Route to Recovery

A trip through the epicenters of the recession

from UK News:

Ignore the data, Royal Wedding and sunshine give Britain Plc a Q2 kickstart

May 5, 2011 14:49 UTC

A lot of the economic data in recent days has made for pretty grim reading, reinforcing expectations that interest rates will remain at record lows for some months yet.

But a string of bullish updates from British retailers and manufacturers suggest that the second quarter could have got off to a flying start, with fine weather, the Easter holiday and the Royal Wedding all improving the national mood.

Anybody who ignores such signals from within the real economy does so at their peril. In January the pound tumbled when it emerged that the British economy had suffered a shock contraction in the final three months of 2010. The market was caught off guard again a month later when revisions painted an even bleaker picture.

Those of us who had been following closely the steady stream of profit warnings from UK retailers, travel groups and builders were not quite so surprised, particularly as we churned out long lists of companies hit by December's big freeze and predicted a looming standstill in the construction industry.

The big question now is whether the glow left by a month of unusually sunny weather and two holidays in swift succession for Easter and the Royal Wedding will translate into a sustainable recovery, or at the very least be enough to dull some of the pain of government cutbacks and job losses.

Supermarket group Morrison is sounding very cautious this morning. In common with a growing pack of retailers it has reported stronger than expected sales thanks to a bumper April but has not raised its forecasts for 2011 as a whole, citing falling disposable incomes and economic uncertainty.

An industry survey on Tuesday showed shopkeepers are planning for a weak May after last month's pick up.

Those in the firing line of government cutbacks also show that for some at least, the worst has yet to come. Defence giant BAE Systems said this week that it still expects sales to be hit by lower UK military spending, hinting that more job cuts may be on the way.

April's mini-boom did, however, give fashion retailer Next the confidence to up its guidance for the first half even if analysts warned people not to assume there had been a sea-change in consumer morale.

There are also very early signs of something more than just a bit of fair-weather, party spending. Within the construction sector -- such a big drag on the economy at the end of last year -- shares in house builder Galliford Try are up over 9 percent today after it predicted significantly better than expected full-year results following a buoyant spring where it has been enjoying a substantial rise in home sales even if prices remain subdued. Property website Rightmove also reported this week that its average revenue per advertiser was growing strongly while upmarket property consultant Savills has flagged a strong performance from its UK residential business.

People don't buy new houses on the back of Royal Wedding good cheer, do they?

Meanwhile software firm Sage this week reported growth across all regions for the first time since 2007, citing a tentative recovery in spending by small- and medium-sized businesses while Logica, which helps manage companies' IT systems, beat sales growth forecasts thanks to precisely the sort of stronger private sector demand the government is pinning its hopes on.

Not everybody is having an easy time of it. DIY chain Focus is preparing to appoint administrators, putting almost 4,000 jobs at risk, while chocolatier Thorntons blamed warm weather for weak Easter trading.

Overall, though, the upbeat noises have been drowning out much of the bad news from a corporate perspective with engineering group Weir upping its profit guidance, Moneysupermarket.com saying it is trading well ahead of last year and pub group Wetherspoon describing sales as resilient. Shares in bus and train operator Go-Ahead jumped today on higher profit guidance

The economy is certainly not out of the woods yet, with many firms grappling with high raw material costs and individuals worried about their jobs, but perhaps markets should be bracing themselves for a positive surprise from second quarter GDP data after the nasty shock at the end of last year and consequently readying themselves for rate hike expectations to be brought forward again. Whether its an expression of confidence or just irrational, 'pomped up' exuberance, there's no getting away from the fact that the FTSE 100 is hovering around levels not seen in almost three years.

Next week brings another flurry of corporate earnings, by the end of which we should have an even clearer picture of how Britain Plc is really faring.

America’s Route to Recovery: Part Two – A New Revolution

Dec 29, 2009 22:28 UTC

For the Reuters multimedia project Route to Recovery, a team of journalists toured America to examine the impact of the recession and posted their reports on reuters.com. For the last installment in the series, reporter Nick Carey has written an extended overview of the challenges and opportunities facing the country.  The second part of this three-part report is below. Click here for part one.

Leslie Taito is executive director of Rhode Island Manufacturing Extension Services (RIMES), a nonprofit that provides consultation for small and medium-sized manufacturers in Rhode Island, a state of 1 million people.

Rhode Island was the home of America’s first mechanized cotton mill, but since Taito arrived 16 years ago, the number of manufacturers here has fallen to 1,945 from 2,800. Still, she believes that all of those that are left can be helped to survive and thrive — and the best way is to get smart and not try to compete with low-cost Chinese producers.

“Manufacturers have to specialize and find a niche where they develop high-end goods that are not sold just based on cost,” Taito said. “Sure, China can make it cheaper than we can,” she said, while weaving in and out of traffic en route through the heart of Providence. “But what they don’t have is the design or engineering capabilities that we do.”

ROUTETORECOVERY/

Maria Montero carries plastic products for quality control inspection at Blow Molded Plastics in Pawtucket, Rhode Island November 17, 2009.   REUTERS/Brian Snyder

One of the companies that RIMES has worked with in the past is Pawtucket-based Blow Molded Specialties, which makes products from hot plastic that is blown into molds where it sets. Its clients are predominantly in the healthcare sector.

President and majority owner Tom Boyd describes how the company’s largest customer switched production of a basic product to Mexico because it could be made there for 2 cents apiece instead of 8 cents in the United States.

That company had accounted for some 35 percent of business. “That was nearly the end of us,” Boyd said with a wry smile.

So instead of trying to compete on low-cost products, Boyd’s company specializes in high-end, complicated and intricate products, and even develops products for customers.

In the company’s meeting room, he shows off some of the firm’s products including one which looks almost like a plastic accordion and is about the same size, with evident pride.

This, he explains, is a plastic bellows his firm developed for a healthcare company, whose name he says he cannot divulge. It has a special function. Conventional practice in organ transplants has been to ship organs on ice. But Boyd says it has been found that a better way to ship organs is to keep them functioning, and the bellows he holds in his hands is part of a device to keep a set of lungs pumping while in transit.

Asked how much Blow Molded charges for a pump like this, Boyd shrugs his slight shoulders. “Maybe a few dollars each. And we only sold a few of them.”

But then he leans forward with right eyebrow and right forefinger raised. “Ah, but you see, the money’s not in the product,” he said, his grin widening. “The money’s in the engineering. We bill our customers for the development work we do.”

Communities around the country say they want to attract small firms like Blow Molded rather than focus on major corporations, for the simple reason that when a giant plant shuts down, it is almost impossible to replace the jobs lost.

The classic example is Wilmington, Ohio, where empty store fronts on Main Street are grim testimony to what happened when DHL axed nearly 10,000 jobs.

“When a big company like that goes, it leaves a very large hole to fill,” said Mayor David Raizk (pronounced “risk.”)

“I’d rather see 200 small companies with 50 employees each than one big one,” he said. “You can lose one, two or even 10 of those and find a way to replace them. Big companies are great when they’re in town, but when they leave they devastate communities.”

ROUTE-RECOVERY/

A pelican flies near a fisherman in Pensacola, Florida November 11, 2009. REUTERS/Carlos Barria

One such small firm is Computer Technology Solutions Inc, the largest privately-held software firm in Alabama, which has added some 40 jobs this year and now employs 150 people. “If that’s what we can do in a recession, imagine how we can do when the economy improves,” said president Sanjay Singh.

CTS got its start in a business incubator run by the University of Alabama in Birmingham. Singh said that unlike big corporations — which tend to be bureaucratic, slow-moving and inclined to withhold responsibility from young employees — CTS gives its 20-something employees multimillion-dollar projects to run on their own.

