Local Economy Tipping Point
Something happened over the most recent weekend in regards to our economy. For the first time I, and others, seriously felt the impact of this recession.
I don’t know the cause for the change, but something seriously hit this weekend.
The first sign came when I pulled into our office parking garage on Monday. The floor I’m on of our garage is quite massive (several hundred spaces) and there is usually just a couple of spots left by the time I get in. On Monday, there must have been 30-50 more spots than normal available. A drastic change that did not come all from one company as far as I have heard.
Next, my fiance was driving by my office and wanted to bring me dinner late Monday night. She drove by several of our normal restaurants and she could not find a single one of them open. They had either closed down, or closed early for the night.
Finally, thinking this was just an anomaly, I took this situation to several other local friends. Many concurred and acknowledged the same trend in jobs and local businesses over the last week.
Has anyone else noticed the same? I realize the economic situation, I was just amazed at the transformation within a very short period of time.
*image source: recgov.org
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Its happening everywhere – we used to live on West 10th street in New York – 7th and Bleeker were the crossroads and is in the very heart of the village. A few months back I went to visit some old restaurants and almost everything was closed – and this is in one of the key areas of New York.
Fort Lauderdale, same thing – many restaurants closed, real estate signs everywhere, educated people deciding not to pay thier mortgage since at the very minimum, it takes 18 months to get foreclosured on. I’m pretty sure you have strong opinions (from what I remember reading) on the whole mortgage crisis but when banks are not lending, credit requirements going way up, home prices going down and banks getting bailed out hand over fist many consumers are looking at homes as simply another form of investment – not one with the emotional heartstrings many people qualify these as.
In Miami-Dade for example a consumer can stop paying his mortgage for 18 months, rent out the property at the same time and when it comes time to foreclosure the consumer is relived of the debt by the court or short sales (with no liability for the difference or tax loss on a primary home) giving them cash (from the savings)and a fresh start.
Its an entirely different economy today but people who are not getting tied up in the emotional aspects or moral issues of whats good for a society are actually making some wise decisions.
Some people I know are settling with credit card companies for 10 cents on the dollar. The economy is bad but there also many oppurtunities for people to benefit from this and take care of thier own house as well – instead of just debating whether is right or wrong – as that argument will always be there.
Very interesting that you point out people are settling with the credit card companies for 10 cents on the dollar. Most of that securitized credit card debt is still trading higher than that. More pain to go in the financial industry…
Yes, the domino effect seems to be hitting harder and harder as the months progress its plain scary.
Google recently aired concerns about their dropping Q1 ad revenue, people don’t seem to be as click happy anymore. Coming from the world’s most successful and progressive Online company, one can only imagine how the weaker ones are taking this.
Let’s all hope this deleveraging of wealth finds a flat soon, some economists are predicting some form of rebound to happen in Q3. There’s just too much pessimism out there atm.
Personally, I don’t consider it too much pessimism. I think there is too much optimism. A rebound is Q3 is a madman’s dream. No chance.
This will take years to get out of, not quarters. The amount of pain to be absorbed into the system has barely begun to sting.
I am not surprised at all by how ugly it is out there, I was just quite surprised at the quick swing over the weekend.
I haven’t noticed it personally in my community yet (southeastern CT). I think our region is getting hit less hard although we also have big budget problems in our state CT.
i know it is happening based on my personal habits. My wife and I still both have our jobs and while bonuses are down, we are doing fine.
However we are being a lot tighter with our money – just in case. We used to order out sushi 2-3 nights a month and we haven’t done that in 3 months. Used to order out pizza / chinese once or twice per week but haven’t done that in over a month. I am now bringing my lunch every day to work – (something I haven’t done more than once a month in the past 10 years). If a family like mine is cutting way back on the local businesses, and we haven’t yet been hit hard – I have to imagine most people are doing the same.
I notice the effects of what is happening nearly every day. For example whenever I get my oil changed I also get a car wash, generally the wait for the oil change is a half hour with three cars being worked on and another three – four cars waiting, from what I have noticed in the past this is pretty consistent traffic for this particular Jiffy Lube, this past Sunday I was in and out in fifteen minutes and there was only one other car being worked on. I had happened to get a $10 coupon in the mail the day before; I generally toss the coupons but have come to realize that is like throwing away money so I used it. While using it the other individual who had their car being worked on freaked out when she saw the coupon and proceeded to tell the clerk that she never uses coupons but would be grateful if they would honor the discount for her too, the clerk did.
After the oil change I went to get my car wash which generally has a pretty deep wait with prices ranging from $25-$50 depending on what kind of wash, to my dismay the car wash was not open with a sign on the door stating they will temporarily not be open on Sundays and have reduced their hours until further notice.
What is funny is that it circled back around to a conversation I had with the driver of the car company I use to drive me home from the airport as I travel allot for work. Like I have been doing for the past year I asked the drive how business is going, I expected to hear down 50% (as that is how much I have cut d own my travel), but the driver through a shocker out there and told me down 75-80% since the new year and that if things didn’t pick up he was going to pack it in and move back to his home country. Well there you have it one less oil change, one less car wash, and a minimum of three jobs gone (driver, mechanic, car washer) and you can probably branch that out as far as you like (parts salesman, deliveryman, cashiers, dispatchers, etc.)
There is something really important you mention here in your last paragraph. Our country is full of first generation immigrants who came to the US in search of prosperity. While freedom is great, many will return home without the potential for prosperity. That will probably create more jobs over the next 5 years than any other stimulus package. It will take time though.
A lot of places to run with that thought. Worthy of a seperate post…
The present economic model has peaked. We need to look at new ways to generate wealth, a completely new economic mindset, something that will include human economics and technological revolution. Over the past 30 years we have strived to increase productivity while reduce the number of people in the workforce. This has worked beyond our wildest dreams and the last 10 years reflect how good the productivity boom has been. But in reality we were too good at what we did, we over produced, an over production revolution that caused a recession, whether it is was too many automobiles, homes, commercial office space, products manufactured in china etc.
Now we are beginning to see mass unemployment as the over capacity built into the system will have to be extinguished before new capacity can be started and it seems unlikely nations like the US will ever return to anything like full employment ever again. This is where we need governments and some great scholars to come up with a new economic model, an economic model that incorporates a minimum standard of living for everybody regardless but where those who choose or can be in employment be rewarded above and beyond this minimum.
There is not going to be a recovery like past recessions. As a matter of fact, through technological and research advances higher productivity gains will be the norm, which means less people in employment. Advances in computers, robotics etc is likely to erode away at those who are still in employment. The human being is being replaced on the factory floor, but also in the office environment, the operating room, at the airport. Everywhere, companies are striving to reduce their workforce numbers. For instance every member of check in staff at airports will be replaced by online check in the coming years. Apply this across other industries and you realise the need for humans in the workforce is in steep decline and that the trend is going to continue and unlikely ever to be reversed. Governments have to realise that the human being is being made permanently redundant in the workforce.
James, I believe you are correct. I am a huge proponent of capitalism, but I am coming to realize that it is dead in its current form. The dream of capitalism stems from the belief in “growth”. We grew as much as we possibly could and will now have to retreat.
What comes next, I am not sure. It will probably be some hybrid mix of capitalism and socialism that drags us along for the next 20-50 years while we look for something else.
Scary times, not knowing what lies ahead. I actually believe we know less about our economic model for the future right now than we have in the last 150 years.
Shiphouse – that is great (and unfortunate) info