Empty homes and for-sale signs clutter neighborhoods around the country. You’ve lost your job or know someone who has. Your paycheck and nest egg are taking a hit. Could the country be in recession? Sixty-one percent of the public believes the economy is now suffering through its first recession since 2001, according to an Associated Press-Ipsos poll.
The fallout from a depressed housing market and a credit crunch nearly caused the economy to stall in the final three months of last year. Some experts, like the majority of people questioned in the poll, say the economy actually may be shrinking now. The worry is that consumers and businesses will hunker down further and pull back spending, sending the economy into a tailspin.
Has this actually happened in Bulloch County? Have residents purposefully reigned in their discretionary spending? Are business owners feeling the “pinch?” Depending on who you ask, you are going to get a different answer.
Local resident Nelson Burnsed, owner of Burnsed Contracting, said he believes this area is in a recession.
“Honestly, I have never seen it this slow,” Burnsed said. “I really don’t believe it is because people don’t have money or have lost their incomes. I just think everyone is scared to do anything with it. The media has frightened them to death.”
Peggy Chapman, president of the Statesboro-Bulloch Chamber of Commerce and the Development Authority of Bulloch County, has a somewhat different view of the local economy.
“It is no big secret that the housing market and housing construction have really slowed down here in the last several months,” Chapman said. “But, I haven’t heard of any businesses closing, or of anyone laying off employees. When I talk with local business owners, they say they are doing well. Bulloch County seems to one of those pockets that isn’t as affected by national trends as other areas are.”
For all of 2007, the nation’s economy grew by just 2.2 percent. That was the weakest performance since 2002, when the country was struggling to recover from the last recession. The housing collapse was the biggest culprit in 2007. Builders lowered spending on housing projects by 16.9 percent on an annualized basis, the most in 25 years.
In Bulloch County, new home construction appears to be down significantly from the first six weeks of last year. Only 12 single family residential building permits have been pulled so far this year compared to a staggering 140 through the same period last year.
Local builder and developer Donald Nesmith acknowledged the local housing market woes, but as a veteran of many ups and downs in the business cycle over the last 30 years, Nesmith remained undaunted.
“I really don’t feel it is a recession as much as it is a slow down in the economy,” Nesmith said. “I lived through the high interest rates of the Jimmy Carter years when long term mortgage rates were 16 percent and higher. We sold homes then. Now the rates are a third of that, some of the lowest in years. That isn’t the reason we aren’t selling houses.”
Nesmith blames much of the slowdown in the local housing market on buyers unable to sell their homes in other areas.
“Our problem here is that buyers can’t sell their homes elsewhere,” he said. “We have buyers, they are just stuck. I don’t know that we will never be back to where we were three years ago, but, I do see us getting back to a normal selling pattern in the next 12 to 24 months.”
By one rough rule of thumb, a recession occurs when there are two consecutive quarters — six straight months — when the economy shrinks. That did not happen in the last recession, though. The economy contracted in the first quarter of 2001, turned positive in the second quarter, shrank in the third quarter and turned up again in the final quarter of that year.
The National Bureau of Economic Research, the recognized arbiters for dating recessions, uses a more complicated formula. It takes into account such things as employment and income growth. By that measure, the last recession was in 2001, starting in March and ending in November.
Local Sonic Restaurant franchise owner Russell Rosengart said it is hard to argue with the economic data that is coming out.
“All of the data points to a ‘mini’ recession if nothing else,” Rosengart said. “I can tell you as a restaurant owner that sales throughout the restaurant industry are down across the board. I believe that we are in a mini recession if nothing else.”
Rosengart said the housing “mess” has literally affected everything.
“From the guy delivering bricks, to the landscaper, and the furniture salesperson, when housing goes into a steep decline they all are affected which trickles down and affects everyone else,” he said. “My next big fear is inflation.”
Rosengart, who owns 12 Sonic Restaurants in South Georgia said his costs have increased significantly in the last several months.
“The price of everything we use has gone up,” he said. “We have fuel surcharges on virtually every delivery. The cost of fuel is just killing everybody.”
Consumer confidence, as measured by the RBC Cash Index, dropped to a mark of 48.5 in early February. It was the worst reading since the index began in 2002. A cooling job market along with high energy and food prices are taking a toll on paychecks. Workers’ average weekly earnings, adjusted for inflation, fell 0.9 percent last year. In 2006, earnings grew by a solid 2.1 percent.
Ronald Shiffler, dean of College of Business Administration at Georgia Southern University, thinks too much is made of the label "recession."
“With all due apologies to our economists, even they have a hard time defining the term or even identifying when a recession begins or ends,” Shiffler said. “But we all like labels, so "recession" is a convenient term to define an economic slowdown or contraction.”
Shiffler feels you don’t have to look any further than the news headlines to see that the economy is slowing
“Most economic indicators are going the wrong way,” he said. “Housing starts are down. Unemployment insurance claims are up. State income tax collections for the month of January are down. Even Chairman Bernanke (U. S. Federal Reserve Board) admits that the downside risks for our economy are increasing.”“Locally, my friends in the financial services, housing, and realty industries are all keeping a positive outlook, but you can read between the lines and conclude that the operative word in Statesboro is "slow." We can let the economists tell us if this is a recession. If history is a guide, they will figure it out after the recession is over. In the meantime, the economy is contracting.”