Following a third tough year in which actual sales, profits and employment fell short of expectations, New Jersey employers are heading into 2004 with a tempered optimism that anticipates a moderate improvement in business conditions.

Forty percent of companies responding to NJBIA's 2004 Business Outlook Survey said they expect conditions in their industries to improve in the near term, and only 19% said they expect conditions to worsen. This is the most expansionary assessment in six years, and expectations are more positive than negative for all major industry sectors, including manufacturing.

But the outlook of individual companies for their own sales, profits and employment in the year ahead remains subdued. While this outlook nearly matches or slightly exceeds last year's improved outlook, it nonetheless remains well below the highs reached in the 1990s expansion.

"Two years after the national recession has ended we find that business confidence in New Jersey, while improved, remains guarded. It is well below the easy confidence achieved in the prosperous 1990s," NJBIA President Philip Kirschner said in a news conference today at NJBIA's Trenton headquarters.

The survey of NJBIA's 21,000 member companies was conducted in September 2003. The findings are based on the first 2,000 responses, which came from companies of every size and every industry across the state.

Employment-The weakest link in the outlook is employment. Twenty-three percent of survey participants anticipate hiring more workers next year, and 11% anticipate reducing employment, as shown in the table on page 3. The remaining 66% expect to maintain employment at current levels. This is even somewhat below last year's employment projections, which, as it turned out, were above the mark. A weaker than expected economy caused many employers to scale back their hiring plans in 2003.

When polled a year ago, 24% of companies anticipated adding workers to their payrolls in 2003 and only 10% anticipated making cutbacks. Because of weaker than expected conditions, almost the reverse came true. Only 15% of this year's respondents reported adding workers to their payrolls in 2003, while 24% reported making cuts. This marked the third consecutive year in which actual hiring conditions fell short of expectations.

Sales & Profits-As with employment, expectations for rising sales and profits over the past year failed to materialize for many companies. Our 2003 outlook survey found more companies than not expecting their sales and profits to rise. Actual conditions turned out to be less favorable, with more companies reporting declines than increases.

Looking ahead, 50% of all respondents expect sales to rise in 2004 and only 23% anticipate a decline, barely changed from last year's expectations. Forty-four percent of respondents project increased profits in 2004 while 28% anticipate a decline. Expectations are above last year's levels but are well below the optimism generally seen in the 1995-2001 surveys.

Business Cycle-When the survey was conducted in September, 57% said their industries were either expanding (19%) or at least recovering (38%) from recession. Two years ago, only 34% said their industries were in the expansion/recovery phase of the business cycle. The percentage of companies saying their industries were still in recession in September of this year was 37%, down from 43% last year.

Business Climate-Attitudes about New Jersey's business climate have reached a ten-year low. Only 28% agreed that New Jersey is a good site for business expansion, down from 50% just three years ago and the lowest "good" reading since 1994. A signi-ficant majority of respondents said New Jersey is worse than other states in its attitude toward business (74%), in attracting new business (72%) and in its economic development efforts (65%), all ten-year highs. However, a significant majority still believes New Jersey is better than other states in the quality of its public schools (69%), the quality of its workforce (66%) and as a place in which to live (64%).

Biggest Problems-For the 15th consecutive year, respondents cited health insurance costs as their worst problem. This was followed by property taxes, frivolous lawsuits, state taxes and state regulations, in that order. Not surprisingly, 95% said New Jersey is worse than other states in controlling healthcare costs. Although skilled workers are no longer in as short supply as they were just a few years ago, six in ten companies said they still have trouble finding them.