Recession

Last week I had two speaking assignments – the New Jersey Historic Preservation Conferenceon the Rutgers campus in New Brunswick and the Maine Downtown Conference in Biddeford. More about Biddeford in the next post.

First to New Jersey. The other opening keynote speaker was Dr. James Hughes, Dean of theEdward J. Bloustein School of Planning and Public Policy at Rutgers, one of the top rated planning schools in the country. Anyway, Dr. Hughes’ presentation was mostly about the economic and demographic changes in New Jersey at the dawn of the 20th century and at the dawn of the 21st century. Now for a numbers geek like me, this is always interesting stuff. But for many it isn’t. But that is not the case when Dr. Hughes tells the story. He is clever, self deprecating, amusing, and clear. No tables of linear regression on PowerPoint slides…just a very interesting, entertaining, and very relevant presentation of what’s happening.At one point Dr. Hughes said that he was known as the Dr. Kevorkian of economics in New Jersey, having forecast nine of the last five recessions.

Well, as it turned out I had essentially a down day between my New Jersey speech and the one in Maine. So instead of going back to Washington, hanging around for half a day, flying to Portland, Maine, renting a car, driving to Biddeford, then reversing the process, I decided to make the whole thing an auto trip. I took lots of music and audio books and enjoyed a couple of days in the car.
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So after my sessions were done I drove from New Brunswick to Bennington, Vermont, figuring I would then have a leisurely drive the following day to Maine. And I did.

But here’s where Dr. Hughes and recessions come back in. I left Bennington driving on Route 9, a wonderful two lane highway across Vermont and New Hampshire. Mid morning I stopped for breakfast in a mom and pop (literally…both mom and pop were working there) cafe in a small Vermont town. The technical definition of a recession is two consecutive quarters of negative growth. But I don’t think that’s the test. The test is what I heard and read while eating breakfast.

Outside the cafe I bought the local weekly newspaper so I’d have something to read…and I always find local weeklies interesting. Front page story one — a locally owned gas station in operation by the same family for over 65 years was shutting down. The high wholesale price of gas, and credit card fees of almost $.12/gallon left no gross profit to pay the rest of the bills. The classic case of “lose money on every deal but make it up in volume.” Front page story two — a local daycare center was either going to have to significantly cut back on staff and children served or close altogether. Why? Because they were losing their United Way funding. Why? Because the donations United Way typically received in the past were not coming in, so they, too, had to cut allocations to agencies.

And then the conversation lesson. I was sitting in a booth but a man, obviously a regular, was sitting at the counter. I figured out he was a small businessman who plowed snow in the winter and did lawns in the summer. So on his way out, “mom” asked if he was keeping busy with his lawn mowing customers this year. “No”, he said, “but that’s probably alright. I just don’t have the cash to pay the workers. Half of my snow plow customers haven’t paid last winter’s bills yet, and my biggest customer still owes me $15,000.” Now maybe for 28 year old MBAs on Wall Street making $800,000 a year, $15,000 is barely enough for a cheap Rolex. But for small businessmen like him (and me, for that matter) $15,000 is a huge amount of money.

But here’s the rest of the conversation I eavesdropped on. “And what do I do? Sue them? I’d be lucky to get 25 cents on the dollar, and I would lose my biggest customer permanently. So I just have to wait and hope that eventually they pay. But in the meantime, a new piece of equipment that I bought for $12,000 I returned to the dealer. I was going to buy a new truck this year, but I settled for a used one instead.”

Now THAT is a recession. So I’m with you, Dr. Hughes. This is a recession ….whether the black box analysts in Washington want to call it that or not.