These economic times are confusing. Everyone agrees spending has slowed down, but not by how much or why. There are lots theories being floated what's happened to throw cold water on the red hot economy. Everyone agrees the growth couldn't last forever. 90.3 WCPN's Mike West explores what could be in store for our area if the slow down continues. And if the economic danger is real or imagined.
Mike West- After 10 years of economic growth, the brakes are on and one of the first areas that will feel the bump in the road is the auto industry.
In this factory giant spools of flat steel are galvanized before being used to make cars. There are hundreds of other companies in northeast ohio that directly or indirectly supply the auto industries, not to mention the auto workers themselves. Gary Adams is the head of the Greater Cleveland Automobile Dealers Association.
Gary Adams- This is really a second city to Detroit when it comes to automobile employment. So it is very important that that part of the economy keeps going strong. And we think it will.
MW- Adams isn't worried though -- he says it will take a lot more than just a slow down in auto sales to keep him awake at night. Although car sales slowed in december, over all the year 2000 was one of the best in the history of the "horseless carriage."
GA- December was down, but it was record year. The year before 1999 was a record year. 3 years ago or 4 years ago no one could have imagined that 1999 and 2000 we were going to experience this level of vehicles sales. So even if there is a slight drop in 2001, relatively speaking it's still going to be a very strong year.
MW- Adams says things have never been better for the industry. One of the big reasons is the popularity of leasing cars. Now 50% -- 90% of all new cars are leased. That means most people turn them in every 3 years and then drive off with a new one. Adams feels the biggest threat to American cars sales is negative economic reports that can lead to cold feet.
GA- We really think that's what happened in the last half of 2000. Gas prices were fluctuating, interest rates were going up somewhat. People see that, it's not that high gas prices stop people from making a decision, it was the uncertainty of where fuel prices were going to be. And I think that that has a lot to do with consumer confidence which then relates into their buying decisions.
MW- The real estate market has also slowed down, affecting everything from mortgage companies and construction workers to building supply manufacturers and real estate agents. Dennis Steed is on the board of directors of the "Cleveland Area Board of Realtors" -- he also blames reporters.
Dennis Steed- It has everything to do with the perception of what's going on in the marketplace and I'd say that in reality if there is a downturn in the economy than people are not as comfortable making those big ticket purchases, if you will, housing being the largest in most cases.
MW- No matter what happens to the economy, steed feels northeast Ohio is a solid place to buy property. He says it's because evaluation may be slow, but it is steady and it's very unlikely to crash.
DS- We have had very steady good, we've got a good local strong economy and we have had very steady appreciation in this marketplace for a number of years. So I don't see, even if we do go into a quote recession. I don't see it affecting us in northeastern Ohio as it may in some of the other areas of the country.
MW- Steed says if you've been thinking about buy a house, you may want to take the plunge. Interest rates are down and could go even lower soon, plus steed predicts a buyer's market this spring. He says when "for sale" signs start popping up like spring flowers, there will be more people selling than buying. That should lead to low prices and good selection.
Another area taking a hit is retail sales, just about ly everything you buy falls into this categories. Josh Sanders is a spokesman for the Ohio Council of Retail Merchants. He agrees, when it comes to the economy, we have nothing to fear, but fear itself.
Josh Sanders- With the media catching this buzz that "oh no" this is a recession or were slumping and everything's going down. People buy into that, and while it might not be the truth or it's just simply not as strong as the past years. When they hear that word "recession" or hear that things are turning downwards than there is real danger that that can even spark it even if there was nothing that was actually going to happen.
MW- You may recall all the dire predictions about the Christmas shopping season. They didn't happen. According to the National Retail Federation, during November and December we bought $195 billion worth of general merchandise, apparel, home furnishing and furniture. Drum roll please.
That means a 5.3% increase over what shoppers spent during the high flying 1999 holiday season. It's cheerful news but Sanders admits 2001 will probably be tougher, but don't look for all those "help wanted" signs to disappear from shop windows anytime soon.
JS- We're a long way from that where were having a whole bunch of people out of work. The pool there is very accessible. It is tough right now to get the labor but I don't think were in a point where that's gone turn yet and I think that lends itself to some of the danger out there with keep saying recession, recession then stuff like that starts to build and gain momentum.
MW- With all the slow down talk workers are bound to be nervous about their future. That's one of the reasons things have slowed down. Another factor sighted by economists is watching all those wonderful stock market gains melt away like a dot com that doesn't show a profit. But most northeast Ohio workers have little to fear. John Ryan of the AFL/CIO..
John Ryan- Most white collar and other jobs are as secure as they were last year. We see that we'll have nearly full employment in the building trades over the next year. Anything over 6 months or a year is always a question anyway.
MW- Like the ant and the grasshopper story, Ryan says unions have always used the sunny weather and good times to negotiate contracts that will protect workers for the slow downs that can freeze paychecks but are a natural part of economic cycles.
JR- We have previsions that if there needs to be cutbacks the way we try to have it done is through labor agreements that allow buy outs and allow pension improvements rather than having releasing your person out the door without any question or maybe the person who's not the bosses friend out the door. That's the way we protect our members.
MW- It's the era of free trade and it bothers Ryan that so many factory jobs are going away. But he accepts that american workers can only wave goodbye from the shoreline as work sails away for places like Mexico and China. He says one answer is education.
JR- Don't wait until there in bad times, don't wait an employer tries to cut back or eliminate jobs, try to do a re-shuffling of jobs where someone's found without a job. Take advantage of often union contracts tuition aid programs, even non-union companies often have tuition aid programs try to educate yourself and try to prepare for tomorrow today.
MW- "What goes up must come down", "The only thing certain is change" -- we've heard them all, but it's too bad they old saying are true when it comes to the economy. Mike Bond is an economics professor at Cleveland State University. He says slow down(s) are not all bad.
Mike Bond- It's a natural cleansing process for the economy. We've obviously had a lot of these dot com high tech businesses that have gotten way over extended. The stock market has come back to earth and said these people aren't able to produce any profit because there is not enough market for their businesses. The economic downturn will accelerate their exit.
MW- Bond says the funny thing about a recession is that sometimes we don't know we are in one. He says in the past they have started months before anyone knew what was happening.
MB- We don't know if we are in a recession. I think it's about a 50% chance that that's the case, if we are your talking about a downturn where if you take the whole income of the economy and it drops by maybe one and half percent, it dropped by 30% during the depression.
MW- Bond says the best thing you can do to secure your financial future is to get a education. The strong demand for skilled workers in northeast Ohio and elsewhere is likely to continue for many, many years to come.
As for business owners and managers, it's up to them to met the changing market forces and brace for the lean times in between expansion. In Cleveland, Mike West, 90.3 WCPN 90.3 FM.