Jersey Shore out of season, and this may continue to bring heightened levels of tourism into the summer. Tourism remained high even with the mandatory evacuation of the Shore before Labor Day in preparation for Hurricane Irene.

When Guadagno took office two years ago, she announced that the state would cut over $2 million in funds for the promotion of tourism. Last week, she said the state will put $2.7 million towards a campaign to market the state as a vacation destination in the spring and summer. The state will also offer a greater role for the tourism industry in planning major future events. These events include Wrestlemania and the 2014 Super Bowl, which will be played at East Rutherford’s Meadowlands.

A report from an economist, Joel Naroff, presented at the same conference offers support for the lieutenant governor’s optimism. According to the Press of Atlantic City, Naroff gave a keynote speech saying that “all signs point to a good summer.” Despite the possibility of gas prices reaching $4 per gallon in the summer months, Naroff predicted that recent good economic news will lead people to do more discretionary spending this summer. This includes vacations.

Other economic indicators in the state are not as bright, Naroff noted. While unemployment is down nationwide, the housing market is still struggling and the public sector is still reducing its workforce. Consumer spending, however is rising.

Another report released on Thursday came from the New Jersey Gaming, Sports and Entertainment Advisory Commission, also known as the Hanson Commission. The Commission’s report detailed a lack of communication and organization between the north part of the state, which will host Wrestlemania and the Super Bowl, and the rest of the state. The state also does not have sufficient resources and leadership infrastructure to be competitive nationally as a tourist destination.
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A bill that would increase New Jersey’s minimum wage came one step closer to becoming law this week. The Senate Labor Committee approved the bill on a 3 to 1 vote on Thursday, March 8, 2012. An Assembly committee approved it in February. The bill would increase the state’s minimum wage to $8.50 per hour, an increase of $1.25 per hour over the current rate. The bill would also tie the minimum wage to inflation, meaning the minimum wage would automatically increase in proportion to the Consumer Price Index.

Democratic lawmakers in New York also want to raise the rate the same as New Jersey, from $7.25 to $8.50 per hour. New Jersey increased its minimum wage from $5.15 to $7.15 in 2005, and again to $7.25 in 2009. The Minimum Wage Advisory Commission, created by state law to track the economic impact of the minimum wage, has reportedly recommended increasing it to $8.50 per hour three times since the last increase. If the bill passes the full Legislature and is signed by the governor, New Jersey will have the third-highest minimum wage in the country, after Washington and Oregon.

A worker earning minimum wage testified to an Assembly committee about her inability to support herself and her family on $7.25 per hour. A representative of a business group testified that the economic recovery remains too uncertain to impose additional costs on employers. According to the Gloucester County Times, approximately 40,000 New Jersey workers currently earn the minimum wage and will directly benefit from the proposed increase. The higher minimum wage amount could mean $2,500 or more in additional annual income for a minimum wage worker. That would also be an additional expense for employers.

Supporters of the bill tout the need of New Jersey workers for additional resources to pay their bills and debts and support their families. Putting more money in the hands of employees, they say, will lead to more money being spent in New Jersey businesses, thereby spurring the economy.

In opposition to the bill, lawmakers, mostly Republican, argue that an increase in the minimum wage imposes an undue burden on businesses at a difficult economic time. They warn that an increase could actually lead to fewer jobs overall, as employers who cannot afford the increased wage rate would instead choose to lay off workers, or even leave the state.
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1181597_60270378_01292012.jpgA surge in optimism is evident among New York City’s small business owners, according to the New York Daily News. As the national unemployment rate slowly drops and consumer spending slowly rises, confidence in an economic recovery may be on the rise as well. Anyone who follows business news knows that bad economic conditions bring an onslaught of people offering all sorts of predictions and prognostications about impending recoveries or further collapses. The Daily News did not talk to any of those people though. Instead, it spoke to business owners themselves, and they demonstrated some of the causes for their optimism. While the optimism may only be temporary, it could at least serve as motivation or inspiration for other businesses.

The Daily News interviewed the owner of a Brooklyn restaurant as an example of current conditions for many of New York City’s small businesses. She reports that her business grew by more than twenty-five percent in 2011 and that they plan to open a second location early this year. She credited her success on two factors. First, she says they maintained an emphasis on “customer service, excellent product and overall value.” Of course, these are good goals for any business, since a business with poor service and an undesirable product probably should not survive. Of perhaps more direct benefit to her company was the second factor in her restaurant’s success: they were featured on the Food Network. The lesson for other small businesses, perhaps, is not only to offer exemplary service and a good product but also to find a way to be highly visible. Not everybody can get on cable television, but everyone can get on the internet.

