Peggy Noonan had an intriguing column Saturday, about what she was seeing in Manhattan in terms of real, street-level effects of the recession. Here's an excerpt:
One senses it, for the first time: a shift in energy. Something new has taken hold, a new air of peace, perhaps, or tentativeness. The old hustle and bustle, the wild and daily assertion of dynamism, is calmed.
And now Washington becomes the financial capital of the country, of the world. Oh, what a status shift. Oh, what a fact.
Here's what struck me about that: She implies that — because of the stimulus, the TARP, etc. (I guess) – the hustle-and-bustle that's missing from the not-so-mean streets near Central Park has somehow been transferred to Washington.
And yet, weirdly enough, I had been talking to someone else last week who had made a similar observation about a loss of activity in Washington. It was USC President Harris Pastides. When he came to see us with Mayor Bob and the gang last Monday, he had just stepped off the plane coming back from D.C., and his impression was that it felt dead, deserted. Of course, he acknowledged that the contrast was particularly sharp because he had last been there for the Obama inauguration just weeks earlier, but he seemed to be suggesting that he was seeing was a loss of activity from the norm, not just from the inaugural excitement.
(I heard that with particular interest because one thing that had always struck me when I visited D.C. — and mind you, I haven't been there in years and years — was something that my libertarian friends can identify with. I thought, crowded onto a metro platform with well-dressed commuters, or walking past swanky shops, "There's too much money in this town." Of course, part of that is the sheer size of the gummint, a good bit of which should be devolved. But part of it is the amount that the private sector freely spends on lobbying. I have no idea how to separate it out. But I know that in my limited experience, the lobbyists are snappier dressers.)
I haven't been to New York in almost a year, and I last went to D.C. in 1998 (yes, more than a decade). I don't know what impression I'd have if I visited either today (although I'm pretty sure NYC won't be as busy as when I made this video). Come to think of it, I don't know what impression I have of right here in the Midlands. For instance:
About three weeks ago, I went to the Lowe's out on Garners Ferry for the first time since before Christmas. It was late on a Sunday afternoon. And I was shocked, because when I walked in, there were about a dozen or more of those carts you use to stack your lumber on — the kind that when it's busy, you've got to hunt around for — lined up in a neat row in the lumber aisle before me. So there were at least that many carts free, and an employee had had time to gather them and make that neat row. Then after I left and got to thinking about it, I thought I had seen about as many employees as customers.
I've mentioned that several times since then, and sometimes people nod their heads and sometimes they dispute it. For instance, Cindi said she's been to Lowe's (including that particular store) maybe six times in the last few weeks, and it's always been busy.
Then when she said that, I suddenly remembered that I went out to Harbison Saturday, and the traffic was the worst I'd seen in several years. I thought I'd never get there, or get home. And the stores I went into were at LEAST as busy as the norm, if not more so, so I don't think it was just a matter of my having hit the traffic at a bad time.
From where I sit, there's plenty of evidence of our economy tanking in the aggregate, from the state unemployment figures to the horrific effect that reduction in advertising has on newspapers and TV. We can quantify the cuts that have occurred already and are coming in state government, or local school districts. And I know of quite a few specific cases of people close to me — personally and professionally — who have lost their jobs or are facing the high probability of such losses.
But then we still see the anomalous things, such as all that activity out at Harbison. And not just there. Over the weekend I thought, not for the first time, that the Vista is just TOO successful. Yes, I'm being ironic, but it's frustrating when that district has become so popular that you can't park within a block of Starbuck's.
So I'm wondering — what are YOU seeing out there, as a worker, as a businessperson, as a consumer? What's the true picture of what's happening thus far in the Midlands? Maybe we can get a snapshot — or better yet, a panorama — of that right here on the blog. So how about it? What are you seeing?
Brad, like you I see a mixed bag. The pizza store I work in seems busy but the reason is simple, we have fewer people on staff. Actual sales figures are down. I’m not sure that’s a great indicator however. A competitor just opened across the street and that no doubt has had a huge effect. As you noted Harbison still seems ridiculously busy. I went there on Valentines Day to bring home carry out from a restaraunt there and had a very difficult time getting back on the road.
