Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, July 2, 1995 TAG: 9506300037
SECTION: BUSINESS PAGE: G-1 EDITION: METRO
SOURCE: JOHN LEVIN
DATELINE: LENGTH: Long
A shift in the economy, especially when things appear to be headed down, rarely comes as a surprise. Lines form at the fast-foods while tables go begging at upscale cafes. Workers grow grateful simply to hold jobs, putting aside thoughts of demanding a raise. Families tighten their budget belts before events force it.
Recently there's been predictably confusing talk of soft landings and sub-par growth and whether a rise in business inventories means companies are cautious or increased use of credit cards is a sign of consumer optimism or distress.
Some suggest that the economic expansion, begun 50 months ago, is about ready for an inevitable shift.
But the fact is, we'll feel the impacts of recession long before we know officially that it has begun. That's because the National Bureau of Economic Research, the Cambridge, Mass., organization that tracks economic fluctuations, doesn't date shifts in the business cycle until it has firm evidence of a change. Not until December 1992, for example, did the bureau declare that the last recession had ended in March 1991. To convince the bureau's economists, an economic change must affect a broad range of businesses, be longer than a few months and be of substantial impact. No temporary flutters over interest rates are enough to convince them of revival or retraction.
That means many in business have early warning signals, often informal gut reactions, that tell them change is ahead.
Stan Cross, president of Holdren's Inc., suspects recession is coming when he sees a fall-off in sales of big-ticket items in the Roanoke-based appliance chain's stores. At the beginning of this year, "everybody felt the big tickets decline, then they stabilized in April and now we're seeing some recovery," he said.
His conclusion: Instead of recession, "we're headed for stagnant growth for awhile."
Cycle Systems Inc., a Roanoke recycler of waste goods, sees its future by watching its customers. If consumers are buying cars and new homes, the company's president, Bruce Brenner, knows there'll be demand for scrap steel and aluminum for automaking and copper for wiring in new construction.
Demand is still strong, though Brenner says he's hesitant. He's forecasting business for just six months into the future. In more confident times, he'd talk about business a year or 18 months ahead.
Howard Noel is keeping an eye on congressional Republicans' appetite for cutting federal spending. Reducing government budgets could mean less work for his Roanoke-based Hayes, Seay, Mattern & Mattern Inc., an engineering and architectural firm that gets two-third of its business from government agencies.
Noel is delaying his definition of the economy until the fourth quarter. Oct. 1 marks the start of a new federal fiscal year and a new budget.
"We have not detected any softening of the economy," he said. What we are seeing is more competition among contractors and materials suppliers."
Lynn Miller said she can spot an economic shift in the volume of orders for temporary personnel. "We do weekly billings, so we can see it immediately," said the owner and manager of Adia Personnel Services in Roanoke. After a slowdown this spring, labor demand has picked up and "we could be headed for a record year," she said.
Contributing to her optimism are orders for temporary workers to fill slots while companies give full-time personnel summer vacations and mail-order companies gear up for Christmas orders.
The Dreiling Partnership is an architectural firm specializing in residential remodeling, so its business generally increases in recessions - "when people can't afford to build new houses, so they remodel or add on to existing ones," said principal Helene Combs Dreiling.
But her business has remained steady since the previous recession ended, so she now gauges her situation by how busy contractors and construction tradesmen are. "I can tell I'll be busy when they start getting hungry" from a fall-off in new construction.
"Now they are so busy they have to hold people off before they can start a project. Or projects that normally takes eight weeks are taking 14 to 16 weeks" because contractors are juggling so much work, she said.
John Sarber's business is sensitive to the budgets of major companies. His Sarber Management Services in Roanoke provides employee training as a franchised consultant of Priority Management Services, an international company that sells services to the Fortune 500.
It means when Coca-Cola Co. or Norfolk Southern Corp. hire Priority to train all their workers, Sarber picks up work for their operations in this region. When those companies trim training from their budgets, Sarber knows the recession has arrived.
"One of the trademarks of the last recession was companies tightening their budgets for staffing. But as we came out of recession, those budgets stayed tight. That was good for us, because employees with heavier workloads needed training on personal productivity."
Sarber said he hasn't yet seen any signs of companies cutting back on training.
When recession comes, it will be a new experience for Doug Robison who, with his wife, Evie, operate Wildflour Cafe in Roanoke. They opened the restaurant in April 1991, just as the last recession ended, and it has grown every year since then.
In a recession, Doug Robison said, people who might not buy a new car or take an expensive vacation will continue eating out. "People still need to get out and commune, and eating out is a cheap way to do it," he said.
"Maybe I'm naive, but it's what keeps me from being apprehensive," he said.
by CNB