A survey conducted by Newtek Business Services demonstrates the rise in optimism among small businesses in New York City and around the country. Newtek is a business consulting and service company with clients all over the country. They conduct a monthly survey of about 100,000 businesses, although all of the surveyed businesses are customers of Newtek. They found that fifty-five percent of small businesses have an optimistic outlook about “the future,” and sixty-four percent are optimistic about their own businesses. On both questions, twenty percent of respondents reported feeling pessimistic, with the remainder answering “neutral.” Sixty-eight percent of respondents said they find it easier to grow their sales than to reduce costs.
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1099609_17171190_01222012.jpgNew Jersey Governor Chris Christie signed a bill into law on January 5, 2012 that creates the Grow New Jersey Assistance Program (GrowNJ), which is intended to promote business and economic development in urban and suburban areas around the state. The program will allocate $200 million from the Urban Transit Hub Tax Credit program and apply it towards relatively small-scale development projects. The program will also expand the reach of the Urban Transit Hub program itself. Sponsors of the bill in the state Assembly describe it as a step forward in efforts to build New Jersey’s reputation as a “business-friendly” state.

New Jersey’s Economic Development Authority (EDA) will administer the GrowNJ program. The program will offer qualifying businesses tax credits worth between $5 million and $8 million over a ten-year period. In order to be eligible, businesses must commit to investing $20 million or more in a “qualified redevelopment zone.” They must also provide at least 100 full-time jobs in the area. Larger projects may allow a business up to $40 million in tax credits under certain circumstances, according to the governor’s office.

The EDA, as part of the new law, will also convey a 12-acre tract of land in downtown Newark to the New Jersey Performing Arts Center. The Center is reportedly considering selling part of the site to the insurance company Prudential for a new office tower. The EDA has stated that it has offered the company a $250 million tax credit if it proceeds with the project.

The Urban Transit Hub program, also administered by the EDA, supports and encourages private capital investment in nine New Jersey cities, known as “urban transit hubs.” Seven of these “hubs” are in the northern part of the state: East Orange, Elizabeth, Hoboken, Jersey City, Newark, New Brunswick, and Paterson. The two other hubs are located in the southwest part of the state in Trenton and Camden. Under the main Urban Transit Hub Program, real estate developers or owners investing at least $50 million and providing 250 or more jobs may qualify for tax credits based on the amount of their qualifying capital investment. The tax credit could total as much as 80 to 100 percent of their investment. The program took effect on June 13, 2008, and businesses may apply for its benefits for a period of five years from that date.
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Newark, New JerseyThe New Jersey Institute of Technology (NJIT) announced in late December that it is moving forward with an $80 million plan to develop a “Greek Village” for its undergraduate students on its Newark campus. Newark’s planning board approved construction of six buildings as part of the project, including five three-story duplexes and a six-story “Honors College building,” according to NJ.com. The new buildings will house dormitories, mixed-use commercial space, a dining area, and a fitness facility. NJIT’s campus near downtown Newark is currently home to about 1,600 students, and the new development will create room for 600 more. The new buildings will replace a 2-acre parking lot.

A private corporation created by the school to manage the development is working out financing and hopes to complete construction by March 2013. By creating a private entity, NJIT has the opportunity to apply for tax benefits under the state’s Urban Transit Hub Tax Credit program. This program provides tax credits up to 100% for certain capital investments made by individuals or businesses in designated urban areas, in an effort to promote private equity investment in development projects. Since the school is a public entity, it may also be able to raise funds through a bond election.

The corporation’s president describes the development plan as a “community development initiative” not limited to the benefit of NJIT. The Greek Village project is the first phase of a billion-dollar “Campus Gateway Redevelopment Plan” that will eventually redevelop about 23 acres around the NJIT campus.

The Greek Village is intended to replace the aging buildings on Martin Luther King Jr. Boulevard used by the school’s Greek organizations. The school hopes that the existing buildings will be replaced by mixed-use developments, combining retail or office spaces at street level with residence above. The development therefore offers opportunities to create new businesses in both an as-yet-unused part of the campus and an older, established but slightly run-down part of Newark.

As of late December, eight of NJIT’s eighteen Greek organizations had agreed to move to the new location. Many students had mixed feelings, citing the existing Greek area’s history despite the often-poor condition of many of the buildings. Non-student residents of that area seem more receptive to the idea, as it brings in new development to the neighborhood and moves the frat parties to the NJIT campus.
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484010_62695363_01032012.jpgThe beginning of a new year is as good a time as any to take stock of your business, review your performance over the past twelve months, and take a look at the state of the economy and business in general. Every year, people publish lists of trends from the past year, trends to watch out for in the new year, lessons and warnings, and so on. A small business owner can get overwhelmed by all the lists and advice circulating, especially in the first week of the new year. As business attorneys, we like to take a look at the issues affecting New York and New Jersey to see how we can best serve our clients.

