Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 26, 1992 TAG: 9201280473
SECTION: ECONOMY PAGE: 1 EDITION: METRO
SOURCE: DANIEL HOWES BUSINESS WRITER
DATELINE: LENGTH: Long
RECESSION OF '91 IS HISTORY; OUTLOOK FOR '92 UNCERTAIN
The half-naked man in the YMCA locker room, recalling a recent sales meeting, had it right: The best thing to say about 1991 is that it's over. C'mon '92.War and its prospect produced anxiety that later flowered into pride. The euphoria that economists said would lift the nation from recession quickly dissipated. Left behind were mountains of corporate and personal debt, swelled work forces, state and local budgets built on unrealistic revenue growth.
This year will be different, the conventional wisdom has it. The Wall Street Journal's recent survey of 42 economists pointed to a bleak winter followed by a mild recovery in the spring.
We've heard it before - and they were wrong.
Besides, there are probably few average Western Virginians who really care what the experts are predicting from their lofty offices in New York, Washington and Los Angeles.
It's the average guy's world that counts - the strength of his employer in the poor economy, the balance in the checking account and the size of the now-predictable increase in health insurance.
Folks increasingly are seeing their economic fate tied to companies, suppliers, even countries whose names seem obscure. The Persian Gulf War proved that. And confidence in once rock-solid financial institutions is wavering, thanks to bad debt and other mismanagement.
It may be scant comfort to some, but the recession that's tearing up other parts of Virginia - including the New River Valley - has gone pretty easy on the Roanoke Valley. True, bankruptcies in Western Virginia reached an all-time high in 1991. But unemployment remains comparatively low, most major employers appear stable, and those that have closed or fired employees are few.
"Companies are still downsizing," said Richard Sorensen, dean of Virginia Tech's business school, and he sees the trend continuing well into 1992.
Face it, the giants are shaking, if for different reasons: Dominion Bankshares Corp. plans to eliminate 10 percent of its work force within the next year, and Norfolk Southern Corp. is buying out brakemen and engineers. State spending still is contracting, and local governments are trimming some services to accommodate flat revenues and increasing costs.
The net effect: Less money is being injected into the regional economy, threatening more jobs once thought secure.
And the longer the slowdown lasts, the more likely businesses will be tempted to cuts costs by cutting people.
It's a vicious cycle: The consumer, worried about bad times ahead, holds onto cash instead of spending. Businesses then make less money, eventually looking to their payrolls - and burgeoning health-care costs - to make up the loss.
"A good result of a recession is companies looking internally and trying to be more productive and more efficient," said Christine Chmura, an economist for Crestar Bank in Richmond. The bad result, however, is that some lose jobs or see their earnings dwindle in the name of health insurance or other benefits.
The first responses come easy for many outfits. The usual thing is to lay off the hourly workers, those who aren't needed when demand drops. "They'd already done the easy things [in this recession]," Sorensen said, "and now they're starting to fire the white-collar workers - and finding out they can live without them."
Pain incurred by cutbacks may prove fleeting, if the economists are right and business turns upward by midyear. But in the public sector, recovery lags behind private companies because tax revenues are pegged to profits, consumer spending and rising property values.
What's the Average Joe to do?
Mary Houska, a Hollins College economics professor, worries that more and more average folks are reaching the end of their economic tethers.
Like businesses that overextended during the economic boom, many families became accustomed to double incomes that propped up household income and gave the false impression that standards of living were improving.
Then folks turned to debt, running up huge credit-card bills and using home equity to pay college bills. Most of the levers available to most people have already been pulled. What's next?
"We are indeed shaping a world order - or have shaped a world order - with 80 percent of our population worse off than 18 years ago," Houska said. "Our business leaders specialized in making themselves richer - as we now know - and everyone else poorer."
There's more.
Innovation and advances in technology are touching increasing numbers of people, making some workers unnecessary to corporate decision-makers. And businesses are tailoring their work force around consumer preferences, trimming hours during slack times and bolstering staff during peak hours.
Gone, increasingly, are full-time jobs and the benefits that go with them. It seems the value of those benefits - especially health insurance - are increasing each year. The Norfolk Southern brakeman, for example, who takes the company's buyout offer but is too young to retire may find it nearly impossible to land work with comparable pay and benefits.
Chmura predicts job growth in the Roanoke Valley will be "a little faster than the last decade," which was a tepid 1.2 percent from 1980 to 1990. By comparison, employment in Virginia grew 3 percent, and the national rate was 2 percent.
Comes now an election year. President Bush finally has realized that all is not well in the republic - and that a quick victory in the desert does not ensure a second term. So we have a plan that seems more a middle class bribe than anything else. When it's all done, the federal deficit will be bigger than ever.
C'mon '92, indeed.
Underpinning it all is the changing world. More nations and their industries are competing in the global marketplace. Houska said she worries that many U.S. firms - indeed, many Americans - aren't prepared for the economic New World Order taking shape for the 1990s.
"We always had a very large captive market," she said. "Other countries have come around and many companies don't know how to compete. It sort of snuck up on us; we're not prepared. I wish I could be more optimistic."