Article published January 04, 2009
Lingering cloud likely for Toledo-area economy in '09
Housing, auto industry in doldrums
John Collins, left, with sales manager Brian Chapman, is optimistic for the future of his Toledo start-up that makes sealant for contaminated river beds.
(
THE BLADE/JETTA FRASER
)
|
By GARY T. PAKULSKI
BLADE BUSINESS WRITER
FACING unemployment in 27 days, John Rodriguez, Jr., gave up a house on which he no longer will be able to afford the payments, endured a Christmas short on cheer, and signed up for job re-training.
"It ain't the way it's supposed to be, but it's the way it is," lamented the married father of three who for more than a dozen years has made fabric for vehicle interiors at Toledo's Textileather Corp.
"I've got to hurry and get through it," said the 43-year-old Monroe County resident.
That sentiment likely expresses the hopes of thousands of unemployed workers and other residents of northwest Ohio and southeast Michigan eager to get through an economic cyclone for which the ultimate toll is not known.
But experts see few signs of fast relief in 2009.
Many jobs are in peril in the region's key auto industry as ailing General Motors Corp. and Chrysler LLC depend on cardio-pulmonary resuscitation from the U.S. Treasury.Unemployment hit 10.3 percent in Toledo in November for the highest jobless rate of any major city in Ohio. Across Lucas County, the number of jobless was up 43 percent from November, 2007, to 21,700.
John Rodriguez is to be laid off from Textileather Corp. in 27 days after more than 12 years at the Toledo firm.
(
THE BLADE/JEREMY WADSWORTH
)
|
The picture was similar in adjacent Wood County, where the number unemployed rose 56 percent, and in Monroe County, where unemployment rose by a third.
The value of homes, stock portfolios, and retirement savings accounts plunged.
Even the most cautious investors have been hurt, as interest rates paid on ultra-safe certificates of deposit sank below 3 percent amid central bank officials' attempts to stimulate the U.S. economy with inexpensive lending.
And day after day, headlines report more layoffs like those announced in late November by Textileather, which has ties to Toledo going back to the turn of the 20th century. Owner Canada General-Tower Ltd. said the plant, at 3729 Twining St., isn't receiving enough orders from car makers to justify keeping a full staff. All but 40 of the factory's 160 employees will be gone by Jan. 31.
Despite official denials, employees like Mr. Rodriguez predict the plant will be finished by the end of this year.
To prepare, he has returned to the owner a house he was buying on land contract and found less expensive accommodations. "It's tough to tell your kids," he confessed. He is eligible for 14 weeks' severance pay and, when that runs out, unemployment compensation.
Even so, he worries. His wife is a car salesman, linking the household's second paycheck to the struggling auto industry as well.
Economists do not foresee a quick return to good health for the region's economy.
"It's all pretty gloomy," said Michael Carroll, director of the Center for Regional Development at Bowling Green State University.
Unemployment could hit 12 percent locally this year, he said.
More businesses, especially those linked to the auto industry, are likely to fail.
If long-term trends persist, the regional economy is not likely to begin to improve until six months after the national economy starts to revive.
Few economists forecast much improvement before summer. Richard DeKaser of National City Bank in Cleveland expects gross domestic product - the main measure of national economic health - to stop declining and show a tepid annual growth rate of 0.8 percent in the spring quarter, followed by a 1.4 percent rate in the third quarter.
Part of the problem, he suggested, is the collapse in consumer confidence. He compares the current situation to a psychological condition known as "learned helplessness," which he describes as "a clinical response to prolonged exposure to unpredictable negative events."
He recently wrote: "Like a prisoner subjected to harsh interrogation, the loss of control, even if only perceived, frequently results in the surrender of will and depression."
The auto industry will be a major factor in how the region's economy performs in 2009, said economic development official Steve Weathers, president of Toledo's Regional Growth Partnership.
He said that if the current trouble forces another wave of plant closures, GM's West Toledo transmission plant and Chrysler's Jeep assembly complex in north Toledo could receive more work because they are regarded as efficient and contain relatively new machinery and equipment.
"Toledo could come out pretty well," he said. Now, however, both manufacturing complexes are in the midst of extended holiday shutdowns that will last until mid-January.
Production of all three vehicles Chrysler makes in Toledo nose-dived in 2008, company figures show.
Through November last year, the local plant produced 66 percent fewer Dodge Nitros, 25 percent fewer Jeep Libertys, and 19 percent fewer Jeep Wranglers.
But Mr. Weathers said that despite the popular perception that the local economy is at a dead end, his agency is talking with more firms now than at this time last year about locating or expanding here. About 70 potential projects are "in the pipeline" compared with about 60 last year.
He conceded, however, that the credit crisis has killed some deals. Still, firms such as First Solar Inc., with a solar-panel-making plant in Perrysburg Township, are proceeding with expansion plans.Optimistic start-up
Among local start-up firms that the growth partnership is assisting is AquaBlok Ltd., of Toledo.
