A look into the crystal ball
at local economy in 2009
By Chip Drago
Mobile Bay Times
While the economic hangover should pain the entire nation throughout 2009, the local economy should weather it well enough to anticipate the next party on the calendar, according to a number of Mobile area businessmen and professionals.
No locale will be immune from the fallout of the nation's poor policies of more than a decade, but while those practices were infesting the framework of the national economy, Mobile is approaching harvest season on 20 years of toiling in the fields of economic development.
ThyssenKrupp's $4.2 billion steel plant operation in Calvert was born and it is toddling along before hitting stride in the next year or two. The container port at the Alabama State Docks has been a relatively unsung chapter in the area's modern economic development story, but its impact should be huge.
The whole Boeing/EADS tanker contract imbroglio has hardly been unsung. Still, there is an underlying truth in the political war between Boeing and its competition, French aircraft manufacturer Airbus and its American partner Northrop Grumman, for the U.S. military's $40 billion air refueling tanker business -- Brookley Field is more likely than not to join Toulouse, France and Seattle, Washington as one of the three places in the world where large jet aircraft are manufactured regardless of the outcome of the tanker contract.
All of this and not to mention the USA Mitchell Cancer Institute whose role locally will transcend the economic, though those should be substantial.
Already up on plane, Australian shipbuilder Austal's contributions to the area economy are evident and substantial, showing no signs of receding.
So what's ahead for Mobile in 2009 and beyond?
"I think we will continue to experience challenges not on par with but due to a national and international economic crisis.
We seem to be experiencing isolated job losses and personal income levels that will scale back some. Digressionary spending will be limited, if not from a real lack of personal disposable income, a perceived one.
I heard a great quote of Warren Buffet's the other day, 'Now that the tide is going out, we are seeing who was swimming without their trunks on.'
There will be some fallout locally as lenders begin to let go of properties that no longer carry the same value they once did.
With that said, we have a lot to look forward to with what is going on in Calvert and the Port development as well as this being a desired area to live. We do need to retain as much local work with local vendors as possible."
-- Matt White,
President, White-Spunner & Associates
"A great deal better than most all other areas of the continental USA, but still a far, far cry from what it needs to be in order to allow most people to continue to maintain the standard of living and retail spending the area has experienced in the pre-1998 1990's. With responsible governmental leadership, hopefully we will start seeing some light at the end of the tunnel in late third quarter or fourth quarter 2009."
-- Jerry O'Brien
J. L. O'Brien & Associates, Inc.
"The Mobile economy will follow national trends, although I believe the impacts of the recession will not be as deep nor as long as the rest of the nation. As the steel plant begins to hire local workers, our unemployment rate will level off and decline.
2009 will be very difficult for national retailers as consumers continue to spend very cautiously. I expect an unprecedented number of national retailers will file bankruptcy. Although most will not result in vacancies in the Mobile market, or more specifically the mall, undoubtedly opportunities will develop for local merchants to expand into spaces that have traditionally been occupied by national merchants. The mall has two very successful examples of local merchants that moved into spaces where national merchants failed, namely Lotus and Polish."
-- Tim Nolan CSM
Vice President, General Manager
Bel Air Mall
"Slower than last several years. Basics are good, so (Mobile's economy will be) not as bad as most."
-- Cooper Thurber,
Lyons, Pipes & Cook attorneys
"The Mobile economy is like Lake Mead above Hoover Dam, slowly evaporating to record low levels."
-- Gavin Bender,
President, Bender Real Estate Group
"2009 is easy ... it will be worse than 2008, which is saying something. The thing we all want to hear from Nostradamus is when will it start to improve? One thing I will predict is that when we do see a bottom, and the numbers show that we are coming out of the recession/depression, you will very quickly see double digit interest rates. Once again cash will be king, but you will need a lot of it."
-- Larry Chason,
Chason & Earle Real Estate
"The good news is, with TK and Austal going full speed, there are jobs. If NG-E gets all or part of the tanker deal, even better news. I don't see the downturn here as drastic as elsewhere although there will be some job losses.
The upside is that there will be quality people applying for those jobs that are available. Since Katrina repair on the Gulf Coast had subsided, more Mobile and Baldwin County people are returning to look for work in our area. Hopefully, weather will cooperate throughout 2009 and keep the 'H' word away, although that certainly is a source of economic stimulation -- unwanted as they may be.
Sadly, there are no bright spots on the tourism scene for at least the next 75 days or so. Snowbirds are coming, but spending less time here and certainly less money doing 'non-free' activities. Mardi Gras brings in people but not to visit our area attractions. March will bring Spring Break and Easter is in April, so that extends that season.
