NorthJersey.com

2012: Sandy, Jobs Put A Damper On 'Jersey Comeback,' But There Were Positive Signs, Too

The Record (NorthJersey.com) — Sunday, December 30, 2012

New Jersey's sluggish economy continued to dominate the business landscape in 2012. As the dismal monthly job figures cast doubt on Governor Christie's "Jersey Comeback" — he ditched the slogan in late summer — North Jersey's business climate turned even chillier with the announcement in June that Roche was shutting its former U.S. headquarters in Clifton/Nutley, a complex that once employed thousands. Meanwhile Medco's 2011 merger with St. Louis-based Express Scripts continued to drain workers from Franklin Lakes and Willingboro.

Struggling businesses were dealt a shocking blow from superstorm Sandy, but the state economy will get a boost as New Jersey rebuilds.

As 2012 came to a close it was still anyone's guess when the shopping and entertainment megamall formerly known as Xanadu would open, or when North Jersey real estate values would finally regain their footing and get on an upward track.

Here are some of the top business stories of 2012, as compiled by The Record's business staff:

Anemic job gains, stubborn unemployment plague state

New Jersey's job creation lagged even the weak national performance in 2012, and that could prove a big problem to Governor Christie in 2013 as he seeks reelection.

The state added just 20,200 jobs through November, a lackluster average of about 1,800 a month, with nearly 90 percent of them in the private sector.

The unemployment picture was worse, with the jobless rate rising from 9 percent at the start of the year to 9.9 percent in August, even as the national rate fell to 8.1 percent. New Jersey's jobless rate is now 9.6 percent, while the national rate is 7.7 percent.

That spells bad news for Christie, who has made job creation a top priority for his administration — not to mention his desire to enact an income tax cut.

Consider that the state has recovered less than a third of the 248,200 jobs lost during the recession and post-recession period, while the nation has recovered about half of the 8.8 million jobs lost.

New Jersey's strongest sectors in 2012 were health care and social assistance, which added 12,500 jobs, and professional and business services, which added 12,200. The accommodations and food services sector was also among the strongest until big losses in September and October, the most recent fall likely from the impact of superstorm Sandy.

Many health care and hospitality industry jobs are low paid. For a truly convincing economic rebound in 2013, the state will require muscular job creation in well-paid sectors like the business and financial industries.

— Hugh R. Morley

Sandy takes a toll, but there could be a dividend, too

No sooner had the powerful storm left New Jersey towns flooded and in tatters than economists set to estimating the damage. Known so far are the number of damaged homes and businesses — 72,000, according to federal estimates — and the 10 or more lost business days for the 2.5 million New Jersey companies left powerless or seriously damaged. State tax collections showed sales taxes, a chief indicator of retail activity, fell 9.4 percent below expectations in November, a sign of how Shore resorts and some northern retail hubs ground to an economic halt.

But the wider economic impact of Sandy may not be felt fully for months — and may offer mixed signals.

Employees in some sectors sent reeling by the storm included 6,900 hospitality and leisure workers, whose hopes of a vibrant holiday season driven by festive trade were dashed by lost jobs or furloughs.

Shore towns are looking at how to welcome next season's customers when local businesses are still under repair.

On the flip side, state labor leaders anticipate a rebuilding boom, which may emerge to bolster employment in some key sectors.

In the coming year, New Jersey anticipates its rebuilding price tag will reach $36.9 billion, with much of that going to in-state and national construction and cleanup companies that will receive reimbursement from the Federal Emergency Management Agency.

— Juliet Fletcher

Roche leaving economic crater

When Roche said in June it was shutting its 119-acre facility, which straddles Nutley and Clifton on Route 3, the announcement hit employees, local officials and businesses like a bombshell.

Operations will cease at the pharmaceutical maker's campus by the end of 2013, and Roche said it will completely close the site by the end of 2015. About 1,000 full-time Roche employees have to hunt for jobs, and another 1,000 contractors and part-time workers need new posts.

New Jersey also lost in its bid to provide a home for Roche's planned 200-employee research center, as company officials chose to locate the facility in Manhattan.

In 2013 there should be more clarity about what will happen with the Roche campus, which has 2 million square feet of commercial real estate. There have been discussions about possibly bringing a hotel and conference center to the prime location, which has generated about $14 million in annual local tax revenue to Nutley and Clifton.

Town officials are working with Roche about planning the future of the site, which was once Roche's U.S. headquarters and is where Valium, Librium and interferon were developed. Roche has been at the location since 1929.

Roche's exit is a hard pill for the state to swallow, part of the exodus of jobs and drug companies as the result of pharmaceutical consolidation and the shift of the industry to biotech research.

— Linda Moss

The mirage in the Meadowlands

For the ninth year running, the new year rings in without the proposed entertainment and retail mall in the Meadowlands open for business.

The project, which was first proposed in 2003 and is now called American Dream, has no opening date, and remains a half-built shell in the shadow of Metlife Stadium.

Governor Christie said he expects work to start again in January. But the governor spent 2012 talking up the project, and it has already missed numerous deadlines.

The latest developer to embrace the plan — Triple Five, which operates the Mall of America in Minnesota and the West Edmonton Mall in Canada — has yet to announce that it has the final funding in place to complete the project.

Triple Five has added a water park to earlier plans for the development, formerly called Xanadu. The company said in October that it needs $1.8 billion, which it intends to secure from private and government sources. But the state Economic Development Authority has yet to award a previously discussed tax break, which the governor has vigorously pressed for.