“If you give young people responsibility, they deliver,” he said. “We don’t hang over our employees’ shoulders waiting for them to get things done, we just let them do it.”

GREEN ECONOMY A LONG HAUL
There are great expectations that alternative energy or the “green economy” will help move America forward.

According to Lisa Frantzis, managing director for energy at Navigant Consulting Inc, in 2009, 7,000 megawatts of wind power was installed in America with the creation of 70,000 jobs — 50,000 direct and indirect jobs, plus 20,000 service-related jobs. Solar power saw 300 megawatts installed with the creation of 60,000 jobs.

Jay Paidipati, a Navigant managing consultant who works with Frantzis, said because of the industry’s breadth and relative youth, it is hard to make forecasts. “I would feel comfortable saying that the number of green jobs will be in the millions,” he said. “Just how many millions, I don’t know.”

ROUTE-RECOVERY/

Mesquite Lake Cattle Manure Power Plant is seen in El Centro, California, November 3, 2009.  REUTERS/Lucy Nicholson

It will be years, however, before that potential is realized. One of the main problems is the mass of rules and regulations that make building plants a lengthy process.

Imperial County in southern California has hit on a novel way to get around red tape, using a provision of state law that allows local authorities to streamline the approval process for building a plant, as long as it is under 50 megawatts.

This loophole enables officials to handle the approval process in as little as a year, compared to several years at the state level.

“Getting anything done in California is hard,” said Imperial Valley Economic Development Corporation CEO Tim Kelley, at his office in El Centro some 100 miles (160 km) east of San Diego. “But it is less hard to get it done here.”

This area has 360 days of sun a year and has suitable geological conditions for geothermal power — there are 10 such plants already. Thirty others for solar, geothermal and wind facilities, are in the process of acquiring permits.

Red tape is not the only challenge.

Paul Rich is chief development officer at Deepwater Wind LLC, which aims to develop America’s first offshore wind farm, in Rhode Island. The farm, which would eventually provide 15 percent of Rhode Island’s electricity, should come in two phases. The first test phase with six to eight turbines could be installed off the coast by 2012. By around 2015 the wind farm would contain around 100 wind turbines.

Rich described the coast between Maine and Maryland as the “Saudi Arabia of wind,” predicting an “enormous, exponential leap in jobs, manufacturing and infrastructure.”

Part of the reason for the long lead time is the need for extensive tests of local wind conditions, he said.
“It won’t happen overnight,” Rich said. “We are trying to create a truly new industry here and it has to be done right.”

“A far bigger concern for us is finding a qualified workforce to run and maintain the wind farm when it becomes operational.”

In blighted states like Michigan, many former manufacturing workers are already training for green jobs, even though relatively few have been created.

Matthew Derra, 41, lost his job at struggling auto supplier American Axle & Manufacturing Holdings Inc in July 2008. Now he is taking an associate degree in renewable energy and wants to find a job maintaining wind turbines.

“There’s nothing out there in my old field of work,” he said. “And there will be thousands of people out there chasing every green job, but I have to try.”

“I can’t just sit home and watch television.”

ROUTETORECOVERY/

April Metts watches television at her apartment in Providence, Rhode Island November 18, 2009.  Metts was homeless for several years before getting into her subsidized apartment as part of the Housing First RI initiative.   REUTERS/Brian Snyder

Even in California, which has America’s most aggressive climate change regulations, just 159,000 of the state’s 18 million jobs are considered “green” as of the start of 2008, according to public policy group Next 10.

Still, there are encouraging signs that money is flowing into renewable energy even in a sluggish economy.

Bill Gibson, is a business broker and principal of Gibson & Associates Inc in Pensacola, Florida. Gibson finds buyers for companies that want to sell.

He noted that companies selling luxury items are having trouble finding buyers because gun-shy banks won’t lend for that kind of investment, but he has noticed a lot more interest in renewable or alternative energy firms.

“There are definitely going to be haves and have-nots,” Gibson said. “Green energy is part of the future.”

The green energy industry is also seen as an opportunity for manufacturing firms to retool.

“What concerns me is when I hear people talking about manufacturing in the past tense,” said Virg Bernero, mayor of Lansing. “If we want wind turbines, someone here should manufacture them.”

ROUTE-RECOVERY/

The Vulcan statue is seen at Vulcan Park in  Birmingham, Alabama November 14, 2009. The Vulcan statue is a symbol of old times at the iron industry in Birmingham.  REUTERS/Carlos Barria

GEEKS AT THE TABLE
Laurie White, president of the Greater Providence Chamber of Commerce, keeps a board covered in bad news — headlines from The New York Times, The Washington Post, The Boston Globe and The Economist about how badly the economy of the state has been faring. Rhode Island’s unemployment rate was 12.7 percent in November, the second highest in the country after Michigan.

“Our problems have made not just national but international headlines,” White said. “That motivates me to find a new way forward.”

Rhode Island is pinning its hopes on a strategy dubbed “Strengthening Providence’s Knowledge Economy.” It has involved bringing together local and state government, the Chamber of Commerce, the Rhode Island Economic Development Corporation (RIEDC) and hundreds of small hi-tech software companies.

“The geeks have finally been offered a seat at the table,” said business consultant Jack Templin.

White said there was an easy explanation: “The geeks are just about the only ones creating jobs right now.”
Companies like Working Planet, which handles algorithmic online market research for its clients, are now at the table.

“Up until a few years ago the chamber was focused on major companies and its existing membership base,” said Working Planet Marketing Group Inc president and co-founder Soren Ryherd. “Over the past three years the chamber has done an about face and is now also about the smaller companies that are creating jobs.”

“We have also become more organized because we need to reach the local universities so we can find and retain top talent,” he added.

Mike Saul is the interim executive director of the RIEDC and has spent much of his career as a “turnaround guy” taking poorly performing companies and making them thrive. He wants to do the same here, in part because three of his four children, like many of the state’s offspring, live outside Rhode Island because there was no work here for them.

“In any turnaround that is going to work you have to ask where is the enterprise value that I can push forward,” he said. According to Saul, the state’s education system and its wind potential create much of its enterprise value.

“Rhode Island’s attempts at economic development have been episodic in the past, but this time everyone is on the same page,” Saul said. “A crisis makes things happen. It helps individuals reinvent themselves and will help this country reinvent itself.”

Part Three – The Mind Factory

ROUTETORECOVERY/

A U.S. flag decal is stuck to the window in a door to the Harrington Hall homeless shelter in Cranston, Rhode Island November 18, 2009.    REUTERS/Brian Snyder

