News-Leader: When will the recession be over?

The Springfield News-Leader reported in its Sunday, January 31 edition on what signs to watch to recognize the end of the recession. Construction activity was cited as a leading indicator. Home Builders Association of Greater Springfield CEO Matt Morrow and Past President Kevin Clingan are among those who were interviewed in the front-page story:

January 31, 2010

When will the recession be over?

Signs of recovery are trickling in, can’t come soon enough for most.

Kathryn Wall

The U.S. economy may be on the road to recovery, but change can’t come fast enough for some in the Ozarks.

While business owners and officials cite a collection of unemployment statistics, housing expectations and gut feelings as indications that things are getting better, they acknowledge that it may take some time for the effects for businesses to ripple down to individuals.

“For everybody without a job, it’s a recession,” said Tom Wyrick, an economics professor at Missouri State University.

Rachel Henry’s story is one similar to the many college students who walked across the graduation stage and nearly straight into the unemployment line.

“I felt like I worked really hard to keep a part-time job and get my degree, but all that didn’t seem to matter,” Henry said.

She graduated with a bachelor’s degree in business, but many employers she talked to were looking for candidates with a master’s degree or more experience.

On Friday, she got a job as an administrative assistant. It’s not the middle management position she envisioned after graduation, but she’s happy to have landed a job at all.

She acknowledged that even through her five months of unemployment, she was lucky. She was able to stay afloat by combining her unemployment money with her new husband’s salary, but not without stressing her new marriage and having to cut corners.

“It’s a little embarrassing when you have to tell your friends you can’t go to the movies or whatever because you simply can’t afford it,” she said.

She said she’ll know the recession is over when the couple can sell their house. But, she doesn’t think that will happen soon.

“It will also be nice to not owe more money on our house than what it is worth,” she said.

What numbers say

Wyrick discussed several promising statistics that point to a local economy that’s turning around: Unemployment seems to have leveled off, the construction industry looks to be rebounding and, nationally, the gross domestic product has been increasing.

He said the gross domestic product, GDP, essentially is an answer to the question: “Are we producing more goods and services?”

The national GDP surged toward the end of 2009. Numbers released Friday indicated the fastest three-quarter increase since 1981.

“That says the economy is growing and that is a signal — it’s not proof — but it’s a sign that the recession is over,” Wyrick said.

He estimates the recession ended in September, but official word won’t come until months after the end has come.

Greg Williams, senior vice president for economic development for the Springfield Area Chamber of Commerce, said he’s seen several good indications lately that the local economy is making a comeback, one of which is the number of people coming to his office interested in moving their business to the area.

“We’re busy again and that’s another indicator, at least from what I do for a living,”he said.

He said business in the area is “making a turn,” but he also acknowledged that things won’t be easy for some time.

Wyrick said he’ll know the recession is over when help-wanted signs are all over the place again.

“When I see those signs, I’m thinking, ‘You know what, this economy is strong,'” he said.

Housing looking up

“If we can get things going again, from a construction perspective, we’ll be right back in the game,” said Matt Morrow, CEO of the Home Builders Association of Greater Springfield.

Morrow said the ratio of homes being sold to ones being built has begun to tip toward a stronger 2 to 1 ratio, which will soon lead to a demand for new homes.

“It’s starting to pick up a little bit,” Morrow said. “We don’t expect any kind of immediate burst of activity, but what we are seeing is a slow and gradual recovery.”

He said demand for homes will eventually kick-start the construction industry, and at the rate homes are selling now, that time could be soon.

Kevin Clingan, owner of Kevin Clingan Home Design, said he’s already seeing an increase in interest.

“Last year I had very few phone calls,” he said. “To be honest, I had one all year. This year I’ve had five calls and I’ve met with four of them already.”

Clingan said big-ticket items, like houses and cars, can only be kept for so long before a person has to buy again.

He said people have decided it’s worth spending the money now.

Part of that push toward spending can be attributed to the housing tax credit that provides up to $6,500 for repeat homebuyers and $8,000 for new homebuyers.

The extended tax credit offering will end in April, and Clingan admits things could be rough for awhile afterward but said the overall industry has made a turnaround.

“It’s not going to be a banner year this year,” he said. “You won’t see any records broken, but I think it’s going to be a good enough year that it’s going to save some businesses.”

The architecture field has been one that has seen several firms leave the area or close completely.

The local chapter of the American Institute of Architects estimates unemployment in its field to be around 30 percent.

“I’ve had this firm 31 years,” said Geoffrey Butler, president and CEO of Butler, Rosenbury & Partners Inc. “I’ve never seen it this bad, where no one has any ability to borrow or desire to do anything or when unemployment is so high. This is the scariest thing I’ve ever seen in my life.”

Morrow said he’ll know more about what the future of the construction industry looks like after this weekend’s home show.

He said the HBA looks at attendance as well as vendor feedback.

Unemployment picture

Morrow estimates a large majority of the area’s unemployed are those who had construction jobs or supply jobs related to building. With incremental growth in the construction field, unemployment rates should decrease.

The number of people applying for unemployment benefits for the first time has dropped drastically, according to Bill Dowling, director of Workforce Development at the Missouri Career Center in Springfield.

During the third quarter of 2008, 4,856 people from the seven-county Ozarks region applied for unemployment insurance for the first time.

During the second quarter of 2009, the most recent data available, that number dropped to 1,979, Dowling said.

He said there’s also been a strong drop statewide in the number of people the Career Center serves who are applying for first-time unemployment benefits.

In October, 16,982 people who were unemployed were helped by career centers across the state. That number dropped to 4,100 in December, Dowling said.

But the Congressional Budget Office reported Tuesday that it doesn’t expect national unemployment numbers to return to the 5 percent average until 2014.

Nonprofits under pressure

Another area struggling with the recession has been nonprofits. While demand for services has dramatically increased, many organizations are hurting from decreased donations.

“We will tighten our belt one more notch heading in to 2010, because we ended 2009 in the red and I have to find the funds or the cuts to make up the difference,” said Jim Harriger, executive director of Victory Mission.

He said Victory Mission “always has hope” that the next year will be better than the previous one.

Harriger said he’s heard the various numbers that seem to point to an end to the recession.

“I’ve been calling them pixels of hope, because the things everybody’s been getting excited about with the economy are like the pixels on your computer screen. Each one is pretty doggone tiny, but if you string enough of them together they actually make a picture,” he said.

He said that picture hasn’t changed much for Victory Mission, at least yet — the organization continues to see high numbers of people using its food pantry services.

He’ll know the recession is ending when he sees fewer people needing assistance.

“We imagine one year, as a slogan for our food pantry, ‘We don’t want to see you anymore,'” he said. “But the point is we don’t want to see you because things have turned around so that you don’t have to see us.”