Yet in some ways business activity just seems more subdued right now. The malls just don’t have the same energy. And of course there are plenty of guys holding signs advertising businesses that are going out of business, Circuit City and Goodies to name 2. I seem to notice more real estate signs for land and houses for sale but that could just be that I’m paying more attention. Overall there are not a huge number of for sale signs in my neighborhood but probabaly more than 2 years ago.
I dunno Brad, things are a bit less hustle-bustle but nothing like depression level stuff. Do appearances suggest a recession? Yes. Severe recession? Perhaps. Depression? I would say no.
This is a trifle off topic, but is the following a simplified scenario of what has led to the worldwide predicament (and I really don’t care whether you think the godless socialists or the fascist Bushies are responsible, I’m just interested in the chain of events.
1) Housing prices steadily increased spurred by a reduction in the qualifications for loans required by banks.
2) Large numbers of borrowers began to default resulting in a tightening of credit.
3) Housing prices plummeted.
4) The repossessed assets held by financial institutions were not worth the value of the defaulted loans.
5) Tighter credit results in less money to buy goods.
6) Less purchases result in less demand for goods.
7) Less demand results in layoffs resulting in a vicious circle.
According to the Economist Every major stock market in the world is down 40-70% in the last year. Why did errors in American housing lending have such widespread effects? Why did institutions make loans to overextended borrowers? Why have banks over reacted and ceased making almost all loans? If liquidity is what is needed why not have a program of governmemt guarantees
I think you about covered it there, Greg, although the tightened credit affects a lot more than consumption. It hurts businesses’ ability to expand, or even to operate if they can’t get the money to buy raw materials, etc. The whole economy comes to a skidding halt.
But I’ll be glad to start yet another thread about the mega stuff — the stimulus, the TARP, the causes of the situation, etc. — right now, I’d really like some feedback on what y’all are actually, personally seeing.
Thanks to bud, for starting us off in that direction. I think his observation about the pizza parlor being busy, but there being fewer employees is particularly helpful. Earlier today someone mentioned to me having to wait more than usual to be served at restaurants (this obviously being one those folks who still eats out), and I immediately wondered whether the wait was less because of demand, and more because of fewer people to wait on them… And while I don’t have bud’s direct experience with that, I feel close to it: Three of my kids work in the food-and-drink service biz.
Also, I think bud’s put his finger on something when he says he’s noticed more real estate signs, but doesn’t know whether it’s just because he’s NOTICING them, or because there’s more of them. I guess that sort of self-doubt about my own perceptions is what caused me to post this. Being in a business that is SO sensitive to recession (think about it: there are three main categories of classified advertising in newspapers — employment, auto and real estate), I wonder how it looks to people who don’t have my perspective.
So, what are the rest of y’all seeing?
Some signs are up from last year, like retail sales in December and January. The stock market was recovering. Truck sales are strong. Ford added a shift to make F-150s. Mortgage loans were up about 4% in January.
Unemployment is really only a 2.5% jump from the super low figures of the last few years. Rates were 4.5% in July 2008, even with all the illegal aliens taking jobs from low-skilled Americans.
The main problem is the housing bubble, caused by several factors, including Clinton’s CRA loans to unqualified blacks and illegals. That bubble had to burst.
The big driver in housing was mental, the thought of the house as an investment, or flipping it to a greater sucker.
Now we have Obama and the Democrats bad-mouthing the economy, still in campaign mode, even as it was recovering.
The stimulus bill killed the stock market recovery for now.
A lot of businessmen are doing nothing because of the turmoil and uncertainty being created by Obama and the Democrats. They cannot plan anything, with a radical new spending or tax law coming every month.
My wife and I try and walk every day, and there are definitely more real estate signs out in our area of Lexington.
