The 'R' word

If you are a beach bistro selling margaritas to tourists, you might not notice. But on the mainland, it feels and looks like a recession.

The end of the real estate boom has sent ripples through the economy. Cash register receipts are slumping. Many workers — either laid off or marginalized by cut-backs in hours — are leaving town or taking lower-paying jobs. Food banks are dishing out free food as fast as they can find it.

Consider these factors:

Taxable sales in the region have declined this year, the first time that has happened since 9/11 and the most serious decline in 20 years. In July, sales were down 10 percent.

Bank deposits dropped 8.5 percent in the region during the year ended June 30.

Housing permits in the region are down more than 70 percent from 2005’s peak. Many builders have laid off three-quarters of their work force as a like amount of business has vanished.

Unemployment in the region has surpassed the state average for the first time that anyone can remember, rising to nearly 6 percent inCharlotte County. Builders estimate that 70 percent of their work force is undocumented workers, so the unemployment figures likely underestimate the true joblessness.

Business bankruptcies in the region have doubled from a year ago, while the amount of debt reported in the filings has nearly quadrupled.

Moody’s Economy.com predicts Sarasota-Bradenton home values will have dropped 24.8 percent before the slide ends. That reduction would mean a drop in appraised values of $32 billion, or the total value of all land in Charlotte County.

Nonprofits supplying food to the needy say they will likely have to double the amount they gather this year to meet demand.

To develop a picture of the local situation, the Herald-Tribune scoured available database information and polled economists with very different views of what is going on. Reporters also talked with more than 60 shop owners from Punta Gorda to Palmetto, as well as social service agencies, business leaders and government officials.

With some significant exceptions, those interviewed reported feeling a recession-like pinch.

"I don’t think people realize how many areas the housing market affects," said Scott Brann, owner of Lux-Art Silks, a 41-year-old Sarasota-based maker of artificial trees, plants and flowers.

"You can see it all over town — restaurants going out of business, flower shops closing."

Is it a recession?

The official governmental definition of a recession is two consecutive quarters of declines in gross domestic product — the total of all goods and services produced.

Finding current numbers for Southwest Florida is impossible. The U.S. Bureau of Economic Analysis recently unveiled metropolitan-area GDP figures, but only through 2005. The 2006 numbers will not be available until fall of 2008, a spokesman said.

With that data unavailable, economists were the next natural source to consult, but they are divided.

On one side are the well-known Hank Fishkind, the University of Central Florida’s Sean Snaith, the University of Florida’s David Denslow and Wachovia’s Mark Vitner, who believe that the regional economy has not been dragged into recession by the housing slump.

They point to Southwest Florida’s stable of wealthy retirees, whose incomes have been boosted by healthy stock market returns, and a hard-charging tourist sector that saw sales increases of nearly 8 percent for the year that ended July 31.

On the recession side are Northern Trust’s Paul Kasriel, Steven Cochrane of Moody’s Economy.com and Jack McCabe of McCabe Research in Deerfield Beach, who argue that Southwest Florida is so dependent on housing and real estate sales that it has slipped into recession.

"When you look at the regions in the country that have the highest likelihood of recession, there are two places that rise to the top of the list: Southwest Florida and Southern California," said Cochrane, Economy.com’s chief economist.

"Both areas have many of the same characteristics — overpriced housing, soaring delinquency rates and high dependence on construction employment — employment that is disappearing."

With nearly 14 percent of its work force tied in some way to the construction industry during the boom, the Charlotte County-North Port area is the third most dependent region in the state on home building and real estate sales, trailing only Naples and Fort Myers.

The lack of diversification is a good reason why unemployment in Charlotte County-North Port has risen nearly 2 percentage points since April and is now closing in on 6 percent. Of the state’s 21 largest metropolitan areas, Sarasota-Bradenton is the seventh most dependent on home building and real estate sales. Since April, Sarasota-Bradenton unemployment has risen 1.3 points, to 4.4 percent.

Don Root, Charlotte County’s economic development director, reckons every construction job in his area directly affects another 1.5 to 2 workers — everyone from mortgage brokers to cashiers to bowling alley attendants.

"Even a 10 percent downtick in sales is significant, and I’d call that a recession," Root said.

But other economists, looking at Florida overall, are more upbeat.

"We are definitely not in a recession in Florida," says Stan Geberer, an economist at Fishkind & Associates in Orlando. "We have very strong population growth. We have very strong new job formation growth. Those numbers are lower than they were last year but they rate still among the highest in the nation. We have a very vibrant tourist economy."