The developer will also have to overcome the expected legal challenge from the Giants and Jets, which argued in court over the summer that the project will choke area roads with traffic. A Superior Court judge dismissed the argument as premature in August but said the NFL teams can file it again should the New Jersey Sports and Exposition Authority approve a full master plan for the proposal.

If the delay lasts much longer, it may be time to remove the "American" from the name, and replace it with "Pipe."

— Hugh R. Morley

M&T offers $3.7B for Hudson City

New Jersey's largest bank, Paramus-based Hudson City Bancorp, agreed in August to be acquired by Buffalo-based lender M&T Bank Corp. for $3.7 billion in stock and cash in the country's largest bank deal of 2012.

Hudson City, the top deposit holder in Bergen County, has northern New Jersey roots dating to 1868. It was the largest U.S. lender to forgo a government bailout in the 2008-09 financial crisis.

Chief Executive Ronald Hermance took a medical leave in February for a bone marrow transplant and returned in August, shortly before the deal was announced.

M&T, which has no retail branches in New Jersey, will likely become the fourth-largest deposit holder in the state if the deal is consummated. The bank plans to add commercial lending and a long menu of other financial products and services at the 135 Hudson City branches it will acquire, including 97 in New Jersey.

New York and New Jersey affordable housing advocates Inner City Press/Fair Finance Watch and New Jersey Citizen Action recently asked regulators to hold public hearings on the deal.

They have complained to the Office of the Comptroller of the Currency that Hudson City has done little lending to blacks and Hispanics in its market areas.

The groups want M&T to make specific commitments on community lending before they will support the merger. So far there has been no word from regulator on whether public hearings will be held.

— Richard Newman

Housing appears to be on the mend

While home prices in New Jersey continued to drift lower in 2012, other housing measures pointed to a recovery after a brutal, six-year downturn.

"We started to see the market turn around in 2012," said Frank Nothaft, chief economist for Freddie Mac. "Home sales were up, housing construction was up, and home prices were up nationwide."

Still, the national housing market is only about halfway back to healthy levels, as measured by home sales, construction and foreclosure activity, according to Jed Kolko, economist for the real estate website Trulia.

Foreclosures loom over New Jersey's housing recovery, especially in urban and rural areas. Foreclosure activity in the state slowed to a trickle in 2011 after the mortgage industry was accused of running roughshod over homeowners' rights in the rush to evict. But after several legal settlements and court decisions, the Garden State's foreclosure pipeline started up again in 2012, and foreclosures rose about 150 percent. Those properties are expected to continue hitting the market the next year or two, putting downward pressure on prices.

Home construction, along at post-World War II lows for several years, began to pick up again in New Jersey in 2012. An estimated 17,700 housing units have been built in the state in 2012, up from an average of around 13,000 the previous three years, according to the economist Patrick O'Keefe of the accounting firm CohnReznick. But activity in the state and nationwide remains well below normal levels and well below the number needed to accommodate population growth.

— Kathleen Lynn

Sandy puts dent in Bergen blue laws

Superstorm Sandy, in addition to causing billions of dollars of damage in the state, also created a breach in a 60-year-old Bergen County institution — the blue laws.

On the first weekend after the storm hit, Hackensack and Mahwah officials announced they would not enforce the blue laws, and County Executive Kathleen Donovan asked Governor Christie to suspend the rules temporarily countywide.

Christie granted that request, and the blue laws were set aside the first two Sundays of November. But when Paramus said it intended to continue to enforce some aspects of its municipal blue laws and prevent certain stores from opening despite the order, the county took Paramus to court.

Superior Court Judge Menelaos Toskos ruled that Paramus had to abide by the temporary suspension.

The blue laws were reinstated by the governor by the time the third post-Sandy Sunday arrived, but the temporary suspension may have a long-ranging impact. The court fight renewed debate over whether the blue laws should be abolished permanently. While Paramus officials, including Mayor Richard LaBarbiera, have vowed to preserve the laws, opponents are wondering if the time may be right for another ballot question on the laws. Two previous ballot attempts to kill the laws — in 1980 and 1993 — were defeated by wide margins.

— Joan Verdon

Trenton in a ruffle over gift cards

The Christie administration's efforts to portray the state as business friendly took a hit this spring, when American Express and two other companies that sell stored-value gift cards said they would no longer do business in New Jersey because of a change in the state's unclaimed property law.

The announcement by American Express in April that it was withdrawing its cards from New Jersey stores triggered an immediate response from state lawmakers.

American Express was reacting to a 2010 amendment to the state's unclaimed property law to allow New Jersey to claim the unspent value of a card, after two years of non-use and would have required retailers to collect the names, addresses and ZIP codes of card purchasers to determine if New Jersey could collect the unspent value of the card.

Retail groups challenged the law in court and won a preliminary injunction against the law. The legal challenge eventually made its way to the U.S. Supreme Court, which in October decided not to hear the case.

In August, a law to postpone the data collection requirement for four years passed easily in the Senate and Assembly and became law. John Holub, president of the New Jersey Retail Merchants Association, said the four-year delay means there will be another round in the fight to get the data-collection requirement off the books. He expects that legislative effort will begin in 2014, in order to have the issue resolved before the four-year delay expires.

— Joan Verdon

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