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Job Losses, Economic Realities Hit Home in Indiana City

March 6, 2009 at 6:15 PM EST
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Amid a deepening economic crisis, the unemployment rate in Elkhart, Ind., has skyrocketed to 18 percent as the town's manufacturing base has collapsed. Paul Solman reports on the town's tough economic times.
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JIM LEHRER: Now a report on the job losses in Elkhart, Indiana. It’s part of NewsHour economics correspondent Paul Solman’s series on making sense of financial news. Paul was in Elkhart earlier this week.

BARACK OBAMA, President of the United States: It is good to be back in Elkhart.

PAUL SOLMAN, NewsHour Economics Correspondent: President Obama may be one of the few at the moment who can make this statement. Last month’s trip to Elkhart, Indiana, was to sell job creation by way of his stimulus package against a backdrop of despair.

BARACK OBAMA: When we say that this area has lost jobs faster than anywhere else in the United States of America, with an unemployment rate of over 15 percent when it was 4.7 percent just last year, we’re not just talking numbers. We’re talking about Ed.

PAUL SOLMAN: Ed Neufeldt, who voted for John McCain, was laid off in the fall.

ED NEUFELDT: Two of my daughters and two of my son-in-laws are also unemployed. I know that Elkhart County has the highest unemployment rate in the country, but I know we don’t want to be there. We want to work.

PAUL SOLMAN: Neufeldt’s daughters, Brandy and Lisa, and their mates home with the kids, daughter Lori, and her husband, Josh Gaut, Josh’s mom, Lucinda, and dad, Don, have all lost their jobs.

LISA NEUFELDT: So I’ve been out of work for a little over a year.

PAUL SOLMAN: Or are woefully underemployed.

LORI GAUT: When it gets bad, I’m maybe down to five hours a week.

LISA NEUFELDT: So I got lucky and got a part-time job working with Lewis Bakeries, stocking bread. That’s a good thing. At least people still need to buy bread, so…

JOSH GAUT: I went through a stretch where, from Thanksgiving to February, I didn’t work at all. And it looks now that we’ll probably be getting more time off in the future.

PAUL SOLMAN: Lucinda Gaut had a job when we arranged this interview, but by the time we set up our camera, she’d lost it.

LUCINDA GAUT: And Thursday was my last day.

PAUL SOLMAN: On a scale of 1 to 10, where 10 is terrified and 1 everything’s OK, where are you?

LUCINDA GAUT: Probably terrified. I don’t know.

PAUL SOLMAN: And perhaps laughing to keep from crying. Her husband says his faith keeps him going, though he lost his job in April.

Looking?

DON GAUT: Yes.

PAUL SOLMAN: Finding anything?

DON GAUT: No, there’s nothing around here. There’s no jobs.

ED NEUFELDT: They’ve got a dollar store right down the road here and pay $6.50 an hour. They’re not even hiring, so there’s nothing out there at all.

R.V. industry in decline

Ed Neufeldt
We were all shocked when [Monaco Corporation] closed down, because we were one of the bigger corporations. I thought we would be one of the last to be around, but we weren't.

PAUL SOLMAN: These folks all used to make recreational vehicles, the main industry in Elkhart, which still boasts the R.V./M.H. Hall of Fame, where the upbeat tour guide urges you to "follow the black rubber road."

AL HESSELBART, R.V. Heritage Foundation:  This unit on our left is the oldest existing R.V.

PAUL SOLMAN: And that's a Model-T Ford?

AL HESSELBART: It is a 1913 Model-T Ford.

PAUL SOLMAN: The industry took off in the '30s.

AL HESSELBART: This is a 1931 Chevrolet House Car that was built by Paramount Studios to give to Mae West, the movie star, as part of the enticement to get her to leave the vaudeville stage and make movies for Paramount.

PAUL SOLMAN: But from the get-go through the Great Depression, the R.V. was a luxury good. Modern models include what the wise-cracking Ms. West might have called a movie trailer, or perhaps a mobile McMansion.

But with every income group drooping in the current swoon, who's buying? The industry that made Elkhart famous is making it infamous right now.

ED NEUFELDT: Thirty-two years at Monaco Corporation, and they had like a big meeting about what they were going to do, and we thought it was just going to be a big layoff. And when my foreman came out with tears in his eyes, I knew it was more than that.

We were all shocked when they closed down, because we were one of the bigger corporations. I thought we would be one of the last to be around, but we weren't.

PAUL SOLMAN: Monday, hours before this interview, Monaco said it may shut down not just the local plant, but the whole company, from mobile-home-makers to downwardly mobile homeowners, with crashing home prices in a crashing economy. Lisa Neufeldt heard about one new listing recently.

LISA NEUFELDT: It's got like four bedrooms, upstairs, and I think eight total rooms, a basement, a pool and a hot tub, four bathrooms for $59,000.

ED NEUFELDT: I said we could all go into together and buy that and all live together.

LORI GAUT: I don't want to even entertain the thought at this point.

PAUL SOLMAN: But if you have to, you have to.

LORI GAUT: If I had to, it would be better than being homeless, right?

Consumer confidence very low

Lane David
Indiana University South Bend
People's expectations are very, very important to the functioning of the economy. It could get worse just because people believe that it's going to get worse.

