JEFFREY BROWN: The daily drumbeat of bad economic news, from rising gas prices to falling home values and stock portfolios, is hitting the entire country now, but plays out in different ways.
We take our own snapshot with business writers and columnists from four regions. Keith Reed is at the Cincinnati Enquirer; Doug Smith is with the Charlotte Observer; Kathy Kristof joins us from the Los Angeles Times newsroom; and Loren Steffy is with the Houston Chronicle.
Well, Kathy Kristof, I’m going start with you, because you joined us for a similar discussion back in December. At the time, you said there was a mixed bag in your part of California, but overall not too bad. So how much has the world changed in the month since?
KATHY KRISTOF, The Los Angeles Times: Well, Pollyanna has left the building. The employment market has soured; the housing market has continued to slide; our credit markets are in turmoil. Meanwhile, the cost of everything from food to fuel has soared.
And that makes it a lot harder for the average American consumer to feel good about going to the mall.
JEFFREY BROWN: Are there particular sectors, particular industries hit worse?
KATHY KRISTOF: Well, you know, here we have a huge housing market and financial services market, small business. And all of them are terribly hurt by the credit crisis crunch. Those businesses need capital in order to continue to thrive, and capital has dried up.
We’ve also had a huge bank failure out here. And, you know, for the first time I think since the 1930s we actually had a depositor crisis, where there were little old ladies and men sitting outside of the bank trying to withdraw their money, I mean, like block-long lines. And we just have never seen that before.
JEFFREY BROWN: And that’s the land of IndyMac, right?
KATHY KRISTOF: It is in the land of IndyMac.
JEFFREY BROWN: Keith Reed in Cincinnati, how are the economic woes playing there? In banking and credit, for example, are people able to get credit and mortgages right now?
KEITH REED, Cincinnati Enquirer: Credit is actually very difficult right now. I, not that long ago, a matter of minutes ago, finished writing a story about a project that may be put on hold because the investor in a downtown building here wants to turn it into a hotel, is not going to be able to raise the money as quickly as they want to.
Just last week, I wrote a story about a developer of a condominium that has put that project on hold because many of his buyers or the people who would be in the market for his properties can’t get mortgages or can’t sell the suburban houses that they have on the market.
So it very difficult right now to come by credit, both for the residential buyer, and for the developer, and in the commercial markets right now in the Midwest.
Banks, manufacturers hit by credit
JEFFREY BROWN: And as you look more broadly at your region, certainly the auto industry hitting Detroit, but beyond, as well, I suppose?
KEITH REED: Absolutely, because you have a situation where Detroit is obviously the center of the auto industry, but you have in many states, Indiana, here in Ohio, in Kentucky, even a little bit further south than that, parts of Tennessee, where there are companies that supplied Detroit with many of the parts that they make, some of the interiors that they make.
And in those smaller cities, those small towns, the major employer might be a supplier to Detroit. So you wind up in a situation where, if the major employer is affected by slumping car sales in Detroit, which is obviously affected by people's ability to be able to borrow money to buy a car, than that town's entire economy is going to be affected by what goes on, because then the guy who owns a store, the guy who owns a gas station, they're not seeing the money come in that they would normally come in. So their employees are also affected.
You really see a ripple effect in some of the smaller Midwestern cities and towns.
JEFFREY BROWN: Doug Smith in Charlotte, big banking center. Is that the main concern there?
DOUG SMITH, Charlotte Observer: It's a major concern right now, because the two big banks, Bank of America and Wachovia, both have experienced some problems. Their stock prices have dropped. And people are starting to worry about their jobs.
The banks are the big economic drivers in the Center City. They fill up the office towers. A lot of the people who come in and buy the condos work for the banks, so there's real concern of what's going to happen next and if one of the banks, possibly Wachovia, might be acquired by somebody.
JEFFREY BROWN: And staying with you, what about the housing crisis hitting in other places? How bad is it there? How bad is the foreclosure problem, for example?