A NEW REVOLUTION
Leslie Taito is executive director of Rhode Island Manufacturing Extension Services (RIMES), a nonprofit that provides consultation for small and medium-sized manufacturers in Rhode Island, a state of 1 million people.
Rhode Island was the home of America’s first mechanized cotton mill, but since Taito arrived 16 years ago, the number of manufacturers here has fallen to 1,945 from 2,800. Still, she believes that all of those that are left can be helped to survive and thrive — and the best way is to get smart and not try to compete with low-cost Chinese producers.
“Manufacturers have to specialize and find a niche where they develop high-end goods that are not sold just based on cost,” Taito said. “Sure, China can make it cheaper than we can,” she said, while weaving in and out of traffic en route through the heart of Providence. “But what they don’t have is the design or engineering capabilities that we do.”
One of the companies that RIMES has worked with in the past is Pawtucket-based Blow Molded Specialties, which makes products from hot plastic that is blown into molds where it sets. Its clients are predominantly in the healthcare sector.
President and majority owner Tom Boyd describes how the company’s largest customer switched production of a basic product to Mexico because it could be made there for 2 cents apiece instead of 8 cents in the United States.
That company had accounted for some 35 percent of business. “That was nearly the end of us,” Boyd said with a wry smile.
So instead of trying to compete on low-cost products, Boyd’s company specializes in high-end, complicated and intricate products, and even develops products for customers.
In the company’s meeting room, he shows off some of the firm’s products including one which looks almost like a plastic accordion and is about the same size, with evident pride.
This, he explains is a plastic bellows his firm developed for a healthcare company, whose name he says he cannot divulge. It has a special function. Conventional practice in organ transplants has been to ship organs on ice. But Boyd says it has been found that a better way to ship organs is to keep them functioning, and the bellows he holds in his hands is part of a device to keep a set of lungs pumping while in transit.
Asked how much Blow Molded charges for a pump like this, Boyd shrugs his slight shoulders. “Maybe a few dollars each. And we only sold a few of them.”
But then he leans forward with right eyebrow and right forefinger raised. “Ah, but you see, the money’s not in the product,” he said, his grin widening. “The money’s in the engineering. We bill our customers for the development work we do.”
Communities around the country say they want to attract small firms like Blow Molded rather than focus on major corporations, for the simple reason that when a giant plant shuts down, it is almost impossible to replace the jobs lost.
The classic example is Wilmington, Ohio, where empty store fronts on Main Street are grim testimony to what happened when DHL axed nearly 10,000 jobs.
“When a big company like that goes, it leaves a very large hole to fill,” said Mayor David Raizk (pronounced “risk.”)
“I’d rather see 200 small companies with 50 employees each than one big one,” he said. “You can lose one, two or even 10 of those and find a way to replace them. Big companies are great when they’re in town, but when they leave they devastate communities.”
One such small firm is Computer Technology Solutions Inc, the largest privately-held software firm in Alabama, which has added some 40 jobs this year and now employs 150 people. “If that’s what we can do in a recession, imagine how we can do when the economy improves,” said president Sanjay Singh.
CTS got its start in a business incubator run by the University of Alabama in Birmingham. Singh said that unlike big corporations — which tend to be bureaucratic, slow-moving and inclined to withhold responsibility from young employees — CTS gives its 20-something employees multimillion-dollar projects to run on their own.
“If you give young people responsibility, they deliver,” he said. “We don’t hang over our employees’ shoulders waiting for them to get things done, we just let them do it.”

GREEN ECONOMY A LONG HAUL
There are great expectations that alternative energy or the “green economy” will help move America forward.
According to Lisa Frantzis, managing director for energy at Navigant Consulting Inc, in 2009, 7,000 megawatts of wind power was installed in America with the creation of 70,000 jobs — 50,000 direct and indirect jobs, plus 20,000 service-related jobs. Solar power saw 300 megawatts installed with the creation of 60,000 jobs.
Jay Paidipati, a Navigant managing consultant who works with Frantzis, said because of the industry’s breadth and relative youth, it is hard to make forecasts. “I would feel comfortable saying that the number of green jobs will be in the millions,” he said. “Just how many millions, I don’t know.”
It will be years, however, before that potential is realized. One of the main problems is the mass of rules and regulations that make building plants a lengthy process.
Imperial County in southern California has hit on a novel way to get around red tape, using a provision of state law that allows local authorities to streamline the approval process for building a plant, as long as it is under 50 megawatts.
This loophole enables officials to handle the approval process in as little as a year, compared to several years at the state level.
“Getting anything done in California is hard,” said Imperial Valley Economic Development Corporation CEO Tim Kelley, at his office in El Centro some 100 miles (160 km) east of San Diego. “But it is less hard to get it done here.”
This area has 360 days of sun a year and has suitable geological conditions for geothermal power — there are 10 such plants already. Thirty others for solar, geothermal and wind facilities, are in the process of acquiring permits.
Red tape is not the only challenge.
Paul Rich is Chief Development Officer at Deepwater Wind LLC, which aims to develop America’s first offshore wind farm, in Rhode Island. The farm, which would eventually provide 15 percent of Rhode Island’s electricity, should come in two phases. The first test phase with six to eight turbines could be installed off the coast by 2012. By around 2015 the wind farm would contain around 100 wind turbines.
Rich described the coast between Maine and Maryland as the “Saudi Arabia of wind,” predicting an “enormous, exponential leap in jobs, manufacturing and infrastructure.”
Part of the reason for the long lead time is the need for extensive tests of local wind conditions, he said.
“It won’t happen overnight,” Rich said. “We are trying to create a truly new industry here and it has to be done right.”
“A far bigger concern for us is finding a qualified workforce to run and maintain the wind farm when it becomes operational.”
In blighted states like Michigan, many former manufacturing workers are already training for green jobs, even though relatively few have been created.
Matthew Derra, 41, lost his job at struggling auto supplier American Axle & Manufacturing Holdings Inc <AXL.N> in July 2008. Now he is taking an associate degree in renewable energy and wants to find a job maintaining wind turbines.
“There’s nothing out there in my old field of work,” he said. “And there will be thousands of people out there chasing every green job, but I have to try.”
“I can’t just sit home and watch television.”
Even in California, which has America’s most aggressive climate change regulations, just 159,000 of the state’s 18 million jobs are considered “green” as of the start of 2008, according to public policy group Next 10.
Still, there are encouraging signs that money is flowing into renewable energy even in a sluggish economy.
Bill Gibson, is a business broker and principal of Gibson & Associates Inc in Pensacola, Florida. Gibson finds buyers for companies that want to sell.
He noted that companies selling luxury items are having trouble finding buyers because gun-shy banks won’t lend for that kind of investment, but he has noticed a lot more interest in renewable or alternative energy firms.
“There are definitely going to be haves and have-nots,” Gibson said. “Green energy is part of the future.”
The green energy industry is also seen as an opportunity for manufacturing firms to retool.
“What concerns me is when I hear people talking about manufacturing in the past tense,” said Virg Bernero, mayor of Lansing. “If we want wind turbines, someone here should manufacture them.”

GEEKS AT THE TABLE
Laurie White, president of the Greater Providence Chamber of Commerce, keeps a board covered in bad news — headlines from The New York Times, The Washington Post, The Boston Globe and The Economist about how badly the economy of the state has been faring. Rhode Island’s unemployment rate was 12.7 percent in November, the second highest in the country after Michigan.
“Our problems have made not just national but international headlines,” White said. “That motivates me to find a new way forward.”
Rhode Island is pinning its hopes on a strategy dubbed “Strengthening Providence’s Knowledge Economy.” It has involved bringing together local and state government, the Chamber of Commerce, the Rhode Island Economic Development Corporation (RIEDC) and hundreds of small hi-tech software companies.
“The geeks have finally been offered a seat at the table,” said business consultant Jack Templin.
White said there was an easy explanation: “The geeks are just about the only ones creating jobs right now.”
Companies like Working Planet, which handles algorithmic online market research for its clients, are now at the table.
“Up until a few years ago the chamber was focused on major companies and its existing membership base,” said Working Planet Marketing Group Inc president and co-founder Soren Ryherd. “Over the past three years the chamber has done an about face and is now also about the smaller companies that are creating jobs.”
“We have also become more organized because we need to reach the local universities so we can find and retain top talent,” he added.
Mike Saul is the interim executive director of the RIEDC and has spent much of his career as a “turnaround guy” taking poorly performing companies and making them thrive. He wants to do the same here, in part because three of his four children, like many of the state’s offspring, live outside Rhode Island because there was no work here for them.
“In any turnaround that is going to work you have to ask where is the enterprise value that I can push forward,” he said. According to Saul, the state’s education system and its wind potential create much of its enterprise value.
“Rhode Island’s attempts at economic development have been episodic in the past, but this time everyone is on the same page,” Saul said. “A crisis makes things happen. It helps individuals reinvent themselves and will help this country reinvent itself.”