(There) Doesn't seem to be any efforts from the local CVB to fill our attractions or hotel rooms with any short-term promotions, so we're left with our own depleted advertising budgets and there are plenty of unhealthy signs that it will be a long year. Talk of creating a fluctuating tax on gasoline to keep the price around $3.50 a gallon will
be the death knell to many tourist attractions.
Business at USS ALABAMA Battleship Memorial Park, which for 43 years has been self-supporting for daily operations, is and has been down 25% since 2006 saw the Park's reopening from $7.1 million in damages from Katrina.
Business in Gulf Shores was brisk only during the summer months with lodgings tax revenues flat from the previous year, proving they still will go to the beach, but are holding on to discretionary dollars normally spent on dining out and going to attractions like ours. The Alabama Gulf Coast CVB is spending additional advertising dollars to get
people there in '09 and we hope those people stop in Mobile or come over for a day trip while in our area."
-- Bill Tunnell,
executive director,
USS ALABAMA Battleship Memorial Park
"Wall Street scandals, consumer anxieties about the several facets of a declining economy and banks unwillingness to loosen credit (in spite of the fact banks can borrow money for almost no interest) -- the economy will continue to tank through the spring of 2009. It will remain flat for the
remainder of the year and into the spring of 2010. The economy should start to improve during the summer of 2010 and start to create inflation concerns at the beginning of 2011. Variable rate bank loans make a lot of sense right
now with a provision to fix the rate in a couple of years.
*(Source: C.C. crystal ball)
-- Charles Chapman,
Chapman Development
"Residential real estate, equity markets and credit markets will begin to improve in the first quarter driven by unprecedented low interest rates. Banks will begin lending again under the 'encouragement' of the Fed and
refinancing will boom. Commercial real estate and new home building will lag, not stabilizing until the third or fourth quarter. Retail will stagger through the first half of 2009 with a clear distinction between the weak and the strong. All in all, a year of healing as some patients emerge from the ICU while others are admitted."
-- Keith Drago,
financial consultant
"Better than the rest of the country."
-- Georgia Roussos,
Roussos Seafood Restaurant & Catering
"Better than other areas but negatively impacted by the current economic situation. Unemployment will rise locally and we will see an increase in businesses closing their doors. Consumer spending will decline in response to negative media reports. I believe housing prices will be flat due to low interest rates for mortgages. Local stock prices will remain low and volatile through 2009."
-- Edward Dismukes,
Wilson Dismukes
"Tough to say since over 90% of our business is (and always has been) out of state. My impression is that Mobile is in for a slightly milder version of the really, really bad news the rest of the country is facing. Which means we are looking at a bad year, or a really bad year. But not a really, really bad year. Our business is going to grow 12 to 15 percent in 2009, and we will add a similar number of jobs to our employee base."
-- Jerry Lathan,
Lathan Co., commercial roofing
"I have spent part of today thinking about our national and local economy in 2009.
First, let me outline the factors, as I see them, which have brought on the current recession. This analysis is necessary to understand how our 2009 economy will evolve. This recession has been brought about by the greed and lack of personal integrity of executives in the financial sector and lack of necessary government regulation. Capitalism is supposed to create returns to shareholders, not just bonuses to chief executive officers and other corporate officers.
The financial sector meltdown in October resulting from deteriorating asset portfolios caused a sharp decline in consumer confidence. As a result, the automobile industry went from a 16-18MM seasonally adjusted retail sales rate to a 10.5MM rate. The decline in new vehicle sales created
an immediate cash crisis within the domestic automotive industry. General Motors Corporation's management had cut future costs substantially but found it necessary to ask for a government term loan to bridge the period before it achieves a lower cost structure.
With regard to the first quarter, 2009, two intertwined economic elements will determine the health of the local economy. First, will banks lend money to individuals and companies in amounts and for long enough periods of time to allow them to buy consumer durables and make investments? Second, will consumers who have been the driving force in our national economy have enough faith in their personal financial security to borrow money and make these purchases (i.e. homes, furniture, appliances, automobiles, etc.)?
I believe the new administration will provide continuing liquidity to the financial sector; will prod the banks to make consumer loans; and will seek to calm consumers' nervousness about their financial security. For these reasons I see retail sales and the local economy during the first quarter getting slowly better.
Up to this point, I have said nothing about business activities here in Mobile which are entirely positive. How could you not be upbeat about this city which is seeing enormous investments in steel making, container shipment, cancer research and other areas?
