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Saturday, February 04, 2012
Feature: February 2009
A Cutback Story
Wall Street’s forecasts to linger on Main Street
Story by Russell Nichols
Julie Landis had no reason to think her job was in jeopardy. For nearly 20 years, she worked as a customer service representative for a national propane company. She figured she would be there another 20 years. Then one day in August, she commuted to her Woodland office for the umpteenth time, and her boss was waiting with papers.
“You’re laid off effective immediately,” her boss told her. There was no advance warning, no credible explanation, nothing.
Landis has been desperate to find work since. She has gone to job fairs, taken state tests, applied with temp agencies and scoured job sites such as Monster.com and CareerBuilder.com. Nothing has come through.
“I was naively optimistic at the beginning that I would find one right away,” says Landis, who lives near Rancho Cordova with her husband and two children, ages 10 and 12. “It has been very discouraging.”
Her husband, William, has also been hit hard. He is a printer, and this is the first time in eight years he hasn’t clocked 40-hour workweeks. Nowadays, once or even twice a week, he gets furloughs. Landis has already had to pull her youngest child out of day care because of the cost. “It’s a very insecure feeling,” says Landis, noting the job hunt is on her mind 24/7.
In the national scope, the Landis’ story is not uncommon. For the past year, the economy has strangled the country, forcing families to find new homes, companies to crumble, politicians to panic and employees to lose jobs.
The Capital Region, with its government jobs, has traditionally withstood economic turbulence. But private sector jobs have increased locally from 56 percent in 1990 to 61 percent in 2008, a trend reflective of the national and international scenes. In the past two decades, there’s also been steady population growth as residents from the Bay Area and beyond flocked to the Capital Region for job opportunities and affordable houses. But then the market collapsed.
In November 2008, the Sacramento metro area’s unemployment rate was 8.1 percent, the city’s highest since 1994, and roughly matched the statewide rate of 8.3 percent. Local analysts predict more lost jobs — about 15,000 net wage and salary jobs in first quarter 2009 “led by weakness in the retail, construction and financial sectors,” according to “Sacramento’s Key Industry Sectors: Trends and Forecasts,” a report by Brian Leu, an associate at DCA Partners, and Dr. Yang Sun from Sacramento State’s College of Business Administration.
“Given the unprecedented current economic slowdown, we expect the Sacramento unemployment rate will reach 10 percent by the middle of 2009, with the California unemployment rate reaching 11 percent before the end of 2009,” says the report, which bases its projections on historical data from the state Employment Development Department.
“You have to go back to the Great Depression
to find anything that compares.”
— Robert Fountain, regional economics consultant
A key difference between Sacramento and California economies has been construction. Compared to other parts of California, Sacramento had more construction-related projects and fewer farm-related activities. Currently, building contributes to 56 percent of Sacramento’s goods production input. The sector’s employment peaked in 2005, but the city was hit hard by the housing collapse and has lost almost 14,000 jobs since then, according to the report.
The report forecasts technology, healthcare and education to “show resilient, albeit tempered, employment growth through this next year.” However, it also predicts the downturn to impact retail and financial service sectors: The retail work force could decline 3 to 5 percent this year, and financial services could decline 3 to 4 percent.
In Sacramento, a downward trend of this magnitude is unfamiliar territory. During the recession of the early 1990s, Sacramento fared better than other major California cities, says Jeff Michael, director of the Business Forecasting Center at the University of the Pacific.
One of the main reasons, he says, is because manufacturing is usually hit hard. In Sacramento manufacturing employment is relatively small compared to other major cities in California. But that was then. Now the downturn is affecting other sectors after causing extensive damage to construction and real estate. In this recession, Sacramento — already suffering one of the nation’s highest foreclosure rates — is as vulnerable as other cities, Michael says.
“Sacramento is at a much stronger starting point,” Michael says. “Higher incomes, lower unemployment, more sophisticated economy. Having said that, the decline that they’ve seen has actually been worse from where they started to where they are. It’s definitely going to be an awful year for the economy.”
Government employs 26 percent of the work force in the Sacramento metro area. Though the report predicts minimal job losses, the outlook for local and state government spending is less optimistic because of tax revenue — sales, property and income taxes.