COMMENT

I read one comment saying that their 2 children on graduation will have $100K in education debts.
Here in Sweden we can study right thru university completely free of charge, and even get a very generous monthly allowance to help with books and food etc etc

Posted by George | Report as abusive

America’s Route to Recovery: Part One – Castles Built on Sand.

Dec 29, 2009 16:26 UTC

For the Reuters multimedia project Route to Recovery, a team of journalists toured America to examine the impact of the recession and posted their reports on reuters.com. For the last installment in the series, reporter Nick Carey has written an extended overview of the challenges and opportunities facing the country. The first part of this three-part report is below:

YOUNGSTOWN, Ohio – When Bob Hagan was a boy people hereabouts equated the coke dust they swept off their doorsteps each day with opportunity, for it came from the steel mills that built this city.

After graduating from high school more than 40 years ago, Hagan worked briefly at one of the local steel mills that dominated the local economy. In 1971, he became a locomotive engineer at railroad company CSX Corp, switching rail cars in every mill and yard in the area over the years.

The job afforded him a ground-level view of the slow-moving disaster that would tear out Youngstown’s heart over the next decade and a half — as it did many other towns in America’s Rust Belt.

“In my rides through this valley on the train, I used to watch the fires of prosperity burn,” said Hagan, 60, an Ohio state representative since 1986 who still works for the railroad when not in session. “And then, years later, I watched the lights go out.”

ROUTETORECOVERY/

Barbed wire protects a building still standing from Youngstown, Ohio’s industrial past November 22, 2009.   REUTERS/Brian Snyder

On September 19, 1977 — remembered locally as Black Monday — Sheet & Tube Company laid off more than 4,000 workers in a single day. In the following years, the steel industry all but died here.

In hindsight, the big mistake was trying to save it.

“We have spent the past 20 to 25 years looking in the rearview mirror,” said Jay Williams, the city’s 38-year-old, independent mayor. “Letting go of the past has been difficult for many people because the past was so good.”

ROUTETORECOVERY/

Ohio Gas Mart owner Paramijt Singh (C) is reflected in the rear view mirror of a car while talking to his employees in Youngstown, Ohio November 21, 2009.    REUTERS/Brian Snyder

Today, the city immortalized by Bruce Springsteen’s 1995 Rust-Belt anthem “Youngstown” is moving on. Among other things, it has created an incubator to attract the types of small businesses that are expected to drive future growth. Despite the thousands of vacant homes that serve as reminders of a traumatic past and turbulent present, some business and civic leaders think this heartland city has a chance to lead the U.S. into its next era of prosperity.

Getting to there from here, however, won’t be easy — for Youngstown, for Ohio, for the nation.

BURST BUBBLES
Youngstown is an extreme but by no means unique case in America. On a basic level, it represents some of the challenges facing the country today in the wake of the longest and deepest downturn since the 1930s.

After two economic expansions based not on sustainable growth but on asset bubbles — the dotcom boom of the 1990s then the far more damaging housing mania this decade — longstanding problems have been brought into sharper focus.

Even during the recent good times, the U.S. manufacturing sector, the muscle behind U.S. post-war economic might, was buffeted as corporations shipped low-cost production overseas.

“The easy, blue-collar shot to the middle class is gone,” said Mike Rollins, president of the Austin Chamber of Commerce. “It’s going to take a lot more work to get there now.”

In short, the world’s largest economy is at a crossroads.

With a smaller manufacturing sector and a consumer base less able to keep leveraging future earnings, where will sustainable, long-term prosperity come from? And more immediately, where will jobs come from?

This is a debate that is taking place at the local level around the country, from Youngstown to El Centro, California, and many places in between. But it is also a discussion that few see taking place at the national political level.

“Washington just doesn’t get it,” said Shane Savage, a real estate agent in Pensacola, Florida, smoking a cigarette outside the home of a client who needs to sell fast in a down market. “It’s going to take a long time to fix the mess that we’re in and our politicians don’t have a clue how bad it really is out here.”

REINVENTING A NATION
Local politicians and businesses acknowledge that the answers to America’s primary problems have been long known.

The country has to get smarter and send more people to college, making it more able to compete in the global high-tech “knowledge economy” of the future. And America needs to keep attracting the world’s best and brightest to help it prosper.

Manufacturers must also continue moving up the value chain, switching to niche production that cannot be easily transferred to China or Mexico. In the future, the sector will involve fewer but more-educated workers.

Now civic and business leaders are looking closely at another part of the economic equation. After seeing the impact that the departure of large corporations can have, there is a renewed focus on fostering small businesses instead.

The reasons are simple: They create more jobs and can be more easily replaced if they leave.

ROUTE-RECOVERY/

A waitress waits for plates in the kitchen of a restaurant in Bayou La Batre, Alabama November 10, 2009. REUTERS/Carlos Barria

According to the U.S. Small Business Administration, companies with fewer than 500 employees accounted for 64 percent of new jobs from 1993 to the third quarter of 2008.

Small firms also tend to be more involved in their local communities than major corporations.

“We have forgotten in this country that there is so much more to capitalism than just the exchange of goods and services,” said Amy Kedron, who runs Buffalo First, which sells books of coupons promoting businesses in this city at the far northern end of New York State. “It’s also about community.”

“And local businesses are the best at building communities,” she added, “because their owners are in it to make a living, not a killing.”

The other, not unrelated new focus is the “green” economy. Wind farms, solar panels and geothermal power plants will require someone to manufacture them, plus a trained workforce to run and maintain them. And if the private sector and government agree on anything, it’s that this industry must and will become increasingly relevant.

So at a time when critics have been quick to dismiss the U.S. economy as a has-been, some see the makings of an eventual if not immediate resurgence.

“America’s greatest ability has always been its capacity to reinvent itself,” said Diane Swonk, chief economist at Chicago-based financial services firm Mesirow Financial. “We may be able to emerge stronger and better, to the possible anger and envy of some parts of the world.”

But getting there will take a lot of time, effort and money in a nation not renowned for patience and long-term planning.

“Neither our political system nor our capital markets are used to anything but a short-term view, and fixing K through 12 is a long-term proposition,” Swonk said. “Not addressing the issue is an option we don’t have. There is a difficult decade ahead of us.”

The first step toward inventing the future, as Youngstown has found, is acknowledging that the past is gone.

“The thing we’re starting to understand is that the prosperity of the steel mills was the past,” Hagan said. “So let’s accept it and let’s move on into something that makes it even better.”

CASTLES BUILT ON SAND
What sets America’s current downturn apart from most past recessions is that the Great Recession has been national in scope. “Other recent recessions have been regional in nature,” says Swonk. “But this time, there is nowhere to hide.”

Data from the U.S. National Association of Realtors shows the median home price rose every year from 1989 to 2006 before the slide began in 2007. According to real estate website Zillow.com, as of the third quarter of this year 21 percent of all American homeowners owed more than their homes are worth. That equates to 12.4 million single-family homes with mortgages in negative equity, Zillow.com said.

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Daniel and Robin Akerman inspect their new house after buying in short sale in Pensacola, Florida November 11, 2009.   REUTERS/Carlos Barria

Real estate gains have been a major source of wealth creation and class mobility, so the hangover from the recent binge is likely to prove more painful than usual.

“I keep telling people this is not a housing downturn,” said Al Muller, a partner at Pensacola, Florida-based Metro Market Trends Inc, which tracks real estate markets in Florida and Alabama. “We are in the middle of the bursting of the biggest real estate bubble in the history of this country.”

The wealth destruction in Florida, which along with California has been among the hardest hit by the property tailspin, has been staggering.