LANE DAVID, Indiana University, South Bend: Everybody heard how President Obama came here to Elkhart. He came here because this county has the highest unemployment rate in the nation, and that's largely driven by what's been going on in the R.V. industry.

PAUL SOLMAN: Economist Lane David, from nearby South Bend, and an R.V. consumer.

LANE DAVID: I have a trailer very similar to this one, in fact. My wife would like to get what's known as a motor home, which is actually a motorized unit.

PAUL SOLMAN: Are you seriously considering it?

LANE DAVID: With the way the economy is right now, I'm not too excited about buying anything that I can't pay cash for.

PAUL SOLMAN: But then you're part of the problem, aren't you? Because, I mean, if you and others were buying vehicles like this, then Elkhart workers would still be on the line?

LANE DAVID: Yes. And I think you've hit on one of the key features of the economic situation today, which is people's expectations. And people's expectations are very, very important to the functioning of the economy. It could get worse just because people believe that it's going to get worse.

PAUL SOLMAN: So David won't buy a new R.V. because he's afraid things will get worse, and so things get worse because people like him are afraid to buy and because banks are afraid to lend, says the CEO of this R.V. firm.

MARK HORITA, Hy-Line: The banks will simply not lend the money.

PAUL SOLMAN: Even if you put up 20 percent?

MARK HORITA: Even more. We've had consumers that have very high FICO scores, 700. We've even heard of people that have a 800 FICO score and still not being able to get that purchase financed.

High hopes for stimulus money

Dick Moore
Mayor, Elkhart, Indiana
If you go out here on the street and talk to the people, 9 out of 10 of them are going to tell you the most important thing in Elkhart, Indiana, is to create jobs.

PAUL SOLMAN: Mark Horita has no love for the bankers, but says President Obama has to shore up the financial system to spur new lending. The mayor of Elkhart says the president has to deliver the stimulus money to spur new spending.

And what's your pitch? I mean, besides, "Elkhart, highest unemployment rate in the country, so please help us out"?

MAYOR DICK MOORE, Elkhart, Indiana: Well, that is the pitch. Jobs, jobs, jobs. If you go out here on the street and talk to the people, 9 out of 10 of them are going to tell you the most important thing in Elkhart, Indiana, is to create jobs.

PAUL SOLMAN: Envisions creating with a $17 million renovation of this theater, which began as a vaudeville house, though it's not clear Mae West ever played Elkhart. It's hobbling along at the moment, but Mayor Moore has big plans.

MAYOR DICK MOORE: We'll put on local productions, bring in productions from around the world, cultural exchange, relaxation, entertainment.

PAUL SOLMAN: The theater is one of 17 projects Mayor Moore hopes to stimulate. All over the country, local officials are dusting off dormant projects like this one or this $25 million upgrade of the Elkhart sewage treatment system, already mandated by federal law and good for another 400 or so jobs.

An overpass for a railroad crossing that handles 120 trains a day, the mayor is scrambling to get it ready for a stimulus check.

MAYOR DICK MOORE: This project is not quite shovel-ready, but we think we're closer than what we first believed.

One in six people out of work

Lori Gaut
People just want jobs. And the buildings are here, the people are here, so all you private investors out there, come to the Elkhart area. We're willing to work.

PAUL SOLMAN: Best case, going to bid in four months, construction next year.

But Elkhart needs jobs now. With 1 in 6 people out of work, unemployment is the fastest-growing industry in town, while more and more former factories are idled.

ED NEUFELDT: We need someone to come in and figure out what -- a way to open up that plant again and get 1,400, 1,500 people back to work.

PAUL SOLMAN: So to any of you, what should they do with that factory?

ED NEUFELDT: I don't know. Maybe we can make something to do with solar or something.

LORI GAUT: It doesn't matter what they put in. People just want jobs. And the buildings are here, the people are here, so all you private investors out there, come to the Elkhart area. We're willing to work.

PAUL SOLMAN: Well, but these private investors aren't coming, are they?

LORI GAUT: No. The government's going to have to step up to the plate, and it has to hit here locally.

PAUL SOLMAN: But not everyone's a believer in government.

LANE DAVID: Government spending is a source of contention among economists.

PAUL SOLMAN: But if there are all these idle resources in the R.V. industry, the people, the factories, doesn't it make sense for the government to start spending money to put all those resources to good use?

LANE DAVID: We want to use our resources in the most efficient manner, which means that we want to produce goods that the market desires. And if the market desires certain goods, why aren't they being produced already?

PAUL SOLMAN: Back at the pizza parlor, this is just what the Neufeldts and Gauts, lifelong Republicans, believed. Do they still?

ED NEUFELDT: I think I'm slowly sinking from the middle class to the poor class. So it's making me think a little bit different about people that don't have that much. I mean, the hard-working American family that's trying to make it and, through no fault of their own, they're not making it.

PAUL SOLMAN: And that's changing your attitude towards economics in general, you mean?

ED NEUFELDT: Yes. Yes, I think it is.

PAUL SOLMAN: Meanwhile, the unemployment rate in the city of Elkhart, Indiana, population 53,000, has now risen to 18 percent.