Southwest Florida’s population will grow by a healthy 2 percent to 865,148 in 2007, and 7,240 new jobs will be added to the labor force — a 2.2 percent increase, Fishkind & Associates projects.

But Fishkind’s job-growth number does not fit with August employment data from the U.S. Department of Labor, which showed the region adding only 1,400 jobs during the 12 months that ended Aug. 31, an increase of only 0.4 percent.

Even optimistic economists acknowledge that some areas will have more problems than others.

Snaith, the UCF chief economist, maintains that statewide, the real estate scene is not as grim as it looks to people, though he acknowledges that there are problem markets.

"I refer to them as pockets of pain. Yes, Sarasota is one of them."

Taxable sales

Perhaps the best indicator of the economic downturn in Southwest Florida is the decline in taxable sales.

The first drop came in Charlotte County in June 2006, when sales fell 1.1 percent to $206.8 million from the same month a year earlier. Since then, Charlotte’s taxable sales have fallen 6 out of 12 months. For the year ended July 31, taxable sales fell 1.5 percent.

In Sarasota County, sales first slipped in August 2006. In 2007, they began declining even faster, falling 9 percent in May and nearly 12 percent in July. For the year ended July 31, sales fell 2.5 percent. Manatee County, which has a more diversified economy than its neighbors, did not have sales declines until January, but sales have fallen every month since, except for April. For the year ended July 31, Manatee’s sales fell 0.7 percent.

What makes these numbers significant is that monthly sales had not dropped in Charlotte County since Hurricane Charley and they had not dropped in Manatee and Sarasota counties since 9/11. On an annual basis they had not fallen for a decade or longer in all three counties.

What’s more, recent monthly declines are more serious than they were during the recession of the early 1990s. In July 1991, for example, taxable sales fell 5.4 percent in Sarasota County and 3 percent in Charlotte County, but there was no downturn in Manatee.

Compare that with July 2007, when sales fell 12.3 percent in Charlotte, 11.7 percent in Sarasota and 6.2 percent in Manatee.

August — the last month for which taxable sales data is available — saw a 3.9 percent sales rebound in Charlotte County from the same month a year earlier. But Sarasota County sales fell 9.1 percent and Manatee County’s fell 5.3 percent.

Kasriel, Northern Trust’s chief economist, says the drop in sales makes a strong case for recession.

"Sales don’t fall unless there’s a recession, and unemployment doesn’t go up."

Mainland retailers argue that the numbers, while down, do not show how bad the situation really is.

Suzanne Carmichael, who manages Net Set Tennis in Port Charlotte, said customer traffic is down 80 percent from the boom, and her store is having to cut prices by 30 percent to generate sales.

"The store is for sale and we don’t know whether we will make it or not," Carmichael said. "There’s so much uncertainty politically and so much uncertainty economically."

Building industry

People in the building industry will unblinkingly tell you that they are in a recession.

From the housing peak in 2005 until now, Southwest Florida has seen a more than 70 percent decline in building permits for homes.

"Think about what that means," said builder Lee Wetherington. "Let’s say a car dealer wakes up and says my car sales are down 80 percent. Or I have a grocery store and I say my business is down 80 percent over what it was. That is what is going on with the housing industry right now."

Many builders were living off backlogged orders for homes, condominiums and commercial buildings well into this year. When those ended, they had to take other action, and many did. Builders in general in this region have cut their work force by roughly 80 percent, Wetherington estimated.

Manatee, Sarasota and Charlotte counties now all report higher joblessness than the state as a whole. Charlotte County is now pushing 6 percent, Sarasota 5 percent, and Manatee, 4.2 percent. The state is holding steady at 4 percent.

But those numbers understate the employment situation because the construction-based economy relied heavily on itinerant workers.

"I don’t believe you are seeing them apply for unemployment," Wetherington said. "They just move. Everyone who can be mobile has left the area."

Lakewood Ranch-based Lee Wetherington Homes at its peak employed 19 superintendents, Wetherington said. "Now we have three."

Of the 16 who left, only four still live in Southwest Florida. Wetherington knows one who moved to Austin, Texas, one to Arizona and one to Tennessee.

"They know where there is work to be had."

The ripple

The departure of so many workers from the building industry has hurt everything from small shops to bars and car dealers.