“In the years of easy credit we all thought that we had more money,” Muller said after flicking through a wad of papers that included the names and addresses of the 3,018 foreclosures for the first 10 months of 2009 in Escambia and Santa Rosa counties where Pensacola is located.

“The people in foreclosure could be your neighbors, your friends or you could go to church with them or work with them,” Muller said pointing to the papers with evident sadness.

“We all thought (in the boom) that we could live in a bigger house. But we never realized that we were not getting any wealthier… Now there’s simply less money everywhere.”

From its peak in 2005 to the second quarter of 2009, U.S. home equity fell 37 percent, or $4.7 trillion, according to the Federal Reserve. To put that into context, China’s economic output in 2008 totaled around $4.3 trillion.

By the second quarter of 2009, Americans’ total net worth had shrunk 17 percent or $10.7 trillion from its peak in 2007.

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Leaves gather in front of an empty and boarded-up house in Youngstown, Ohio November 21, 2009.    REUTERS/Brian Snyder

FEWER JOBS EVERYWHERE
As well as their money, many have lost jobs. Unemployment stood at 10 percent in November after hitting a recession high of 10.2 percent in October. More than 7 million Americans have become unemployed since the recession began in December 2007.

For areas like Wilmington, Ohio, the job losses involved a single major employer.

This town of 14,000 was home for two decades to express delivery company Airborne Express. In 2003, Airborne was bought by DHL, a unit of German post office operator Deutsche Post, which was looking to take on America’s homegrown package giants FedEx and UPS on their home turf.

After spending billions of dollars, DHL gave up and shut down its U.S. domestic operations in January of this year, with a cost of 9,500 jobs.

DHL was the biggest employer not just in Wilmington, but in the five surrounding counties. The shock waves are being felt in communities filled with people who were able to make a good living with relatively little education.

“I hate to say it, but you have to wonder whether in the long run it was a good thing having DHL and Airborne Express here,” said Katy Farber, president of the Chamber of Commerce in nearby Highland County.

Some 2,800 people out of a population of 42,000 in Highland County lost their jobs when DHL left. The county had Ohio’s highest unemployment rate in October — 15.9 percent. Unemployment in the area before DHL began ratcheting down operations in May 2008 had long been around 3 percent.

“For decades our children were able to make $50,000 to $60,000 a year throwing boxes without even a high school diploma,” Farber said. “We have to retrain our workforce because those jobs are gone.”

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People in a truck leave after shopping at Walmart in Rogers, Arkansas, November 8, 2009.  REUTERS/Lucy Nicholson

It’s a challenge to which Michigan, home of the automobile, has become accustomed.

“The hardest thing for many auto workers who’ve been doing the same job for 25 years or so to accept is that instantly, permanently, their standard of living has been ratcheted down 80 percent,” said Douglas Stites, chief executive of Capital Area Michigan Works, a career center in Lansing, Michigan. “You may have been making $25 an hour making widgets for years, but now your skill set means you’re worth $8 an hour.”

The center is a hive of activity, with people filing in to make job applications and sign up for retraining courses.

Stites recalls a group of Hmong men who turned up after being laid off at an auto supplier. Although they moved from Southeast Asia to America decades ago, their low-skilled jobs meant they never had to bother learning English.

“What do you tell people like that?” he said. “There is no way they’re ever going to be able to sustain the lifestyle they’ve become accustomed to.”

Accepting that many of the easy, high-paid jobs of the past are gone is the first step in a process that some communities have taken toward reinvention. Youngstown, for instance, spent many years looking for a way to revive the steel industry.

“We have had to embrace the fact that we are going to be different and there is no going back to where we were,” said Mayor Williams. “But being smaller can also be better.”

Part of Youngstown’s Plan 2010 strategy involves trying to revitalize neighborhoods that can be saved and — in a city with 4,500 vacant homes — letting go those that cannot.

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A man walks past a painted building in Youngstown, Ohio November 21, 2009.      REUTERS/Brian Snyder

“We are aiming to focus on the neighborhoods that can be saved,” said Phil Kidd, a community organizer at the nonprofit group Mahoning Valley Organizing Collaborative. “But we have to accept the fact that we are going to have to wind down some neighborhoods gracefully.”

From a peak of 28.3 percent in 1953, manufacturing’s share of U.S. Gross Domestic Product fell to 11.5 percent in 2008.

Much of that decline in the recent past has been due to production moving overseas to developing nations like China or across the U.S. southern border into Mexico.

This is a source of frustration and anger for workers like the 1,100 former employees at the Whirlpool refrigerator plant in Evansville, Indiana, which has said it will shut in 2010 as the company shifts production to Mexico.

“It was like a punch in the gut,” said Natalie Ford, 42, of the announcement in August. Ford worked at the plant for nearly 19 years, while her husband Jim, 47, counts 18 years there.

“After all we have done for Whirlpool, I feel like we’ve been betrayed,” she added, her eyes misting over.

Part Two – A New Revolution

COMMENT

as i’ve said elsewhere…its pretty simple: in america you have two choices, governance by corporations or governance by ‘government’.

now ask yourselves: do you want private corporations, answerable to no one (even the u.s. senate), making the laws and controlling everything? it would be no different from n. korea or burma or the middle ages in europe! you’d have a few rich individuals on top and the rest would be serfs. its already like that in small town u.s.a. out in the heart (or hinter) lands. hell, you might say the whole country is run by the few and the privileged, since they seem to be able play congress like a fiddle. you might say that all this talk is already too late!

now, i don’t know about you, but it seems pretty simple to me; that if you’re going to let the corporations get their snouts into everything from health care to education, you’d better have a public dole and free medical for when they throw everybody out of work during technological expansions and out-sourcings.

but, if you insist on ‘working’ for a living rather than taxing the corporations and the rich into providing you a ‘living’ for sucking up our natural resources and polluting up our land and air and water and minds; then you better have a government able to provide you with ‘make work’ when you’re out of corporate work.

government created ‘make work’ is the only overnite solution! you can’t pull out of nafta or the wto overnight! you can’t rebuild all of the rust factories overnight! and you certainly can’t staff up factories you can’t rebuild overnite, overnight!!

nope, folks! corps aren’t going to do anything that’s not in their self-interest, and the repubs are the party of the white corporate upper classes. (after all, the white upper classes have their own clubs–you can’t get into (unless you’re serving)–why shouldn’t they have their own political party?) so you can count the repubs out of a recovery that doesn’t have you standing in a soup line like the poor folks in haiti!

you want to live like haiti after the earthquake? just keep voting republican!

our only hope is to clean-up of the democratic party by kicking out the dlc and blue dogs and going hard left! if we had a real party fighting to nationalize the corporations and banks, then at least we’d have a party on the road to recovery.

otherwise, you’re just on ‘the road’! (see the film, you’ll know what i mean. you’ll also see your future…’we eat, therefore we hunt’)

Jobless, homeless, all this small band has is each other

Nov 17, 2009 18:17 UTC

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CHARLOTTE, North Carolina – With no work, no home and few prospects, all Roy Hawkins, Mark Corbett and Drew Everhart have is each other.

“We’re pretty much what you’d call a brotherhood,” said Corbett, 48, sitting in the makeshift camp he set up in the woods about an hour’s walk from the center of Charlotte in January 2008 and which has been his home ever since. “We look out for each other and we share what we have.”

Hawkins, 44, has been with him on and off since then, since he received his prosthetic leg three months ago. He lost the lower half of his leg in an accident in April.

“When you lose your leg, you lose your livelihood,” Hawkins, an electrician, said.

Everhart moved into the camp about three months ago. He ended up in Charlotte around a year ago after an accident on a construction job. Corbett is also a construction worker, with few possibilities for full-time work because the U.S. housing crisis and the recession it spawned have wiped out many construction jobs.