The economic outlook for New Jersey and New York is good, but current conditions remain rather bleak, with hiring still down and borrowing and lending only rising slowly. In times like these, it is important to recognize what is working in your business and what is not working, and to look at new developments that could help. The Street‘s Elizabeth Blackwell recently identified five lessons for small businesses from 2011 that are worth reviewing.

First, New Jersey small businesses have an abundance of resources offering support to owners and managers. Trade associations, merchant groups, chambers of commerce, and city- and state-supported programs allow business owners to draw on the expertise of others, or just to spend time among like-minded people. No one should have to run their business entirely alone.

Technological advances continue to change the way we run our businesses. Sometimes these changes make little overall difference and eventually fade away. Others make a lasting mark. Blackwell identifies the iPad, which gained ever-greater prominence in 2011, as an “instant status-booster and conversation-starter.” Identifying which new technologies are worthwhile and which are not is an ongoing challenge of running a business.

Social media may have hit its high point in 2011, with nearly every business in America deciding whether or not to join Facebook, Twitter, Google+, and other platforms. Some businesses will thrive online while others will remain comfortably analog. This decision depends entirely on the personality and needs of the business and its owners. Some features of the pre-internet days remain crucial features of running a business. For many businesses and customers, no amount of social media proficiency will ever replace the power of a simple handshake.
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1193021_21321801_12272011.jpgAlthough the economy has shown signs of improvement in 2011, New Jersey should not expect significant changes until 2013, according to a spokesperson for the state’s district office of the Small Business Administration (SBA). The SBA’s Harry Menta, a public affairs specialist in the Newark office, recently discussed various economic indicators with the Hackensack Record. He cited trends in business loans to suggest that growth among businesses is happening slowly, but steadily, throughout the state.

According to the SBA’s analysis, business loans during the fiscal year ending on September 30 increased by eight percent over the previous year, but have not come close to pre-recession figures. New Jersey businesses took out 1,290 loans totalling $678.2 million dollars in the most recent fiscal year. This is a slight increase over the 1,198 loans issued the previous year, but it is an enormous increase, forty-nine percent, from the $455 million borrowed by businesses that year. While the total number of loans is the more pertinent figure, the increase in amounts borrowed is still a hopeful sign for business growth. Increased borrowing and lending often signals increased confidence by both businesses and the banks, as businesses are willing to take greater risks to continue operations and banks are willing to finance them.

Menta also mentioned loans in two New Jersey counties, Passaic and Morris. Passaic County saw explosive growth in the last fiscal year, with 69 loans totalling $36.2 million, an increase from $13.8 million and 51 loans. Morris County saw no change in the number of loans and a small decrease in amount, with 75 loans totalling $30 million, down from $34 million in 2010.

The SBA predicts that construction and similar businesses, which have suffered since the 2008 Wall Street crash, will continue to struggle. Technology companies and other service-oriented businesses have much better prospects, since they often require much less overhead expense and capital.

The SBA is an agency of the federal government that supports small businesses and entrepreneurs throughout the country. It does this by supporting loan programs, providing assistance to areas affected by disasters, and conducting education and outreach programs. It also supports the federal government’s goal of awarding a specific percentage of government contracts to small businesses. Legislation passed after the 2008 crash allow the SBA to guarantee certain loans to small businesses up to ninety percent. Nationwide, the total number of SBA loans increased significantly by the end of 2010.
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493668_69476274_12272011.jpgAs the economy makes what we are told is a slow recovery, unemployment remains at uncomfortably high levels in many parts of the country, New Jersey included. With a 9.1 percent unemployment rate, some New Jersey workers have sought out alternative solutions. As the Asbury Park Press reports, entrepreneurship may soon become an appealing option for many as jobs remain scarce.

The Press tells the story of Charles Schlapfer of Lavallette, New Jersey, who worked as general manager of a building supply company when the 2008 financial crisis hit. He survived a massive round of layoffs but suffered a fifty percent pay cut. Although he looked around for other jobs, he could not find anything that met his family’s financial needs. Rather than continue with his reduced salary and no clear job security, he rolled the dice, quit his job, and started his own company. He now runs a “manufacturers’ sales representation firm” that helps businesses in the construction industry take advantage of public-sector opportunities, which he sees as a huge and relatively untapped market for local companies. The business draws on his work experience and contacts and, he hopes, has great growth potential.