Stores owners who cater to Mexican and other Latin American customers are feeling more pain than most.

"It’s very bad," said Victor Batista, owner of EV Tires Discount on Ninth Street in Bradenton. "My sales are down by three quarters."

A large part of Charlotte County’s economy is based on construction, and the slowdown is showing up at the cash register, said Jeff Kincaid, a salesman at Capt. Ted’s Tackle & Bait in Port Charlotte.

"It just trickles down to everyone else," Kincaid said. "People with secure incomes are the only ones buying much of anything these days. I don’t see the average guy going out and buying a boat, and if he doesn’t buy a boat he’s not going to need new tackle."

Roger Van Aman, who drives a truck for cement and aggregate producer Florida Rock Industries, picked through the artificial lures in the store — cheaper than live bait. He is earning half what he made two years ago.

"I just delivered a load this morning and I’ve got the rest of the day off," Van Aman said. "During the boom, I was working 65 hours a week."

It might be surprising to hear that a family-owned business that makes silk flowers has been caught in the concrete-and-two-by-four crunch, too.

Lux-Art Silks of Sarasota, a 41-year-old family-owned business that makes artificial trees, plants and flowers, has seen year-after-year growth for a generation.

That is, until 2006. Last year, sales fell 3 percent. This year, owner Scott Brann says sales have fallen 20 percent.

"It would be fair to say that somewhere between 5 and 10 percent of our customers have gone out of business — didn’t make it through the crisis, I guess," he said.

Brann tried to hang on and keep his best workers. He had 55 at his peak. He has cut 20 percent.

"Everybody who is still here is more versatile," he said. "Someone who was just designing floral pieces before might be asked also to go out into the warehouse and do warehouse work, and also wait on customers."

Lost wealth

In a study looking at boom markets, Moody’s Economy.com projects that home values in the Sarasota-Bradenton market will fall 24.8 percent. That leaves the local market virtually tied for first place in expected declines with Stockton, Calif., and Palm Bay-Melbourne, on Florida’s east coast.

The drop is not surprising given that Sarasota-Bradenton had some of highest percentage gains during 2004 and 2005.

The three markets all peaked in the first quarter of 2006. Moody’s predicts that Sarasota-Bradenton’s prices will bottom out in the third quarter of 2008, one quarter ahead of Stockton and Melbourne.

The total appraised value of all residential property in Sarasota, Manatee and Charlotte counties in January 2006 was $127 billion. Applying the 25 percent reduction to that results in about $32 billion in vanished equity.

That is the equivalent of all the appraised property in Charlotte County — agricultural, commercial, residential and institutional.

That $32 billion loss is purely hypothetical, but it is consistent with reported prices for residential homes and lots.

Just as the dot-com stock crash of 2000 swept away investors’ paper profits, the drop in real estate values is lost potential purchasing power.

"Now there is no equity to tap there," said McCabe, the Deerfield Beach consultant. "Their home was worth $200,000 and then it went up to $400,000 and they took out a $150,000 line of credit on top of their first mortgage and went out and bought a big-screen TV and new cars."

Another indicator of a downturn is an 8.5 percent decline in bank deposits in the three-county region. Deposits totaled $18.7 billion during the year ended June 30, down from $20.5 billion a year earlier.

The lost buying power also shows up in personal income data. Personal income for the three counties rose 13 percent in 2004 and 5.3 percent in 2005.

But in 2006, the latest available data for Southwest Florida, personal income grew only 0.6 percent to $17.2 billion.

To make matters worse, rising gas prices, food costs, insurance and taxes have cut into spending power.

Manufacturing

While the collapse of the construction-based economy has been dramatic, it has been accompanied by a more gradual exodus of manufacturing jobs. In many cases, manufacturers cite the high cost of real estate, taxes and insurance as part of the reason for moving jobs offshore or to cheaper states, such as the Carolinas.

This month, automotive component maker Hi-Stat Manufacturing announced plans to close its Manatee plant, laying off 300. A week earlier, PGT Inc., the Venice-based maker of hurricane-resistant windows and doors, laid off 180. Wellcraft Marine, Honeywell International, WPI Interconnect Products and the Herald-Tribune have also laid off workers this year.

"In addition to the construction industry going south, we are seeing simultaneously that the manufacturing is shrinking," said Dale Vollrath, co-founder of recruiting firm TRC Staffing Services and a past chairman of the Suncoast Workforce board. "It is not happening all at once. It is kind of dribbling out."