But the main thing I have to do with is the non-profit area, and donations are tanking, at least in our neck of the woods. I heard yesterday that one foundation that gives regularly to relief work overseas is deciding whether to change policy and give some of the principal holdings, rather than just out of earnings as they’ve done in the past. The particular source I was talking to said that earnings at this foundation during the past 12 months are 20% of what they were in the previous year.
In general organizations in our line of work are having to make some hard decisions, probably sooner rather than later.
Here’s what I’ve noticed: Two months ago, someone stole an old washer and dryer from my garage, and two ready-to-install windows from my porch.
Three weeks later, someone stole my heat pump.
Yesterday, someone stole my riding lawn mower.
The hard rain is falling.
Greg, you’re correct. But I think an important factor that has been left out of the discussion was the price of oil. Gasoline prices were squeezing consumers which led to reduced sales of big SUVs. That hurt auto companies. In addition, the extreme cost for diesel fuel was hurting trucking companies and retailers who were forced to pay more yet could not pass costs along. Once the housing market collapsed the demand for goods world wide declined and eventually led to a slowdown in the price of oil-related goods. But by then it was too late. The damage was done. This illustrates the need to find less volatile sources of energy.
The automobile companies can recover quickly if the unions take a 50% wage cut, and take a partial cash settlement of their pensions.
If they don’t, GM and Chrysler will be shut down in 60 days, the UAW will be out of work, there will be no pensions, and the Democrats will be trying to figure how to bail out the UAW with more deficit spending.
Herb’s observation is correct. There are more houses with “For Sale” signs than before and the numbers keep growing but not just in his city but across the state.
Other signs are in the parking lots at Dollar General and Family Dollar stores. The number of cars and customers is higher than usual. Aldi Food Stores, a “small box” store for lack of a better description, are booming with customers. The prices are great, the products good, and a decent variety of goods. Wal-Mart SuperCenters are busier than ever and their parking lots stay full. One noticeable change at these stores is the type of automobiles you find in the parking lots now that you didn’t see before. Higher end newer cars, i.e. Mercedes Benz, Cadillac’s, BMWs, Jaguars, Hummers, etc.
I spoke with one of the employees at Best Buy and more people are coming in but not buying as they once did.
The assistant manager at the local Belk Store is a friend and she told me sales are down, especially in the higher end brands for men’s and women’s clothing. Unless items are on sale and for a really good price, they stay on the shelves.
A friend’s wife is in time share sales at Myrtle Beach and business is doing well and some properties are actually oversold but the condo market is almost totally depressed. Depending on the location, some condos that were selling for $249,000 a year ago are now priced at $179,000 and any offer considered. The inventory of available units is still very high on the Grand Strand and no indication of any relief anytime soon. Several of my business associates live in Myrtle Beach and most who had projects planned a year ago have tabled them for the next several months to a couple of years until there are definite signs of recovery.
My nephew is in the used car business where the dealer financing is available on the lot and their business is at an all time high even with the extremely high interest rates. This is another indicator of a depressed economy when credit is tight and cash is short.
The price of gasoline will continue to increase according to a recent report. The price for a barrel of oil is based on WTI, West Texas Intermediate. Right now there is almost a glut of WTI available but no sufficient pipeline system available to transport it to the refineries. Most of what we buy at the pump still comes from foreign oil and that oil is selling for anywhere from $7 to $10 a barrel higher than the price we see on television or in the financial news.
My wife and I enjoy cooking and with the necessity to save where we can, we no longer go out to eat as often as we did a few months ago.
Taxes are the fastest rising cost for working families, and taxes consume more of their income than anything else.
My wife and I went to Charlotte for Valentines Day. As we walked around the South Park Mall, I mentioned to her that I only saw two businesses that appeared to have a steady stream of customers: the Apple Store and Cheesecake Factory. There was also a push cart of See’s Candies that was doing brisk business selling one pound boxes of chocolates for $28. (Note: Warren Buffett has owned See’s Candies for many years.
