COLUMN: The Economy: What Next?

The biggest question since the 2008 Great Recession is “Where’s the recovery?”

On the presidential campaign trail, economic issues have the highest scored interest followed by national security/foreign policy. So, let’s take a look at the #1 issue: the economy and jobs.

According to the latest economic indicator statistics, New Jersey’s unemployment rate peaked upwards to 5.3 percent in August for the sixth consecutive month. In February, it was at a post-recession low of 4.3 percent. New Jersey’s unemployment rate now exceeds the U.S. unemployment rate at its August level.

The Federal Reserve Chair, Janet Yellen, in her remarks at the Jackson Hole monetary policy conference, seemed to suggest that interest rates will be raised by the end of 2016. “The historically low Federal funds rate, the central bank’s still-large balance sheet, and the U.S. economy’s failure to fully recover from the last crisis all potentially dent the firepower of conventional monetary policy tools should a recession hit the U.S. economy in the coming years.”1 Some economists say we are headed for another recession. The fact is that after eight years of creating money out of thin air via quantitative easing and very low interest rates with the intent of spurring the economy, the national economy has shown little growth. According to an August 26th press release issued by the U.S. Bureau of Economic Analysis, real gross domestic product increased at an annual rate of approximately one percent (as of the second quarter).

Income growth for the vast majority is a concern. People, particularly the middle class and poor, are hurting. According to a Pew Research Center’s May 2016 analysis, there is a shrinking middle class not only in various regions, but, in metropolitan areas throughout the country. “The share of the American adult population that lives in middle-income households has fallen since 2000.” According to PEW’s analysis, the fallout is a result of the 2001 recession and the 2007-2009 Great Recession with slow recoveries after each of these economic downturns. On the other side, some argue that more people are becoming richer to be considered middle class any longer.3

As reported recently, “The 2008 financial crisis apparently knocked U.S. entrepreneurship to the ground, and it’s having a hard time returning to its feet.”4 It was noted in a recent paper of the Federal Reserve Board that when there is a decline of business entries (i.e. new businesses) that this affects the GDP and productivity. Over the past decade, the formation of individual business establishments has remained low, yet, it is noted that new companies or businesses “hire faster and produce higher levels of productivity than firms that have been around for a while.” Thus, some economists maintain that the decline in new business start-ups since the recession is creating labor market problems.

An economist with the Bank of America Merrill Lynch alludes to “tighter credit conditions as loans become harder to secure.” And, there are other factors that add to the dilemma of job growth and productivity. A recent report by Harvard Business School references “political dysfunction” as holding back the nation’s economic performance.

Once again, though, it’s apparent that small business pumps the economy. So, state governors and legislatures need to do more for small businesses and entrepreneurs. The New Jersey Legislature has persevered in securing appropriate state investment for small business technical assistance through the New Jersey Small Business Development Centers network (America’s SBDC New Jersey). The Legislature’s efforts are appreciated and duly noted on behalf of small businesses and entrepreneurs statewide.



America’s SBDC New Jersey – known as the New Jersey Small Business Development Centers program – contributes greatly to the state economy and state economic development efforts by providing small businesses and entrepreneurs with comprehensive assistance to develop and grow. Every year our small business clients and Leadership mobilize to advocate for this jobs-producing program. Many key legislative leaders have been involved with these state funding efforts annually. They include Republican and Democrat Budget Committee Leaders like Senators Paul Sarlo and Anthony Bucco; Assemblymen Gary Schaer and Declan O’Scanlon. Countless additional legislative advocates from both parties have done their part in persevering for these endeavors.

Last year, for the first time during the Christie administration, the Legislature and Governor enacted a state budget with a restored increase, allocating $500,000 for SBDC. That was a great accomplishment spearheaded by the Legislature! Small business owners of the state were beneficiaries. That’s where program state funding was two decades ago. But, when the Governor proposed his budget this year for FY 2016-2017, the clock was turned back again. NJSBDC is not asking for an inflated state budget funded through more tax dollars, but rather, reallocation of existing budgetary funds for this high-yield purpose. Why reduce the level of services and support for small businesses at a time when some economic forecasts warn of a new recession? That doesn’t make sense!

The program brings back to New Jersey $3 million in federal funding for small business comprehensive support and assistance, provided the NJSBDC network meets the one-to-one federal match requirement. State funding helps achieve the latter match along with other private sector sponsorships, and non-federal (private sector/public) grant awards the SBDC obtains. Without the proper match funding, NJSBDC’s federal funding would be reduced and returned to the U.S. Small Business Administration for them to award supplemental funding to other states’ SBDCs. Why should New Jersey allow this to happen when our state does not receive its proper share of federal tax revenues it sends to the federal government? Why not maintain our full federal funding to help New Jersey’s small business owners and entrepreneurs through the SBDC program?

Over the years, the SBDC program has produced lots of windfalls for the state of New Jersey. According to an independent 2015 study, for every dollar invested, $2.92 is returned. And, the study also documented that for those small business clients in 2013/2014 receiving at minimum five hours of counseling or more, the cost to create a job stood at $1,150 and the cost to save a job is $1,204. SBDC’s historical economic impact is strong. In 2015, the number of jobs created and saved through technical assistance to its small business clients grew to 16,606 – 1,715 more jobs than in 2014. The number of SBDC clients who started businesses grew to 554 – almost two dozen more start-ups than in 2014. That’s why it was remarkable that given the documented strong economic impact and client success stories over the years, the Governor’s proposed budget (FY 2016-2017) set the effort back again! This is especially so when one considers that New Jersey ranks 49th in small business and entrepreneurship-friendly public policies according to a recent study of the non-partisan Small Business and Entrepreneurship Council.

Between 2005 and 2015, America’s SBDC New Jersey helped its clients create and save 105,804 jobs; facilitated $497,381,922 in financing (equity and loans); and more than 5,000 SBDC clients started up new businesses. That’s a solid track record.

In June 2015, Governor Christie was quoted as saying to a group of business owners at a Chamber event: “Small business people don’t have a lawyer on staff”…. “They can’t afford to hire two or three people to fill out the paperwork, and they get overwhelmed by what government places on them.” 1 Small business owners who receive the kinds of services and assistance from the SBDC program would not be able to afford the same services from for-profit consultants/entities/ and business experts. So, the SBDC program supports small businesses at a high level to make a difference in their development and growth and inevitably helps them to create and save jobs in the state. The business owners pre-paid such services with their taxes. We hope this administration will work with the Legislature like last year to make the proper decision and fund the program at the same level (i.e. $500,000) to help maximize small business assistance resources.

Let’s fast-forward the clock and not go counter-clock wise, by allocating the proper amount to a program that delivers major services to our small business sector with a proven high rate of return. Then, New Jersey can begin to catch up with all the other states with similar populations that invest way more in their SBDC statewide networks. For instance, North Carolina and Georgia invest $2 million and $3 million, respectively. A recent, past survey indicated the average state investment in SBDC state networks is $1.1 million nationally. Why can’t New Jersey again invest $1 million in the program? Why can’t this happen again as we near the final years of the Christie administration? That would be a great example of bi-partisanship to help New Jersey’s economy get back on strong ground by supporting small businesses! Small business development and growth is the simple route to prosperity. That accomplishment would be a real jobs initiative! That would certainly be a great way to close out two terms as the curtains close.