Local Economy: A Tale of Uncertainty

by David Lillard

The commercial printing business has long been considered a reliable barometer of the local economy. Even in the digital age, in good times sales circulars, catalogues, and real estate listings fly off the presses.

But in these times of global financial turmoil, what can an established local printer tell us about the overall direction of the economy? In a word: “Uncertain,” said Laura Lowther, owner of Progressive Printing in Martinsburg. “July and August were killers.”

Store closings, bankruptcies, and the housing slump all play off one another to create a sense that tough times are ahead. Cash-strapped retailers are cutting back on promotional printing — if they’re surviving, that is. Other retailers are bracing for the unknown, like homeowners boarding up windows in anticipation of a big storm that could be worse than expected, or not nearly as bad.

Just as things were getting scary for Progressive Printing this summer, when Lowther wondered whether she would have to let people go, they had a surprising September. “We were up $10,000 for the month, and October started with a bang,” she said. She even hired a new employee.

Ironically, the uptick in business at Progressive is more a sign of bad times than good. Foreclosures and bankruptcies, and auctions create work for the businesses that run and promote them — including printers. This kind of sales increase has done little to give Lowther optimism.

“We’ve backed off investments,” she said. “We cancelled a contract on a six-color press. We had financing lined up for a $500,000 purchase, but held off.” Lowther didn’t want to paint herself into a corner. “If it comes down to a press payment or payroll, I’ll choose payroll,” she said. “Times are too uncertain.”

According to Chris Colbert,Commercial Lending Vice President at United Bank in Shepherdstown, the murky state of the economy is having an impact on small-business planning. Fewer businesses are seeking loans than in the past couple of years. When people hear words like credit crunch, they might think banks aren’t making any new loans. “A lot of people don’t apply solely because they think they won’t get the loan,” said Colbert. “But cash for loans is not the problem people think it is.”

Colbert did say that United has modified the way it evaluates credit risk. Typically, a bank would look at a company’s balance sheet, management, and business plan to assess risk. “Now there’s a huge trickle down,” said Colbert. In effect many banks now look at a business applicant’s industry and customer base when they consider a loan. When an applicant is heavily dependent on one or two big customers, the prospects of the customers and their industry enter into the lending equation. It’s all an attempt to manage risk in uncertain times.

If business execs and owners aren’t sure where the economy is headed, some of the traditional measures offer even less insight.

“Employment numbers for Jefferson County remain strong,” said Jane Peters, executive director of the Jefferson County Development Authority (JCDA). The second quarter unemployment figures show a rate for the county between 3.5 and 4 percent; many economists consider anything below five percent to be full employment.

But those numbers don’t take into account the people who have stopped looking for work or the laborers who worked for cash until the construction industry dried up.

Another conventional measure of the economy is to track the number of people seeking food, medical, and social services. Michelle Goldman, director of the Charles Town Health Right free clinic, says their clinic has seen a marked increase in the number of patients seeking free medical care. At one point they had a waiting list of 300 people, and hired a full-time nurse practitioner to help meet the need.

“We’ve seen people who had six figure incomes who have lost their jobs,” said Goldman. Charles Town Health Right is one center in a 10-clinic network that gets about half its funding from the state of West Virginia. The rest comes from donations, fundraising events, and support from area churches. But in tough times like these, donors have less money to give. “That’s the paradox,” she said. “As the need for services increases due to the bad economy, funding from the private sector drops.”

When asked about Jefferson County’s relatively low unemployment rate, Goldman says layoffs don’t tell the whole story. To qualify for medical services at the clinic, patients can’t have incomes higher than 150 percent of the poverty line. For a single mom with two kids, that amounts to about $26,000. About a quarter of Jefferson County workers are employed in retail, restaurants and hospitality, the workers who see their hours cut when business slows, or their income from tips take a dive when people forgo eating out.

Retirees are also seeing their incomes drop, or they’re holding off on spending. A quarter of all households in Jefferson County are headed by people over the age of 60. The disruption in financial markets has shrunk their retirement assets and frightened even people with traditional pensions. Nationally, even with the relative peace of mind provided by Social Security and Medicare, retirees have cut back on spending, according to the quarterly Principal Financial Well-Being Index. When retirees cut back on spending, workers in retail and restaurants get hit even harder.

Christian Asam, general manager of the Bavarian Inn in Shepherdstown, says the economy has put a small dent in the hospitality business here. “We are down slightly in occupancy, yet I am reading in trade publications that in many areas across the country the hospitality industry is in big trouble. Generally we have not been hit as badly as other markets,” said Asam.

Asam says that Jefferson County’s proximity to Washington, D.C. has helped soften the blow.  “We find when times are tight travelers tend to take shorter trips or one night getaways instead of spending a lot of money on airfare and expensive resort lodging,” said Asam. “Spots like Shepherdstown that are just over an hour from metro areas can do well.  Also, thank goodness gas prices dropped a bit just in time for the fall foliage, our busiest season. Four dollar gasoline in October could have been disastrous.”

The biggest change Asam has seen is in how much guests are spending. “Three years ago I remember selling $200 or $300 bottles of wine three to four times a week. Now it is maybe once a month. Guest are still coming, but they are spending less,” said Asam. Guests are looking for perceived value, he says. The Bavarian’s Sunday brunch buffet, for example, has been a huge hit, as has casual dining in the inn’s Rathskellar pub.

Asam also said one thing locals can do to help the local economy is to do their Christmas shopping in independently owned stores, instead of making all their purchases online. The Shepherdstown Business Association is promoting a “shop local” campaign this season. “ The more we spend in our community the better off we all will be.”

The national economic doldrums have hit Jefferson County just as it was trying to claw back from the loss of several large employers. The AB & C telemarketing company and a warehouse fulfillment center pulled up stakes when their companies were bought by larger companies. In a county with total employment of about 14,000, the loss of a few employers can do a lot of damage.

While a lot of signs are pointing downward, Peters of the JCDA says they continue to field inquiries from companies considering relocation to Jefferson County. So it seems the local economic picture is one of those classic “On the one hand there are positive signs, and on the other hand there are negative signs,” the type of situation that prompted President Harry Truman to quip: “What I need is a good one-armed economist.”

A business owner who wished to remain nameless put it this way: “Call it a decline, call it a recession, call it slump. It doesn’t matter. I need a solid Christmas season, or I’ll be calling it quits.”