DOUG SMITH: Well, we're starting to see foreclosures here. It's not a serious problem at this point. Charlotte actually thought it had escaped most of this crisis six months ago. And even four months ago, we were still seeing price appreciation, one of the few cities in the country where that was happening. And we never had a major housing bubble.
But since then, it's caught up with us. Today we're going to have a story in the paper that says building permits have declined 50 percent in the region over the past six months, so it's starting to hit us.
People are having much more trouble qualifying for mortgages. Builders say that they have to go through much more scrutiny. And that will slow sales and has slowed sales to some extent here.
Oil boosts business in Texas
JEFFREY BROWN: And Loren Steffy in Houston and Texas, more broadly, what are you seeing there?
LOREN STEFFY, Houston Chronicle: Well, I guess the thing that's unique in Texas is that we have a large portion of the oil industry that's based here. And that's really helped on the jobs front.
I mean, our unemployment rate in Houston, for example, is running about 4.2 percent. And in Dallas, it's about 4.4 percent. So really the growth in the oil industry, the higher oil prices has helped from an employment standpoint.
We are starting to see the impact of higher prices, of course, higher gasoline prices, higher food prices. Those affect consumers everywhere. And we're starting to see an increase in that, which has some people a little bit worried. But I guess, if I had to sum it up, I'd say cautious optimism at this point.
JEFFREY BROWN: What about your banking sector? Some of your colleagues have talked about the problems that they see there. What do you see in Texas?
LOREN STEFFY: Well, again, our picture is a little bit different. If you remember, we had a pretty major banking crisis in the late 1980s, and it pretty much wiped out a lot of the Texas banks.
And so a lot of the biggest banks that are here now are banks that have actually come in from other parts of the country. You're starting to see some tightening of credit in different sectors, but overall things are still kind of holding steady.
JEFFREY BROWN: Kathy Kristof, back to you in California. Six straight months of job losses around the country. Can you tell yet which kinds of jobs are being hurt the most out there? And are there any pockets of strength still?
KATHY KRISTOF: Well, I mean, we've definitely seen it in the financial services sector. We've had big lenders, IndyMac, Countrywide, either be acquired or go under, and so huge job losses there.
The areas of strength, I'm afraid, are with realtors who specialize in foreclosures and short sales, bankruptcy attorneys. There's still some strength in imports and technology, but we have a lot of pockets of weakness.
And our small business community has always been pretty vibrant, but right now, because inflation has gotten so out of control, because people here very much rely on their cars, when gas prices go up, their cost-of-living is dramatically affected. People are cutting back on the amount that they go to restaurants and go shopping.
Economic strengths seen in cities
JEFFREY BROWN: Keith Reed, you talked about that widening spiral, especially from the auto industry. But are there some pockets, manufacturing or other sectors of strength where you are?
KEITH REED: I wouldn't say necessarily sectors of strength so much as I would say strength relative to some other parts of the country.
Here in Cincinnati, we do have -- this is a pretty strong town in terms of corporate headquarters. You've got Procter and Gamble based here. You have Macy's based here, companies of that nature. And they haven't announced major layoffs. As a matter of fact, I don't think either of those companies that I mentioned has trimmed staff at all at this point.
So you do have some strength here relative to the rest of the country. I think where the impact is coming in is on many of the workers who do work for some of these larger companies here in Cincinnati, and even some of the smaller companies, where they're being affected by prices, by gas, and things of that nature.
Outside of here, Ohio does have a pretty large rural community. Those farms are being hit. Those dairies are being hit by some of the higher fuel costs and transportation costs. You're going to see some job losses in those areas.
Up in Cleveland, where you have more of a blue-collar base, you're also going to see some job losses in that manufacturing industry. And also, as you get a little bit closer to Michigan, Indiana, as you get closer to some of those blue-collar towns, that, again, are affected by the auto industry in Detroit.
