Recession's over, but it doesn't feel that way in capital area

Larry O. Doss Monday, November 2, 2009

Recession’s over, but it doesn’t feel that way in capital area

It looks like the longest U.S. recession since the 1930s is over.

So why doesn’t it feel that way?

After four quarters of shrinking, the nation’s economy – as measured by its gross domestic product – grew 3.5 percent in the third quarter, the Commerce Department reported Thursday.

But the news did little to erase the gloom that has settled over Sacramento’s economic landscape like a thick tule fog.

Local businesses are keeping the umbrellas within arm’s reach. Local consumers, battered by furloughs and job losses in nearly every sector, are struggling to find shelter.

They’re making less, spending less and holding on.

"Yeah, I just bought a bigger wallet, because I’m making so much money over here," said Steve Ryan, co-owner of Rudy’s Hideaway on Folsom Boulevard in Rancho Cordova, when he heard the news that the economy was officially growing again.

"Over the last couple of months, it hasn’t gotten worse, but I feel like it’s trying to get out of its own way," he said. "In the whole scheme of things, it hasn’t gotten worse, but it has gotten only a little bit better."

Ryan said his restaurant’s fate is shared by other local eateries – things aren’t as bad as they were, but business is far from booming.

"The GDP is growing, but the signs of the recession are going to be with us a long time," said Suzanne O’Keefe, an economist at California State University, Sacramento.

"It’s hard to feel that the recession’s really over when you see all these signs that it’s tough out there."

The signs seem to be everywhere: the housing collapse and its devastating effect on the Sacramento region’s construction sector; state and local budget woes; wary consumers and businesses afraid to spend or hire.

The Sacramento area lost 40,500 jobs in the 12 months ended in September – 4.6 percent of its labor force, the U.S. Bureau of Labor Statistics reported Wednesday.

Across the state, the numbers are even more bleak: 88,000 lost jobs in the San Francisco-Oakland area; 47,800 in the Silicon Valley; a staggering 220,000 jobs in the Los Angeles area.

The Sacramento area now has 80,000 fewer jobs than it did in 2007, and the employment base is smaller than it was in 2003, said Ryan Sharp, director of the Center for Strategic Economic Research in Sacramento.

Some economists around the nation Thursday suggested that the nascent recovery is artificial – goosed by billions of dollars in federal stimulus spending on programs such as Cash for Clunkers and a tax credit for new homebuyers.

It is unclear that the economy is ready to stand on its own, they said. When Cash for Clunkers ended, for instance, car sales tanked.

"Consumers are in no position to go on another spending spree," said Sung Won Sohn, a former bank executive who teaches at California State University’s Channel Islands campus in Camarillo.

"The job market is poor," he continued. "Even with the ongoing economic growth, potential employers are unwilling to hire people. They want to make sure that economic recovery will be sustained. The unemployment rate will continue to rise well into 2010."

Without jobs, he added, "Consumers are unlikely to open their wallets."

Still, he said Thursday, the recession is "technically over."

Rick Niello, president of the Sacramento-based Niello Co., which operates 13 car dealerships in Northern California, chuckled when he heard the economy was growing again.

"I haven’t felt it yet," he said. "I think we’re kind of at the bottom of the market right now," he said.

"I think we’re kind of bouncing along the bottom. The good news is that we will come out of it, and I’m very optimistic."

Even though Cash for Clunkers has ended, and the housing tax credit may expire, there are still many millions of stimulus dollars coming Sacramento’s way – money that could stimulate demand for hiring in a variety of sectors.

Federally funded job programs are "starting to make a dent," said Teri Carpenter, spokeswoman for the Sacramento Employment and Training Agency.

Some $7.4 million in stimulus funding has gone toward SETA job creation programs, putting nearly 800 people to work, she said.

"A lot of programs we’ve funded are just starting to percolate, but we’ve still got a long way to go."

What will it take for Sacramento to recover? Mike Lyon, head of Sacramento-based Lyon Real Estate, says it will just take time.

He said consumers have been bombarded by so much bad economic news that their confidence has been shattered.

"What it really gets back to is California’s ability to heal," he said.

Sharp said California’s recovery will likely lag months or years behind the rest of the nation.

"There’s a decline in consumer and business confidence," Sharp said. "Add the coupling of state and local budget (problems) – the state budget issue is so tied to the economy – and that’s also going to make the recession last longer."

No matter the national indicators, retailers in Sacramento’s midtown remain worried, said Rob Kerth, executive director of the Midtown Business Association. A number of midtown boutiques have closed in the past two years.

Yet now, Kerth said, there is a feeling that the remaining businesses have survived the worst of the storm.

"The water has quit coming up in the lifeboat, I’d say."

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