Just how tanked is the economy?
2008-10-28 / 22:37 / dave
Today’s Planet Money opened with Laura Conway interviewing Ken Goldstein about consumer confidence (prognosis: low) and then moved to Jesse Kachapis telling Simon Johnson he’s stopped buying everything (or at least new iPods).
Does the economy really suck that bad? My only nods to the economy are a year ago when I started moving my new investments into CD’s (the financial ones) and this week when I really got serious about selling all my records (the music ones). And no one else I talk to regularly seems to be feeling the effects either. In a way the only person I know in financial distress is Casey, and that’s only because she quit her job and went back to school. Alternately I guess you could say a lot of people I know are poor, but they’re all dirty bike kids whose poverty is voluntary and not a by-product of the commercial paper market.
So why the discrepency? I can think of a few reasons:
- I’m oblivious to the economy as well as the pain of others.
- Pittsburgh is always 10 years behind the times.
- The recession is still only on the margins; most people I know aren’t on the margins.
I’m inclined to think it’s mostly the third, but if you think it’s #1, feel free to tell me your pain.
Clearly, you just don’t have enough acquaintances in the financial services sector. ;-)
Actually, it’s probably a combination of 2 (though I don’t think we’ll wait 10 years to see impact here) and 3, with a bit of demographic skew thrown in: we’re a bit far from retirement age, and aren’t making payments on a “suburbs, hell, I’m my own freakin’ zip code” McMansion or a similarly-sized car or three.
It’s also likely that it’s still just early days for the effects of Wall Street’s roller coaster to hit Main Street (if I may be forgiven for borrowing the language of the pundits). Companies will start tightening their belts and cutting jobs, instituting hiring freezes, etc., at least in part because so many people are looking at each other and saying “I have no idea wtf is going to happen next, do you?”
Related anecdote: Near the beginning of the milder downturn that was the dot-com crash, I quit my job to get married and travel for a bit. The decisions were made before things really started to slide, but it still didn’t seem all that risky, even when the stock markets were shedding points wildly as we prepared to leave the country. We still felt pretty sure we’d land on our feet when we got back. After all, people kept talking crash, but everyone I knew still had a job…
When we got back to the States 8.5 months later, that was no longer true; we knew a lot of unemployed people, excluding ourselves.
Wonder how all of this will read in April ’09.
At the CUFP reception / big-finance functional-programmer recruiting fest (with free booze!) I was talking to someone who wanted to leave his current job and was thinking of talking to some recruiters. “But a bank”? his wife asked “You hate wearing ties.”
So that’s why I have no acquaintances in financial services: ties.
I agree that any effects will take awhile to see. That’s the great part of keeping a blog: I’ll be able to come back next year when I’m unemployed and wonder how I could ever be so cavalier.
Speaking of blogs, are you currently blogging? You have too much intelligent commentary to waste in the comments section.
I think part of the reason Pittsburgh will likely be behind this curve is that we never really had the sort of housing bubble that other cities did. Even during the height of the bubble, you could still buy a pretty decent house in a reasonable neighborhood for under $100,000. Of course, things are different (and more expensive) in the suburbs, but prices are still more reasonable than other places.
What’s interesting is that my employer just saw our industry (clinical drug studies) hit a major down turn last year. We trimmed staff, instituted hiring freezes, etc. Now, business is trending steeply upwards, to the point that we’re having trouble ramping up staff to meet demand. Go figure.
From talking to other folks in the Pittsburgh area, this seems to be the case for their companies/industries, too. Business slowed in the last twelve months, staff was trimmed, and now they are better positioned to weather the current storm (and, indeed, many are doing better right now, including finding investors).
And I still get regular calls from headhunters/staffing agencies, so companies in the area are still hiring.
So:
@brian: That’s interesting to hear. Sounds like businesses actually learned something from the ’01 downturn, and have been proactive in tightening up. That’s a gratifying (if somewhat surprising) turn of events.
@dave: Yeah, my DBA career may eventually be somewhat constrained by tie-avoidance. Also, thanks for the kind words about my comments. I try maintain a level of quality consistent with the original posts. :-) I didn’t pimp my blog in the ‘Website’ field last time, because it’s mostly Oracle-related technodork stuff, so I tend not to drop links to it in fora where it might be considered off-topic. But since you asked, I did so this time. You can also find my “friends and family” blog linked from my Facebook profile.
Cheers,
John P.
I agree with what has been said about Pittsburgh’s housing marking having never been inflated. I bought my house with its half-acre lot in the suburbs in 2003 for right around $100k. Granted, the house was run down – the blight of the neighborhood – and we’ve worked on it non-stop for five years to make it habitable, but most of the other “nice” 1500 square foot houses in my neighborhood are priced at or under $200k. Also, as houses in my neighborhood go up for sale, they’re sold quickly to people who actually want to live in them. There isn’t much house-flipping going on here. I can only think of one house that’s sat on the market for months – and man is it an ugly house – guldens-mustard-yellow vinyl siding.
My sister-in-law recently brought up another point that explains why we’re not feeling it here – Pittsburgh has a ton of breadth in industry. Think of your 25 closest friends. Now think about what they do for a living. Chances are, there won’t be much overlap, save for the fact that there will be a large sample of software people, because you have friends from work and school. Pittsburgh isn’t like Silicon Valley where everyone works in software, or like Detroit where everyone works for GM/Chrysler/Ford, or like Arkansas where everyone works for Wal*Mart, or Kansas where everyone’s a farmer, etc. We have a ton of vocational diversity and that insulates us to a degree from economic trends.
There was an interesting stat in this CNN article: only 5.7% of all mortgages in Pennsylvania are “underwater” (meaning you owe more than your home is worth). Compare this to the 47.8% (!) in Nevada.
The breadth of industry point is a good one, and an angle I’ve not thought of before.