But as I looked around, I had to wonder if the economic “recession” is more a result of the marketing of overpriced goods that nobody really wants. For example, in Dicks Sporting Goods, I looked at an Under Armor turtleneck shirt for my son. That is I looked at it until I saw the $50 price tag. Who would pay $50 for a turtleneck? My wife looked for a hat for him as well. $40 for a North Face ski cap which cannot be any better than one you can pick up for $8 at Wal-Mart. Needless to say, there weren’t many customers in the store and even fewer buyers. Same goes for the Swarovski store. We walked in, walked through, and walked out. There was a crystal rhinocerous about a foot high that was going for some ungodly amount of money. Who would buy such a thing? and who would think it would be a good idea to open a store featuring that kind of stuff?
We walked into a shoe store that specialized in walking shoes. They had a pair of shoes with an odd rounded sole that the saleswoman claimed helped your posture. For $270, I would expect them to tie themselves and be motorized.
There was a Range Rover on display in the middle of the mall. Price tag: $60K. MPG? 14 City. Just thinking about the property tax bill and the gas bill for that vehicle made my head spin.
The TV age has led to the overmarketing and branding of America. It has evolved wants into needs.
On a personal note, I have taken advantage of the drop in mortgage rates to lower mine by 1.25%. I abandoned Time Warner Cable and their high rates for a combination of ATT and DirecTv, saving about $75 a month in the process. I dropped the weekend edition of The State as it was taking less and less time to read the actual paper amidst the excessive store fliers. We shop more often at Wal-Mart than at Publix like we used to simply because the cost is lower for food items – although we make the sacrifice in terms of longer checkout lines and some brands not being available.
The free market is working as it is supposed to. Trying to coerce it with government funds will not work.
If you need help, talk to your friends, your church, and local charities. Build bonds with people you can rely on, not on the government. If I can be of help to anyone on this blog, let me know and I’ll see what I can do.
Anybody notice that folks of different viewpoints, Bud, Weldon, Bart, are answering Brad’s question with specific tangible observations, but Lee is still talking in theoretical talking points and statistics, nothing about what he is actually seeing?
Well, one thing is for sure: Mark Sanford and Jim DeMint are nice and comfy, and see few signs of any serious economic problems facing our country, except that wealthy people are not being allowed to get wealthier fast enough these days.
“The TV age has led to the overmarketing and branding of America. It has evolved wants into needs.”
Perhaps the most profound words written on this blog since I have been reading it. You hit the nail square on the head. My wife and I were discussing this over the weekend. It is amazing if you stop for a moment and realize that all of the “things” we think we “need” are not necessities of life at all. Looking at the list of items such as a crystal rhinocerous or a Range Rover are not needs at all.
Thanks for a good post.
That’s why the Democrats’ spending efforts failed in September, and will fail in the spring of 2008 – they are putting money into the wrong hands, because they believe that the economy is based on consumer spending based on debt, inflated housing prices, and inflated stock prices.
People buying things they don’t need with money they don’t have.
Politicians ready to meet any wants of a voting block, supplying them with whatever they cannot afford in the free market.
If the consumers can’t pay cash, and can’t borrow any more money, the politicians will buy it for them. The government will borrow, and when it can’t borrow, it will print worthless paper currency.
Back to the thread topic, my primary client budgeted over $1 billion in cash for construction projects in the US in 2009, but put them all on hold the day Hillary handed the nomination to Hussein Obama.
So far, Obama has done nothing to instill confidence for business – quite the opposite. He is using fear mongering to push his socialist deficit spending, which is 90% an expansion of government, rather than a stimulus to the economy.
Government spending as a percent of GDP will double by 2010, as this spending, tax increases, and threats to the retirement plans will cause investment to shrink and tax revenues to plummet.
Someday it will sink in.
And then maybe we won’t be called nattering nabobs of negativism…
The solution to the economic problems of the country is in the minds and hands of American workers willing to take risks, work hard, and be ethical. Printing money won’t do it.
The media is too invested in their messiah, Obama, to ever admit they backed a know-nothing socialist who is bent on destroying capitalism and freedom.
They need to read Solzenitzen’s book on the Gulag, how the liberals were in such denial about Stalin, even as they were carted off to be shot.
Finance is very important to develop the country ,that is Washington
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