The company markets clay-based material for sealing contaminants on the beds of polluted streams and rivers. The material is a less costly alternative to dredging and other more traditional methods for dealing with pollutants, said John Collins, general manager.
Recent orders filled by the Toledo firm include a two-mile stretch of a tributary of the Tennessee River near downtown Chattanooga.
Mr. Collins is optimistic about the future of his five-employee firm at 3401 Glendale Ave. He acknowledged that one struggling customer involved in the housing industry canceled a contract this year.
More typically, however, state and federal regulators force cleanups on firms responsible for pollution. Mr. Collins said those efforts are unlikely to diminish in the incoming Democratic administration that probably will take a harder line on environmental issues.
Cleanup projects typically involve a mix of public and private dollars. And President-elect Barak Obama is expected to seek as much as $1 trillion for public works projects to stimulate the economy.
But the pain is expected to continue for local firms linked to the housing industry. Housing sales nationally and locally continued to slide in 2008, prompting some real estate agents to call it quits.
Membership in the region's main professional organization, the Toledo Board of Realtors, fell by more than 100 to 1,440 by December. Sales of houses dropped 14 percent across northwest Ohio to 5,993 through November last year compared with the year before, the organization reported.
That was slightly worse than the 11 percent decline recorded nationally.
The average house price in northwest Ohio fell by 8 percent, or $10,000, to $113,000 in the first 11 months of 2008. The decline occurred in part because of sluggish sales of higher-end houses and numerous repossessions of houses in older areas of Toledo.Falling home sales
"The quickly deteriorating conditions in the job market, stock market, and consumer confidence in October and November have knocked down home sales to another level," economist Lawrence Yun, of the National Association of Realtors said last month when November numbers were released showing the national median price - half sold for more and half sold for less - was $181,300, down 13 percent from a year earlier.
"We hope the home-sales impact from the stock market crash turns out to be short-lived, as was the case in 1987 and 2001," Mr. Yun said.
The organization representing the nation's home builders expects the number of housing starts nationwide to drop to the lowest since the end of World War II. If that happens, it would represent a decrease of 25 percent and would follow a projected decline of 30 percent in 2008 and 26 percent in 2007, said Gopal Ahluwalia, an economist for the National Association of Home Builders.
He projected that 694,000 houses and condominiums will be built in 2009, compared with more than 2 million in the peak year, 2005. The decline in home construction has led to the loss of 500,000 jobs and prompted 20 percent of home builders to leave the business, Mr. Ahluwalia estimated.
Jack Howard, president of the Mortgage Bankers Association of Northwest Ohio, said, "I would be very cautious about the next year.
"If we have an … increase in unemployment, it will exacerbate our situation by eliminating potential buyers and perhaps a few more people losing their homes."
Still, with depressed prices and low mortgage interest rates, "there is no better time to buy," he said.
Figures compiled by the online real estate tracking firm RealtyTrac Inc. suggest that the home foreclosure crisis may be beginning to peak in Lucas County. Home repossessions, bank default notices, and other filings slipped 24 percent in November from the same month a year earlier, to 938.
However, some other key markets in the region had higher monthly filings, including a 115 percent increase in Wood County to 191 and a 147 percent increase in Monroe County to 141, RealtyTrac said.
Car dealer Robb Brown sees improvements in consumer confidence as key to an economic recovery. Optimism over Mr. Obama's inauguration could trigger such a change, he said.Doubt about recovery
Yet Mr. Brown, president of Brown Automotive Group in Toledo, was doubtful about a recovery in 2009.
Car and truck sales in the Toledo area were down 8 percent through November last year from the year before to 30,114, but fell 17 percent in November alone, according to figures compiled by the Toledo Auto Dealers Association.
Locally based businesses are responding to the economic crisis in various ways.
Archbold Furniture Co., which specializes in unfinished furniture, has increased the number of products it offers, begun selling finished furniture, and branched out into coffins.'We have held our own'
"We have held our own," said Patrick McNamara, president.
The firm entered the coffin business when a Chinese vendor that did other work for Archbold Furniture asked the company to begin selling them. They remain a sideline for the Archbold company, but have proven popular with northwest Ohio mortuaries and have helped boost revenue and profits.
The core business of the furniture company, which markets nationally, has been hurt by customer store closings and lower traffic in remaining stores, Mr. McNamara said.
The firm, which has 50 employees, has boosted sales by dropping prices slightly on some products.
"We have to keep our suppliers going," the company president said. "We can't lose them. Being a smaller company, we have the ability to react quickly to market conditions."
Contact Gary Pakulski at:
gpakulski@theblade.com
or 419-724-6082.
Permanent Link
|
|
 |
|
Search
advertisement