New Jersey offers resources and support for entrepreneurs looking to start their own venture. The state’s Department of Labor and Workforce Development (LWD) operates several Small Business Development Centers (SBDC’s), which have begun hosting training courses and counseling for unemployed individuals who want to pursue an entrepreneurial path. A six-week training program, the “Entrepreneurial Training Program for the Unemployed” (ETPU), instructs aspiring business owners in how to develop a business idea and handle the many aspects of the business start-up process. It also includes one-on-one counseling and assistance with applications for start-up financing. The program is free, financed by grants from the LWD), and requires applicants to meet certain criteria related to employment and receipt of unemployment benefits.

Starting a business requires careful planning and attention. Every business is unique, but all have common questions at the outset. The question of initial capital is perhaps the most important. Some businesses can be run from a laptop computer and cell phone in a corner of your home or the neighborhood cafe, while others require significant equipment purchases and office space. This also affects the questions of how to structure a business. An entrepreneur must consider whether to operate a business as a sole proprietor, to form a corporation, or to create some other business organization. That leads to questions of whether to hire staff, and so on.
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01 Jimmy Dean Sausages at Wal-MartA new Wal-Mart potentially opening in Harlem could cause many locally-owned stores that sell fresh food to go out of business, according to critics of the giant retailer. Manhattan borough president Scott Stringer conducted a survey of the area around a site at 125th Street and Lenox Avenue and issued a report predicting that between 30 and 41 small businesses in the area selling fresh produce could go under within a year. This accounts for twenty-five percent of food businesses in the area and includes green grocers, bodegas, and supermarkets. An additional 18 to 25 businesses could close after one year, the study suggests.

Wal-Mart has not disclosed a specific site for a Harlem location, but the site on W. 125th Street fits the profile for a Wal-Mart location, according to researchers. The site is in a low-income neighborhood, has the appropriate zoning, and is large enough to fit a Wal-Mart store. Although Wal-Mart promotes itself as bringing fresh produce and other food to what it calls “food deserts,” where fresh food was not previously so readily available, Stringer disputes this claim as it pertains to Harlem. He predicts that the overall amount of retail space available for fresh food would actually decrease in the Harlem area if a Wal-Mart opened there, making it even more difficult for residents to obtain fresh food.

Stringer’s report based its predictions in part on a 2010 study by Loyola University that analyzed the impact on Chicago’s Austin neighborhood after a Wal-Mart opened there in 2006. It found that, within one year of the store’s opening, twenty-five percent of the competing businesses within a one-mile radius had gone out of business. That number increased to forty percent after two years. The study’s findings suggested that, in terms of job creation, the introduction of a Wal-Mart to the area added as many jobs as were lost due to business closures.

Wal-Mart’s critics contend that, because it offers low prices with which local businesses cannot compete, Wal-Mart stores inevitably put area stores out of business by drawing away their customers. The prospect of competition with a store like Wal-Mart in Manhattan causes concerns for business owners and entrepreneurs who might want to locate a business nearby. A Quinnipiac University poll conducted this past summer found that a majority of New Yorkers would shop at a Wal-Mart if one were located nearby.
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603618_90729454_12162011.jpgSmall businesses accounted for about 55,000 new jobs added during November 2011, according to an informal survey conducted by payroll processing company Intuit. Intuit collected responses from around 71,000 small businesses that use its online payroll system. It defined “small business” as one with less than twenty employees. The total number of jobs represents a decrease from October, which saw about 60,000 jobs created, but the numbers are still hopeful. Although economic growth remains sluggish, small businesses are still one of the primary sources for new job creation.

The latest employment statistics from the Department of Labor’s Bureau of Labor Statistics, released on December 2, 2011, show that the unemployment rate nationwide dropped by 0.4 percent since October, to 8.6 percent. This is a significant drop from a rate of almost ten percent in November 2009. A reduction in unemployment, of course, does not imply that all those people found jobs. It also includes people who stopped looking for jobs.

A recent article in Fortune examines job creation statistics for the past year and concludes that small businesses have created the majority of new jobs, accounting for over sixty percent of private-sector jobs. Definitions of what constitutes a “small” business vary widely, ranging from twenty to five hundred employees, which makes accurate statistics difficult to find. Using the broader definition of five hundred or fewer employees, Fortune finds an average of 60,000 new jobs per month added to the private sector in the past eight months, not far from Intuit’s numbers.

This is not to say that small businesses are doing exceptionally well in this economy. Small businesses with five hundred or fewer employees hardly constitute a monolithic group. Businesses with ten employees may have a very different outlook than businesses with just under five hundred workers. Different market sectors have responded differently to economic conditions as well. Retail businesses, particularly corner store and “mom & pop” companies. have had a vastly different experience than, for example, technology companies. The potential for small businesses to lead the charge in the economic recovery remains strong, however. The White House sought to give tax credits to small businesses as part of its jobs plan, and hopefully it will continue to seek such benefits.
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