The return of consumer confidence will mean improving local economic conditions for the balance of 2009. Locally, real estate prices will stabilize. Consumers will replace high mileage cars and trucks with new or late model used vehicles. In short, we will see a more normal local economy reassert itself."
-- John Moses,
Bay Chevrolet
"Well, I think the national economy hasn't hit bottom. I think the Dow goes to 6,000 or below and unemployment hits nine percent or higher. A highly regarded economist said privately that we haven't hit bottom. This will come next year.
The local economy will be better than the national picture, but this is relative. We are in for very tough times. Our political leadership has totally failed us. We have allowed an untenable house of cards to arise. We are so deeply in debt that we may never get out of hock. We have spent ourselves into over ten trillion dollars of debt, doubling our national debt during the Bush administration. And the Chinese, Japanese and the Arabs financed it so that we never saw our interest rates rise.
If you want to be thoroughly depressed, read Kevin Phillips' book Bad Money. Written before the current crisis, it is a sobering explication of how both political parties are culpable.
Wish I had something positive to say. I guess the most positive aspect of all this is that it is better that the collapse came now than in the future. It is more likely that we can recover now than some time in the future after we would be even more under water."
-- Palmer Hamilton,
Jones Walker attorneys
"My 'predictions' for 2009:
Mobile has been blessed. Although our economy will be dragged down by national and international forces, the recent influx of companies locating and relocating in Mobile will mitigate the effect. International trade will continue to ride the wave of the previously favorable dollar rates, at least for a while. Real estate and car sales/major purchases will be hurt hardest but even these will probably be better off than in other parts of
the country. I'm guessing the restaurants and certain basic entertainment businesses will do okay, and that smaller companies in most realms will feel pinched but can weather the storm. Medical and legal practitioners and
educational institutions should all get by. Companies with a technological edge will do best. Eddie Smith will continue to be released no matter what steps are taken to hold him."
-- William W. Oppenheimer
President, Enveloc, Inc.
"If we get the tanker/large Aircraft manufacturing plants in the next two years on top of the TK plant under construction and other ancillary business, the Mobile area will begin to rival some of the second tier cities/areas in the U.S. such as Seattle/Tampa. We will obviously be the economic engine of the Gulf Coast as New Orleans wanes in importance and nothing on the Mississippi or upper Florida Gulf Coast can compete. I just heard major container business is moving operations to Mobile to take advantage of our new facility. Port/Aviation-Industrial Manufacturing will be humming but a major limiter will be transportation ... no new I-10 bridge and inconvenient underserved airport. If we can get those addressed in new President's proposed infrastructure spending, the sky's the limit."
-- Scott Hunter,
Branch Manager/Investment Advisor
Raymond James Financial Services
"I think 2009 will start out strong. I think by April, the 90% of Americans who want to work that still have jobs will notice they have less debt and/or more money than they had last year. So, consumer spending will at least stabilize. TK will keep going here in our area, and nationally Nancy (Pelosi) will pump more billions into the economy. Life
will be good.
Well, unless you are one of the 40% of workers (not people, workers) that pay Federal Income tax.
Then, the next shoe falls (here comes the Nostradamus part): I predict that the new union act passes and begins to take effect. I predict that every employer (with 50+ hourly employees) will, unbeknown to them, have an employee who starts collecting non-secret ballots, and when he/she gets 50% + 1 to sign 'yes' for unionizing, the ballots are turned into the new NLRB office here in town, and one more unionized business in Mobile is born. You did ask me to play Nostradamus, right?
The problem is NOT that Mobile workers want unions. I don't think they do. The problem I predict is they (1) may not think that their 'one vote' will matter and (2) they may feel social pressure to sign, during this one-on-one 'meeting' with their co-worker that I am predicting will
happen.
My final prediction may not qualify as a prediction, given recent history, but here goes: I predict that more unionization begets more unemployment in the private sector.
Whatever happens, I predict that the Mobile area will be one of the best places (if not THE best place) to be in 2009, and that is truly something to be thankful for. I know that I'm glad to be here, that is for sure."
-- Les Barnett,
Omniphone Inc.
"The only certainty I'll offer is that my below prediction will be wrong. I'll save the real estate market type predictions for Dr. (Don) Epley and the general economy for Dr. (Semoon) Chang. I'll venture a bit on the banks.
I expect the multiple bank branch openings will do 'okay' ... by okay, I mean that they will have decent new business, but, in general, will attract deposits at the lower end of their desired goal ranges. Also, I think the loan market in Mobile area will be better than in much of the nation, but effective loan demand will be below the level desired."
-- Ross Dickens,
Professor of Finance,
University of South Alabama