“There’s nothing out there for us right now,” Corbett said. “But things will get better soon.”

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We met these three homeless men at the Urban Ministry Center where they had turned up for a meal at the soup kitchen, and they agreed to let us follow them around for the day.

That day included following them to the library in Charlotte where Hawkins fills out job applications and checks whether his application for disability benefits has been approved.

Then we walked more than an hour in the hot sun with Corbett and Everhart to their camp. Hawkins goes by bike, because he cannot make the distance on foot.

As we walk, Corbett and Everhart tell us about the day laboring work they do for an agency, which sends people out to work as unskilled and semi-skilled laborers — usually construction or demolition work. If they get a day’s work, they get $40 after taxes.

This involves walking two hours from their camp to be at the agency by 5:30am; otherwise there is no chance they will find any work.

“If we’re lucky, we get one or two days of work a week,” Everhart said. “Sometimes there are 50 or more guys out there and maybe 10 of them get work.”

He added that standing in line at the agency is often a tense experience, as some men push in line. It’s not easy to know which ones to push back against, as they may be armed.

“If you’re not careful you can get stabbed,” Everhart said. “We’ve seen it happen. Some guys are desperate to work and it’s best not to get in their way.”

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The men said they often lose out to younger men, who are preferred by the temp agency for the physical work they do.

On the days when they don’t get work, Corbett says the three men have different “hustles” or ways to make money.

“But I won’t do anything illegal. If you let your standards go out here it’s a slippery slope,” he said. Corbett’s hustles include collecting aluminum cans for money, or offering to do odd jobs such as mowing the lawn at homes around Charlotte.

Everhart has an ex-wife and has to pay child support, so some desperate days he “hangs the sign,” standing by the road with a sign saying “hungry and need work” or a variation on that theme.

“It’s risky to do because it’s illegal and you can get arrested,” he said. “But I have to pay my child support or they’ll throw me in jail anyway. I haven’t missed a payment yet.”

The camp is just off the road in the woods amid a working class neighborhood. They keep a low profile and are not visible from the road, though Corbett had his bike stolen last week. He paid $60 for it, a day and half’s wages.

“I only had it two weeks,” Corbett, who sports an impressive handlebar mustache, said. “It was nice to be able to get around without having to walk everywhere.”

“But I was used to walking before, so it wasn’t too hard a change,” he added philosophically.

On the way back to the camp, Corbett finds a pan that someone has thrown out, which he says would make a good wok. He takes it back to camp.

There are three tents in the camp. Washing hangs on lines strung between trees and all the furniture they have – a table, cushions and crates to sit on – have been retrieved from dumpsters in the area.

Hawkins and Corbett have larger tents, while Everhart has a little one at the entrance on the path.

“I’m the guard dog,” he said with a grin. Everhart has a pony tail and is clean shaven, and like the other two he takes care of his appearance. “I’m the lightest sleeper so if anyone comes to the camp in the night I’ll hear them.”

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Getting out of this camp and into a home is a long, hard to climb.

“If you want to get an apartment, you need deposits for rent and utilities as well as money for your first month’s bills,” Hawkins said. “You’re talking about $1,500 to $2,000 just to get started.”

“That’s tough when you make $40 a day,” he added.

Hawkins said that even though they are working whenever they can – he himself is limited in what he can do because he cannot stand for long periods on his prosthetic leg – prospective employers look down on them.

“They think you’re unreliable just doing day work,” he said. “They don’t see it for what it is, just doing everything you can to get by.”

All three men feel left behind. In their 40s, out of work and living in the woods, it is not hard to see why. Though Corbett is clearly an optimist.

“If we just keep working hard, things will turn out alright,” he said. “We’re not going to be out in the woods forever.”

Photo and video by Carlos Barria

Click here for more Route to Recovery

COMMENT

Has anyone checked back in with these three? the severe cold weather from NY to Florida and westward has been a killer for a lot of newly homeless people.

Posted by J. Brown | Report as abusive

Selling only when you have to

Nov 13, 2009 19:39 UTC

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PENSACOLA, Florida – Home owners here who don’t need to sell right now are staying put.

“Those people who aren’t in a hurry to sell their homes are taking them off the market,” said Denis McKinnon, senior vice president of the Gulf State Region of real estate firm Coldwell Banker. “They’re sitting this out until the market improves a bit.”

“It’s a great market for buyers,” he added, “but not such a good one if you have sell.”

Though the average home price in Pensacola has dropped close to 20 percent to $178,000 from the peak in 2006, local realtors say the that the best thing going for this northern part of Florida right now is that it has not been hit as hard by the housing slump as the southern part of the state.

“We didn’t experience the best of the boom up here,” said Rick Harper, director of the Haas Center for Business Research and Economic Development, “but that also means we’re not experiencing the worst of the downturn now that the bubble has burst.”

Parts of Florida have been decimated by the worst housing crisis since the Great Depression. Like Nevada and Arizona, a good portion of that collapse has come down to the second-home market. Home owners tend to find it far easier to give up their second home in a crisis than the one they live in most of the year.

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Local realtors and others in this city of around 55,000 in the Florida Panhandle – the narrow strip at the top of the state that stretches to the west until it bumps up against Alabama – say that because Pensacola does not have much of a second-home market like the southern part of the state it was spared the rampant speculation of the south.

Non-performing mortgage loans here make up to 6 percent of the total here, compared to more than 15 percent in some southerly areas.

“The economic fundamentals up here are different,” Harper said. “The foreclosures we’ve seen here are more related to economic distress.”

Not that there has been any shortage of foreclosures and short sales, where a bank agrees to let a distressed home owner sell their home at a loss. According to data compiled by Metro Market Trends Inc (MMT), which monitors regional real estate trends, there were 3,018 foreclosures in Escambia and Santa Rosa counties – which make up the greater Pensacola area and have a combined population of around 450,000 – in the first 10 months of this year.

“If you live here then the people in foreclosure could be your neighbors, your friends or you could go to church with them or work with them,” said MMT co-owner Al Muller.

McKinnon said that property prices have remained fairly flat throughout this year, which makes him hopeful that the worst may be over.

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“The market appears to have reached a bottom,” he said. “And even if it does end up falling further I think the declines will not dramatic.”

Stabilized or not, in this market Muller said it is hardly surprising that home owners that are not forced to move are trying to wait out the worst of the slump. The number of homes sold in Escambia and Santa Rosa is still below 600 month, down from more than 1,400 at the peak of the market in 2006.

“Home owners are either waiting for a better price or they are not selling because they cannot afford to take the loss,” he said.

McKinnon and other realtors here said that foreclosures or short sales form up to 30 percent of sales at the moment.

Deborah Mays, a realtor at Coldwell Banker, said that if a buyer has the patience they should consider a short sale. This is because short sellers are forced to sell and may have neglected home repairs while trying to pay their mortgage – which means that buyers have to be willing to invest in a home.

“If you can afford to wait and you can accept that you’ll have to invest some money in home improvements,” she said, “then you can get a lot more house for your money.”

Photos by Carlos Barria
COMMENT

The reality of Obama’s HAMP..”Hurting Any Modification Possibility” Program

http://www.associatedcontent.com/article  /2381656/why_obamas_home_affordability_ program.html?cat=3

Posted by larry25 | Report as abusive

Facing tough credit market, casino owner will go it alone

Nov 11, 2009 15:49 UTC

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GULFPORT, Mississippi – Before the recession hit, Rick Carter was hoping to borrow money to renovate a hotel damaged by Hurricane Katrina.

Now he says the stringent conditions and high borrowing costs banks want to charge him amid the ongoing credit crunch mean there’s no way he’d sign up for a loan.

