Following two years of weak business activity, a majority of New Jersey businesses remain concerned about the State’s near-term economic outlook, and they continue to give the Garden State poor grades for its business climate and its ability to control costs like taxes and health insurance.

These are among the major findings of the New Jersey Business & Industry Association’s 2008 Business Outlook Survey, in which more than 1,300 businesses participated.

“Half of our survey participants believe business conditions in New Jersey will get worse before they get better, and most remain unhappy with the State’s business climate,” said NJBIA President Philip Kirschner today, speaking at a news conference at the Association’s Trenton headquarters.

Forty-nine percent of businesses expect business conditions in New Jersey to weaken in the first six months of the year, while just 13 percent expect those conditions to improve.  This is only marginally better than last year’s outlook, which was among the weakest since the 1989-92 recession years.  However, as was true last year, most respondents who expect a worsening of conditions anticipate that it will be only moderate.

Only 19 percent of respondents (up from a record low of 17 percent last year) said New Jersey is a good place for expansion of their business facilities.  They identified the high overall cost of doing business as one of the three biggest problems they face in New Jersey, along with the cost of health insurance and property taxes.

Large majorities of survey respondents said New Jersey does a worse job than other states in controlling specific costs that figure prominently in overall high costs, such as government spending, taxes, health insurance and regulatory compliance. Most respondents also said New Jersey has a worse attitude toward business than other states.

The 2008 survey also found that businesses’ collective hiring plans remain close to last year’s restrained levels.  Twenty-five percent anticipate hiring more workers, 14 percent anticipate a reduction in employment, and the rest (61 percent) expect to keep employment stable.  This outlook is consistent with the pattern of modest employment expectations and weak job growth seen over the past several years, and it signals the likelihood that private-sector employment will continue to grow slowly in New Jersey in 2008.

A more hopeful survey finding is businesses’ outlook for their own sales and profits, which has improved from last year’s low levels.  Fifty-seven percent expect sales to rise in the year ahead, up from 43 percent having this expectation a year ago.  And 51 percent expect profits to increase, up from 37 percent last year.  (The outlook for sales and profits had declined in NJBIA’s two previous surveys, falling close to levels seen in the 2001 recession.)

“Given the recent slowdown in economic activity, the improved outlook for sales and profits comes as a relief, but it’s not a reason to celebrate,” Kirschner said.  “Had the outlook for these core indicators fallen from last year’s already low levels, this almost assuredly would have signaled an imminent economic downturn.”

In other survey findings:

Outlook by Industry:  Businesses are more positive in their outlook for their own industries than they are for the US or NJ economies. Overall, 25 percent expect conditions in their own industries to improve in the first half of 2008, compared with 33 percent who expect conditions to worsen, as shown in Table 1.

Analyzing the outlook by industry sector, one finds that the manufacturing and diverse service industries are more or less evenly divided in their outlook.  About three in ten expect conditions to get better in their sectors, and another three in ten expect conditions to get worse, with the rest expecting little change. The least optimistic sectors are construction (44 percent, worse; 20 percent, better), retail trade (43 percent, worse; 20 percent, better), wholesale trade (38 percent, worse; 16 percent, better), and transportation (37 percent worse; 12 percent, better). In the finance/insurance/real estate sector, 29 percent expects to see an improvement, while 36 percent foresees a decline.

Wages. In the wage and salary arena, 73 percent plan to boost pay levels in 2008, while 26 percent plan to keep pay at current levels, and 2 percent plan reductions. Half of all survey respondents said they plan to give pay raises ranging from 2-5 percent, while 10 percent said their raises would be less than 2 percent and another 12 percent said their raises will exceed 5 percent.  Pay raises are most likely to be given by manufacturers while they are least likely to be given by employers in the housing construction industry.