Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SUNDAY, March 25, 1990                   TAG: 9003231771
SECTION: BUSINESS                    PAGE: D-1   EDITION: METRO  
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE:                                 LENGTH: Long

THE TALK IS RECESSION, BUT WORRY IS INFLATION

Income doesn't keep up with living costs, said Joyce Delaney, a licensed practical nurse at Catawba Hospital. "State taxes, sales taxes - They just get you coming and going . . . the Roanoke Valley has hit the pits as far as salary range and cost of living. It just puts a real hardship on an average working couple with kids."

Moderate inflation is ahead, but no recession, Dominion Bank economist Glenn Bowman says. He expects slightly higher long-term interest rates and slow growth in the next quarter.

The economy, rocking along at a flat- to low-growth level, is moving a lot slower than everybody would like, Bowman said.

The weakest point may have passed, Federal Reserve Chairman Alan Greenspan has said, and the auto industry is gradually pulling out of a slump, probably helping other slow-growth industries. But manufacturing and the economy remain fragile, Business Week magazine reports.

While economists analyze the price indexes and talk of sluggishness ahead, consumers are nervous about their supermarket bills and their tax bite. Many uncertain shoppers are putting off big purchases.

Roanoke Times & World-News business writers talked to 50 Roanoke Valley residents at random in February to obtain a sense of consumer economic values.

Although the calls do not represent a statistically valid survey, more than half of those contacted - 63 percent - said they had no plans to buy a home, car, a major appliance or furniture.

Thirty-one said they expected problems with inflation, while 19 percent said a recession is likely.

Thirty-one predicted the economy continuing at the same level; 17 expected a raise; and seven believe their pay will be cut.

Slightly more than half, 52 percent, expected no change in their income in the next six months; 34 percent expected a raise and 14 percent believe their pay will be cut.

Job security, an issue in many labor unions, was a worry of only 10 percent of those questioned. An overwhelming 86 percent said they do not fear a layoff in the six months.

But worrying about job security is a major component of Albert Sindlinger's dark projections for a national recession. From a Philadelphia suburb, Sindlinger has been polling people for 35 years about their economic expectations.

Virginia and 40 other states are in recession, Sindlinger said, because fewer than half of their households gave positive answers to questions about their personal business conditions. He forms his opinion from monthly telephone calls to relatively small samples of consumers in each state. Eighty people in Virginia are called each month.

He said Virginia's rating on his household survey has gone downhill from 54.4 in November to 51.5 in December, 47.5 in January and 43.9 in February. He asks questions about change in income, number of jobs at the company and business conditions.

Household confidence is down, Sindlinger said, "because people are concerned about losing their jobs, they are worrying for fear of the company cutting back operations."

He said his office tries to measure the net effect of what is happening. The value of homes has stopped rising because of business worries, he said, and interest rates will have to go up to finance the federal deficit.

In the Roanoke Valley, housing starts rose slightly and new car registrations declined in the past year, close to national trends.

"Everybody has cut back on spending but it's hard to put your finger on the reasons," said Joel Schlanger, Roanoke City finance director. Business is "very flat everywhere. The plastic cards are worn out. People are trying to catch up, to pay off past debts."

Schlanger proves his grim assessment with the city's receipts from the state tax on retail sales, down 0.7 percent for the first seven months of the fiscal year.

On the plus side, many Roanoke-area companies are working overtime, help wanted ads abound for services and medically related companies, and unemployment is at a low 3.6 percent. The Roanoke office of the state Employment Commission has unfilled job orders for skilled people, but the new Grove Worldwide plant coming to Salem and recent expansion at mail-order companies have drawn many new job applicants in search of higher-paying work.

Roanoke and Western Virginia, with the exception of the New River Valley and its pending AT&T layoffs, appear to be holding up better than most areas of the state, said William F. Mezger, research economist for the Virginia Employment Commission. Layoffs have come at auto and housing-related companies and some textile mills, but not in Roanoke, Mezger said.

In addition to the 1,000 AT&T employees who will lose their jobs at Fairlawn starting in July, scattered layoffs have been reported to the VEC in textile industries in Galax and Southside and at auto-related companies in the Bristol-Abingdon area, Winchester and Hampton Roads-Newport News.

Roanoke seems to have avoided many of the employment problems of other parts of the state because it is "largely a traditional and service-based economy," Mezger said. Manufacturing continues to be relatively stable in Roanoke and Western Virginia.

Most of the forecasters Mezger reads are calling 1990 a relatively slow year of about 1.9 percent in gross national product, less than half the rate of recent years.

Don Bechter, an economist at the Federal Reserve Bank in Richmond, said the economy "is bumping along. We can expect mixed signals because some industries have slippage and some are gaining, it's not uniform."

What the Fed, as controller of the nation's money supply, wants is to keep the economy moving and stable, Bechter said. "The more people believe a recession can be avoided, the more they believe inflation" is increasing, he said.

The growth of the money supply is more than enough to suggest that the economy is not going into a recession, he said. The Fed usually tightens the supply of money if necessary to head off a recession.

Using an old rule of thumb that two successive quarters of declining productivity signals a national recession, the nation is well into its eighth year without a full-fledged decline. One quarter of 1986 saw a decline, but the last time production dropped in two quarters in a row was in November 1982.

George Rasmussen of Roanoke County, retired from the board of Martin-Marietta Corp., a defense contractor, is convinced that inflation is the biggest problem ahead. He says the national rate probably is higher than government figures say because "a bigger percentage of the income of an average working class family is going for the necessities of life than the official rate indicates."

Bob Griggs, president of Griggs Office Equipment, said business has been a little slow and very competitive. "The big problem is finding people who will buy. All the dealers' reps tell me that the last quarter was very slow but nobody had a valid reason for it."

At Virginia Bearings, Ed Lilly, parts manager, said sales to wood products companies have been "a little better" and he sees marginal growth ahead for 1990.

Harry Underwood, a former electronic repairman at the Naval Station in Norfolk, came back to the Roanoke Valley when he retired. "My daggone bills are up and my income's down," he said. "A recession is not likely, but the year after this, I think we'll be in trouble with inflation. There's got to be a top there someplace."

The National Federation of Independent Business, an organization claiming more than 570,000 members, said its fourth quarter survey brought reports of lower earnings, inflation fears and overstocked shelves.

Almost one-third of its members responding to questions said they plan to raise prices in the coming months. The 32 percent who expect higher prices is a jump of seven points from the number in the third quarter.