“There’s  no way I can find anyone to lend me money at a reasonable rate,” said Carter, co-owner of the Island View Casino Resort just a stone’s throw from the Gulf of Mexico. “If we’re going to do anything we’ll fund it ourselves.”

Carter’s casino was originally located on a barge just offshore at Gulfport. But when Hurricane Katrina came through here in 2005, it lifted his casino off its moorings and dumped it on the beach some way off.

In the aftermath of that unparalleled storm, local politicians got together and lobbied for the passage of the Gulf Opportunity Act, which provided tax incentives for the return of developers and investors. Mississippi also decided to allow casinos to build up to 800 feet from the water in order to avoid a repeat of Katrina’s destruction.

Like other casino operators, Carter decided to reinvest on the Gulf Coast. He and his partner Terry Green invested $300 million in their casino resort and golf course.

“Thanks to our local politicians and the good people in Washington, we came back,” Carter said, sitting in a restaurant in the casino. “They saved the Mississippi Gulf Coast. If they hadn’t taken action then this would be a ghost town.”

Now, he is not so sure of the “good people” in Washington. The U.S. government has pumped trillions of dollars into the financial system to help keep it solvent, but he can’t get a loan without paying exorbitant interest.

“It’s amazing to me that after all the money that’s gone into bailing out the banks you can’t borrow money from them,” he said. “Instead of lending that money out they’re just using it to prop up their balance sheets.”

“I don’t get that.”

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Carter said that the only real alternative to mainstream financial institutions is borrowing from hedge funds. But they are even more demanding than the banks.

“The problem there is that they charge even more than the banks and they want a stake in your company,” he said. “And we’re not going there.”

So instead of borrowing money, Carter said he and his partner are trimming their sails by cutting back on unnecessary expenses. Casinos in Mississippi have seen their gaming profits slide 11 percent for the year to date, as the downturn has made people less willing to gamble. The Island View’s gaming profits are down, but not by as much as the rest of the state, Carter said, because the number of people coming had not dropped significantly.

The slot machines and poker and blackjack tables certainly seemed busy for a week night.

“But when they come in, they’re willing to spend $90 instead of a $100,” he said. “People are watching their money more carefully.”

Island View has not laid off staff – it employs some 1,400 people — but has cut overtime and postponed investments in order to fund projects like renovating the hotel, which was damaged by Katrina.

“We’re going to fund everything ourselves, even if it means we have to wait a while to do it,” he said.

He added that in the meantime casinos are going to have to get used to a new post-boom world in which there will be less money to go around as the days of easy credit are gone.

“This is going to take a long time to work itself out and the economy is not going to go back to where it was,” Carter said. “People are going to have to get by with a little less and they’re going to spend a little less, including when they’re at the casino.”

“Given the mess this country has ended up in, that’s probably a good thing,” he added.

Photos by Carlos Barria

Click here for more from the Route to Recovery

COMMENT

With all of the large commercial banks holding up the solid efforts of the USA growth one would think a casino with the flow of funds they have could make a bank in it’s self and flee the National they work with. I think it’s time for us to make a major change! Think about this for any business with client flows. They should IMO. Just find find a local non commercial (not a large National size Bank) yet a small local credit union, Small savings and loan type business and offer their clients specials to firm at that location for doing business with them. Then ask all the local small and large savers to switch over to the same small location so they can grow and loan to the local only business making it possible for firms like the one Rick Carter runs able to get loans at 1.5 to 2% over national rates. Yes kick our the fat cat’s and do business with the small firm. Built them up! Loans must be set up for open change as time passes just like passbook savings would. Drive business to the new bank location by 10 or 15 key business firms. It’s a county full of people helping one another to grow the locations of many a firm then not just of one but thousands so in the end you have both the large National moving out without any clients left and the same small bank growing large due to what a city needs to live out of the dark past. Control is only there due to you letting it be! Yes it will take time yet our Nation has that in spades on it’s hands right now. Make your plan and work the plan helping everyone in the process and you can save your city if you wish to yet the Banks who will not lend (from the past greed and fat bonus payments etc) need not stay in business no matter how large they are. It’s your chance to take back the old to a new life do it now and hold the hand of each person who makes your town one of jobs for life! Just think of what one year of your total work on helping your local town do this across our Nation with new jobs built in the process for others. As we must have this change, new ideas and a willing population ready across our country right now to get more back to peace within our lives and local homes, do it now it will grow and come to be as together we can make it work. Happy Thanksgiving to all who make it work! God Bless you all.

Posted by J.Nelson | Report as abusive

Four years after Katrina, high-cost insurance dogs Gulf Coast

Nov 11, 2009 15:09 UTC

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GULFPORT, Mississippi – It’s been more than four years since Hurricane Katrina lifted the casino barges of this Gulf Coast town at the end of August 2005 and dumped them on the shore, yet locals complain they are still paying a high financial price for that cataclysmic event.

The problem this area faces comes to one that is global – a lack of available credit – and one that is entirely local – a lack of available insurance.

“Insurance is a big issue here,” said Brian Sanderson, president of the Gulf Coast Business Council. “This has been a huge challenge to developing this area to its full potential.”

The local economy here has been sheltered to a certain extent by the presence of two large military bases in the neighborhood, but it is not immune. Unemployment in the Gulfport area is just under 8 percent, versus a U.S. average of 10.2 percent as of October.

“Yes, unemployment is lower than the national average here, but people are still hurting,” said Dave Dennis, president of Specialty Contractors & Associates Inc.

Sanderson said that the local long-term strategy for this part of the Gulf is to become a “Tier One” tourism destination. To attain that goal, the area needs businesses to come in and set up shop. But the cost of insurance effectively puts small businesses off from coming here.

“Insurance is generally available but it is not affordable,” Dennis said.

Insurance against wind damage is the main problem. Dennis said that he is currently paying  310 percent more to insure his home than he did before Hurricane Katrina hit.

“I’m one of the lucky ones who can afford it,” he said. “The cost of insurance means that the local real estate market is not reaching its full potential.”

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And he said that the biggest vendors of the contractor he works for are insurers, instead of any company that provides raw materials.

Gulfport Mayor George Schloegel said that after a major event like Katrina, it was only natural that insurers would be wary of this market.

“After a major catastrophe it generally takes years to get back to the norm,” he said. “As time goes by the market will come back. Insurance companies are always looking for customers and there are lots of customers around here who want insurance.”

Negotiations are underway with insurers on getting back into this market. Sanderson said that insurers need to come and see how construction on the Gulf Coast has changed since Katrina, as buildings near the shore are now usually built on stilts so that tidal surges in storms cannot cause extensive damage.

But there is still some way to go.

“Insurance is the key issue on the Gulf Coast that has kept us from a full economic rebound,” Dennis said.

Pictures by Carlos Barria

Click here for more stories from the Route to Recovery

Arizona town feels a double blow after the boom

Nov 5, 2009 17:14 UTC

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BULLHEAD CITY, Arizona – Not so long ago this town on the Nevada border was in full boom mode.

It was a magnet for people coming to work in the casinos across the Colorado River in Laughlin, plus Californians looking to retire here or have a second home at a fraction of the cost in their own state. Construction workers flocked here to build homes and roads.

All told, successive booms turned Bullhead City from a fishing village just a few decades ago to being a city of more than 40,000 people.

But America’s housing crisis and the most severe downturn since the 1930s stopped the city’s boom dead in its tracks.

“We had booms in the 1980s and the 1990s, but in 2005 and 2006 things went absolutely nuts,” said John “Mac” McCollum. “Then in 2007 all of a sudden the lights went out.”

Many of the construction workers have gone, as have a lot of people who have been laid off at Laughlin’s casinos. Nevada’s casinos have had 20 consecutive months of declining gambling profits.

