How's the economy? It's a matter of perspective
Business leaders say things are good compared to last year
By Russ Gifford
(Originally published in The Weekender, 08/07/03)
|Second in a series
Last week we heard from local people who, faced with unemployment or underemployment, have had their dreams, family businesses and way of life threatened. Read story
Unemployment rates have hit a 10-year high in Siouxland. That translates to business being bad, right? It depends on your perspective.
Numerous Siouxland businesses said things this year are better than they were last year. "I can only tell you what I know," said Jim Dvorak of Knoepfler Chevrolet, "but we are experiencing an upturn through the first two quarters of 2003."
With 4.5 percent unemployment - which does not include many of the March Gateway layoffs, or the estimated additional nine percent underemployed and involuntary part time workers - how can businesses be doing better?
Perhaps, says Dvorak, it's a measure of how bad last year was for businesses. "I don't hear much negative from others on the street. We're seeing enthusiasm from buyers. It's all pretty positive."
Nancy Henry, a Realtor and owner of Henry Homes, has a similar take. "Houses that are priced according to the market are selling in less than 30 days," said Henry, President-elect of the Greater Sioux City Board of Realtors. She says this is truly a buyer's market. "The interest rates are at a 42-year low, and there are programs available for purchase of a home, without a down payment." The downside, of course, is that other houses are staying on the market over 120 days. "Our average house in Sioux City sells in 98 days," said Henry.
There are currently around 900 single family houses for sale in Siouxland, according to the multiple listing service.
Financial incentives such as lower interest rates, are drawing money into the market, experts say. But they also say nationally this is the slowest recovery from a recession on record. That's because businesses have trimmed employees to meet the hard times.
While the business bottom line looks better, the employees took it on the chin, facing cut backs, reduced hours, and involuntary part time work - or no work at all.
The City of Sioux City is currently completing a round of layoffs that already includes 20 people, and perhaps another 10 more. Gateway laid off more than 400 at its plant in March - and it seems almost certain the layoffs there are not finished. In the past 18 months, Tyson Foods has deleted at least 60 jobs - some say more - in the human resources, administration and engineering side of the former IBP corporate offices. This was a stealth layoff, since no one announces Tyson Foods' job cuts.
And there are others. What happens to these people and their spending? What happens to their jobs? What's this mean for the long-term health of the Siouxland region?
What companies need are buyers for their products, and that only happens when those potential buyers have good-paying jobs and are secure about their future employment. Jobs create income, and in turn, sales. While businesses today might simply be happy that sales are better than last year, will those sales spur a return to work for many? Or will the lower sales result in another round of layoffs, resulting in fewer buyers for products, which again leads to less work, the dreaded ripple effect.
There is another ripple effect, though, according to the economic development experts. New businesses moving into town, or local businesses expanding, lead to more spending and more jobs. But many argue only "good jobs" bring that ripple effect. What wage constitutes a "good" job? Is it $15 an hour? More? Or can it be less?
Ten dollars an hour, which translates to roughly $20,000 a year, may not be the ideal of a "good job," but Don Willoughby, of the City of Sioux City's Economic Development department, says turn the thinking around. "When a $7 an hour employee jumps to $10, that person has more money to spend, and he puts it into a house, or services, or products," says Willoughby. So, when the Economic Development Department receives about 6 to 8 inquiries a month from the Iowa Department of Economic Development, "we work every lead that comes in," says Willoughby. "We evaluate them to make certain they are a good fit for Sioux City, but we work them."
However, shifts in the nation's economic situation have changed the rules of the economic development game. "In the '90's, economic development meant offering someone a factory, or a tax break on a factory. That model doesn't work anymore," said Al Wenstrand, outgoing director of Nebraska's Department of Economic Development. "Twenty-five percent of all factory space is idle in the U.S. Companies don't need more manufacturing space right now."
Local experts take issue with that statement, and say Siouxland has some advantages there. "I could name a number of manufacturing firms in Siouxland that are looking for more manufacturing space," says Willoughby. "And things will change again," he says. Either way, it is a difficult job. "These things take months, sometimes years" to develop, he added.
Is Willoughby surprised that the business community sees an upswing in business in Siouxland? No. "Times are good. Are they great? No - they could be better, but we are getting inquires, and we are working with businesses that are expanding." He points out that the unemployment rate is still better than was in 1990.
That is, as long as you have a job. Or, perhaps, a job that includes health benefits.
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