Although every sector is susceptible, the one predicted to see growth is technology. J.D. Stack, CEO of the Sacramento Area Regional Technology Alliance, is still waiting on second and third quarter results, but says he anticipates “a mixed bag.”
In previous years, Stack says he has seen “robust growth.” There was a 34 percent increase in the tech index between January 2007 and January 2008, and he expects many companies to continue growing. But he also says that, in this economy, some companies will struggle to make money and will be more cautious about how, when and where to spend it.
“Some of the companies in the tech sector will be finding it harder to raise their capital in this environment,” he says. “I expect many of them will be really trying to preserve cash. That might result in a reduction of staff positions.”
Because this recession does not compare to that of the early 1990s, experts say Sacramento has no model, and that makes it difficult to analyze and navigate.
The financial services labor force has declined
about 9 percent from its peak in 2005.
— Sacramento’s Key Industry Sectors: Trends and Forecasts, DCA Partners and Sacramento State College of Business Administration
“You have to go back to the Great Depression to find anything that compares,” says Robert Fountain, a regional economic consultant based in Benicia. “It has shaken the structure; 1993 did not. Everybody wants to compare them, but it’s like comparing a heavy rainstorm and Hurricane Katrina.”
The largest labor component in Sacramento is the service sector, which represents nongovernment service providers. Subsectors include professional and business services, healthcare, leisure and hospitality, financial services and retail, which is the largest. According to the report, “approximately one in every 10 jobs in the Sacramento region is in the retail sector. Starting in spring 2007, the year-over-year change in the number of retail jobs has turned negative with a decline of 4.3 percent in October 2008 versus this time last year.”
Researchers say things will get worse before they get better as consumer confidence and credit continues to erode and more retail companies file for bankruptcy.
The week before Christmas, 149 Mervyn’s stores were advertising big sales as part of liquidation efforts. Mervyn’s LLC filed for bankruptcy in July, planning to close its doors by 2009. At the Arden Way location, two men stood on the sidewalks, dancing with bright signs that promoted big discounts. Hanging from the side of the building, a yellow and black banner that read “Going Out Of Business” looked like police tape. Appropriate perhaps — the inside of the store looked like a crime scene. Shelves were completely empty, racks stood bare and sections of the store were taped off.
There were more than a dozen Mervyn’s in the Capital Region, which meant layoffs of more than 700 employees. Days before the Mervyn’s on Arden closed for good, shoppers came in for clearance sales. Employees walked around the store taking inventory and wrapping up items knowing they were in their last days. Even if they didn’t want to think about it, occasional store announcements gave them no choice: “Attention Mervyn’s customers, due to the bankruptcy, we will no longer be accepting charge cards. …”
Many unemployed residents have turned to the Internet to share experiences. They’re looking for work or support or someone somewhere who might understand their struggles and maybe even have a solution.
In the Sacramento area, some out-of-work residents are turning to Craigslist, selling services such as automotive repair and landscaping. Others post ads about items they are selling for rent money: a gold-plated Bulova watch for $200 or a bridal set with pink diamonds for $700. One user was selling a 1997 Isuzu Rodeo for $2,500. Another offered a message with a 1-carat wedding ring: “I just lost my job and desperately need money.”
In response to one posting from a single mother in El Dorado County, a user wrote: “Sorry to hear about you losing your job, but I must agree with one of the responders. EVERYONE [sic] is in a financial mess right now. I have 2 [sic] kids, just bought a house last December, and lost my job before the 1st [sic] mortgage payment was due. My unemployment just ended and every month we struggle to pay the mortgage. We have borrowed thousands of dollars from family, but we can’t rely on them forever.”
In her ongoing search for work, Julie Landis has also been looking for jobs on Craigslist. A lot of the ads, she says, do not include the name of the company or the phone number, so it’s hard to know what’s legit. She also knows that competition is serious with so many people applying for jobs. But through all of her efforts, and despite the economic forecast, Landis tries to maintain a positive perspective.
“We keep hoping things will kick back up,” she says. “I think everything happens for a reason, so hopefully there is something better to come along in my future.”