“Unemployment is on the rise and we’ve had quite a few foreclosures,” said Bullhead City Mayor Jack Hakim. “Families are leaving because there’s no work to be had.”

“It’s going to be tough for a while around here,” he added.

Unemployment in Mohave County where Bullhead City is located is around 10 percent. The median house price here has fallen from nearly $190,000 in January 2006 to less than $93,000 now, a drop of more than 50 percent.

Around 60 percent of McCollum’s sales now are foreclosures.

“Many of the other sales we handle are people trying to avoid foreclosure or at least break even,” he said. “Either way, right now foreclosures are pretty much the only game in town.”

John McCormick of McCormick Development helps run a number of family businesses – a water company, a construction company, a land development company and a real estate broker’s office – and says that many of the people walking away from homes here are either speculators or Californians who bought a second home here.

“If they end up in trouble, it’s so much easier to walk away from a second home than a primary residence,” he said.

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The McCormick clan’s land development business has laid out a subdivision north of Bullhead City with 141 empty lots, complete with roads and water mains. But although there have been plenty of people looking, no one is buying right now. The family business owes the bank $8 million on the development, plus has to pay $160,000 annually in property taxes while the subdivision remains empty.

“There’s money out there but a lot of people won’t let it go,” McCormick said. “They just waiting to see if prices will go lower.”

For Bullhead City to come back, both McCormick and McCollum agree that casino business needs to pick up again but – even more importantly – California’s economy needs to recover.

“If California’s market is in the tank, we ‘re in the tank,” McCormick said. “I think we may be past the worst of it now. But nothing big is going to happen any time soon.”

COMMENT

Bullhead city rules! It’ll never become a ghost town, too much fun to be had there! Take one big lake, one big river, beautiful desert canyons and mountains, shake it all up and add a dune buggy, a jet boat, a kayak and a waverunner. Add tons of weekly happy hours and a Sunday live music jam that rocks this world. Broil it under a hot sun, sprinkle it with fiestas sponsored by the casinos across the river. Hang out in Bullhead for a while and find out just how much fun life can be!!

Imperial Valley strives to be small-scale renewable energy capital

Nov 5, 2009 15:49 UTC

EL CENTRO, California – At a time when alternative energy and “green jobs” have become a significant talking point under the administration of Barack Obama, Imperial Valley is pushing to make it a reality.

The Valley –- which locals in this part of southern California also call Imperial County — already has 10 geothermal plants in operation with a combined capacity of around 330 megawatts. Geothermal energy,  extracting power from underground heat, is a constant and sustainable form of generating electricity.

“This is going to be a great opportunity for the Imperial Valley,” which has a high unemployment rate, said Mark Gran, vice president of community relations at CalEnergy. “We’re going to be the renewable energy capital of the world.”

Potential geothermal or other renewable energy projects need to go through a lengthy approval process. But Imperial County officials have streamlined that process to help companies get permits far quicker, in particular for power plants under 50 megawatts. The state of California has more say in larger projects and has a reputation for being a stickler for due process.

“Getting anything done in California is hard,” said Imperial Valley Economic Development Corporation CEO Tim Kelley. “But it is less hard to get it done here.”

Apart from 360 days of sun a year and suitable geological conditions for geothermal power, the state has mandated that 33 percent of its electricity must come from renewable sources by 2020. Kelley says  companies are falling over themselves to come to Imperial County, where they know the will be welcome.

Some 30 other renewable energy projects — geothermal, solar and wind — are in the permitting process in Imperial County. One geothermal plant has just been built and construction of another will begin next year.

“We have found the optimal way through the process,” said El Centro city manager Ruben Duran. “We recommend to companies that if they want to get approval faster they follow that path. They don’t have to follow those recommendations, but we’ve found that the system works.”

Local officials hope that renewable energy will help lower rising unemployment and help diversify the economy of this rural, largely agricultural community. But one problem Imperial County faces is transmission – getting the power to customers in major markets like San Diego, around 100 miles to the west on the Pacific coast.

“It’s one thing to produce the power, but we need to be able to deliver it to customers,” Kelly said.

The existing infrastructure can handle all of the capacity that the 30 projects currently in the pipeline would require, but not much more.

“Transmission moving forward is going to be a big concern,” Duran said.

Sue Giller, a partner at Valley Solutions Group Inc, which handles public relations for some companies in the area, including one that just opened, said far more needs to be done by California and around the United States to make renewable energy as much of a priority as it is in other countries.

“It’s amazing to me that although Germany doesn’t get much sun that the Germans lead the world in solar technology,” she said. “Something needs to be done to change that.”

For more Route to Recovery stories, click here

(Picture: President Barack Obama speaks about new energy in front of solar panels at the Thunderbirds Hangar at Nellis Air Force Base in Las Vegas, Nevada May 27, 2009.  REUTERS/Jason Reed)

COMMENT

I like this “Amtrak- road to recovery” feature. It is a clever, useful and integral way for Amtrak to get the word out about its services while providing useful news and interesting stories. I wish Verizon and its ilk were that clever and willing to participate in a more up-to-date pluralistic fashion.

Introducing the Route to Recovery

Reuters Staff
Oct 28, 2009 17:13 UTC

A woman wears a "Keep it Made in America" pin as she participates in a labour activists march in Lansing, Michigan June 1, 2009. REUTERS/Mark Blinch

It would be an understatement to say America has had a tough time lately. After many heady boom years, the bursting of America’s housing bubble led to the near meltdown of the global financial system and the longest, deepest recession since the 1930s.

The downturn some have called the Great Recession began in December 2007 and may already be ending. But U.S. unemployment stands at nearly 10 percent, and much of the economy’s growth has been fueled by government spending in programs like Cash for Clunkers and the first-time home buyer’s credit.

The trillion-dollar question for America is whether the growth of the past quarter is sustainable. Reuters will be attempting to find out this month, in a cross-country trip through the epicenters of the recession and the recovery. Reporter Nick Carey, photographers Brian Snyder, Lucy Nicholson and Carlos Barria, and Reuters TV producer Sharon Reich will be on the road for three weeks starting on Nov 3.

From El Centro, California, with the highest unemployment rate in the country, to Austin, Texas, which has been hit comparatively lightly by the recession, the team will seek out answers at the ground level.

  • How have ordinary Americans fared through this long downturn and what are their hopes and fears as the grim year of 2009 drags slowly toward its close?
  • How are everyday people faring in Bentonville, Arkansas, home of the behemoth retailer Wal-Mart, which has thrived as Americans look to cut household spending?
  • What happened to the dreams of retirees who bought homes during the boom in Bullhead City, Arizona?
  • Do shrimp fishermen in Alabama have anything in common with out-of-work bankers in Charlotte, North Carolina?

You can follow the team’s travels on our Route to Recovery page, with an interactive map featuring news, pictures and video from the towns they visit.

Nick, Brian, Lucy, Carlos and Sharon will also be filing updates from Twitter. You can send us your own questions and comments using the Twitter hashtag #routetorecovery, or by clicking “Add a Comment” in the live blog window.

Do you live in one of the towns we’re visiting? We want to hear from you.

COMMENT

Commercial realestate has crashed in arizona my house was in an excellent location.Not now.You cant even give away downtown prime central phoenix realestate.The vultures are everywhere wanting something for nothing.The government should have let the too big to fail banks fail.Im losing my home and they have no real help.I didnt even pay much for my home but will lose it.I got a home loan modification which is reported negatively on my credit.But no help on horizon to consolidate my loans to survive.ITS EITHER GONNA SELL OR ITS GOING TO THE AUCTION SO BOTH BANKS CAN SHARE IN MY JOY!

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