JEFFREY BROWN: Well, Doug Smith, we just heard -- we've talked about prices rising, and certainly gas prices. That brings the other new factor that we keep hearing about now, inflation. How much are you -- how much are you feeling that where you are?
DOUG SMITH: Oh, I think people are feeling it every day and complaining about it. They're trying to find ways to cut back on driving and using gasoline. We're starting to see people carpool. Some companies are going to four-day workweeks to try to keep prices down.
And it sort of had sort of a different effect on the transit system. We just started a light-rail system here at the end of the last year, and rail transit has just shot up, really skyrocketed. It's two years away from meeting the company's 2025 projections for ridership, as people try to get out of the car and save money.
JEFFREY BROWN: Loren Steffy, you had the most optimistic portrait here. What about rising prices and inflation? Any signs?
LOREN STEFFY: That's a big concern. Consumer prices jumped about 5 percent here in the past month or so. And that was really sort of the first big increase we've seen, so people are worried about that. And, of course, a lot of what's driving that is the gasoline prices and the food prices.
Like Kathy mentioned about Los Angeles, Houston is a very large, spread-out city. Most people drive. There's not a lot of public transit. So there is a lot of concern about how it's going to affect commutes and things like that.
But so far, we haven't seen sort of a broadening effect. The jobs picture remains pretty strong. Mostly oil companies are actually adding jobs as opposed to laying off people. So there is still kind of a sense that overall things are sort of holding steady.
Psychology of panic not yet present
JEFFREY BROWN: Loren, let me ask you, because, as you said, your part of the country has seen these booms and busts before. A lot of talk and concern now about the word "panic," you know, the reality of the situation and then the panic that we see in some sectors. And then when does panic become reality itself, the psychology?
Do you see that in the air where you are? Do you feel it?
LOREN STEFFY: Well, we really don't. I was actually a little surprised to see the people lining up at IndyMac. You know, as I said, we went through a pretty major banking crisis here in the late '80s.
And, I don't know, maybe we got a little used to it or something, but people kind of learned pretty quickly that deposits were insured and that their money was relatively safe. I think right now we're kind of looking at that and scratching our heads. We really haven't seen anything like that here.
JEFFREY BROWN: Kathy Kristof, what do you make of it, in terms of psychology and panic?
KATHY KRISTOF: Well, I mean, we obviously saw a lot of panic in the IndyMac failure. You know, it's so mixed here. I have to say there are some people who are very, very worried. The people in the financial services sector are extremely worried, and that's all you hear is gloom and doom.
But there are people in other segments of the economy who are a little bit hopeful. I think what we're looking at is probably another six months of very slow and maybe painful recovery, and then probably next year we'll begin to see signs of life.
JEFFREY BROWN: And, Keith Reed, it must be a little harder to see signs of life or recovery that close at hand where you are, huh?
KEITH REED: Yes, it is difficult. I actually talked to a few people who are in the financial services sector and they really are not optimistic at this point. I'm talking about people who are bankers and who are lenders. They're not optimistic at this point that you're going to see a turnaround any time soon.
I also don't believe that, you know, many people on the street are very optimistic. I mean, just some of the comments that you hear, as I go about my day reporting, are not very, very optimistic at all in terms of when this economy is going to turn around.
Also, in the larger business community, if you look at in Cleveland last week, National City had their shares halted -- trading of their shares halted because of indirect relationship to what happened with IndyMac. There was some nervousness about whether or not National City was going to remain solvent, what its capital looked like at that point in time.
They actually had to write a letter to their shareholders saying, listen, we are not in the same position as IndyMac. And if that's any indication that a bank that is completely solvent, that is not in trouble at this point would have to write a letter to its shareholders to re-assure them, then people are not optimistic.
JEFFREY BROWN: OK, Keith Reed, Kathy Kristof, Loren Steffy, and Doug Smith, thanks for the snapshot.