Growing need

With a high degree of consistency, those helping the needy say they saw a big upswing in clients this summer.

They also saw a dramatic change in the demographic of those being served. "We are seeing people in need of food that we normally don’t see," said the Rev. Mike Butterfield, executive director of one of the area’s Christian-based social service providers, Gifts From God.

"Working people, coming over on their lunch break to get food. They are primarily construction-type people who are just not getting the hours they used to get. They were getting 40 hours, now they are getting 20."

Places like Gifts From God pick up much of their donated food from All Faiths Food Pantry, which runs a food warehouse on Cattlemen Road in Sarasota. All Faiths’ trucks pick up donated food each day from area groceries and restaurants.

The nonprofit group has seen a sharp rise in the need for its services since this summer, said spokeswoman GeeDee Kerr.

Before 2004, it dished out about 2 million pounds of food per year. "I am predicting we will do more than 4 million pounds of food this year. It has just been climbing."

Kerby Standard, a 50-year-old licensed electrician, was laid off in August by an electrical contracting firm that had been riding high during the construction boom.

At about the same time, Standard's wife became ill. And the balloon payment came due on their $1,350-a-month rent-to-own Bradenton home, forcing them to move into a weekly rental. Now Standard is at Dollar Dynasty, a Sarasota food bank, loading three bags of free food into the back seat of his 2004 Jeep Grand Cherokee.

"If I don't pay my rent every week I get kicked out," said Standard. "That's a hell of a thing to wake up to every day."

As Southwest Florida's economy tumbles from the housing boom, people are hurting. No one tracks how many people struggle to put food on the table or meet other needs, says Stewart Stearns, executive director of the Community Foundation of Sarasaota County. But across the region, signs of pain abound.

Calls to 211, a help line in Sarasota, Manatee and DeSoto counties,have risen to an all-time high of 6,000 a month.

The two largest charity food groups, All Faiths Food Bank and Meals to Go Plus Food Pantry of Manatee, will send a total of 5 million pounds of food to local food banks this year, double what they distributed in 2004.

One group that disburses food to the needy, South County Food Pantry, will serve 12,600 people this year, 19 percent more than last year and 48 percent more than during the boom years.

Most striking, say those who have been involved for years or even decades in helping the needy: Some of the people seeking help were until recently providing help.

"Contractors, electricians or plumbers or whoever would come and drop off some turkeys ever year, and all the fixings," says Mary Ann Cooper, who works at All Faiths Food Bank. "This year, they are coming in asking.

They're calling and saying: 'I've been giving to you for years, and now I can't make ends meet. How can I get some food?' "

Calling 211

Economists say that Florida is generally resilient, and that Southwest Florida is in a "pocket of pain" brought on by speculation and overbuilding in residential construction. But Stearns of the Community Foundation said some economists say the cycle may last three to five years.

"We've gotten calls from I don't know how many churches, that have said to us, ‘Isn't there a way for us to get support, because we cant keep our shelves filled?'" Stearns said.

"I think we are seeing the beginnings of a lot of family crises," Stearns said. "If that is the case, it is going to get a whole lot worse before it gets better."

When Kerby Standard began to realize how desperate his situation was this fall, he called the 211 phone line operated by the United Way. Standard had just landed a new job shelving groceries at Publix Supermarkets, but the pay was $10 an hour, not the $20 an hour plus consistent overtime that he had made as an electrician working on new homes.

The 211 service directs callers to agencies that may be able to help. Ben Kunkel, director of operations for United Way 211 of Manasota, keeps statistics on the four main kinds of calls — work, housing, financial assistance and food.

The hottest requests now are for food and financial assistance, he said. Requests for housing and employment seem to have peaked in the summer, just as the unemployment rate was spiking.

"It started with the construction industry, at least from our end," Kunkel said. "Starting two and a half to three months ago, we started getting a lot of calls from people who work jobs in construction — from layoffs to hours cut back. It is rippling out from there into the food-service industry."

Standard's call was referred to Victoria Brown, who runs Dollar Dynasty, a small but effective food pantry on Dr. Martin Luther King Jr. Way in the Sarasota neighborhood of Newtown. It is a crowded place, with two freezers and shelves lined with canned goods.

Dollar Dynasty helps several hundred families a month, Brown said — and it is only one of 200 agencies that get food from All Faiths. Standard's case is all too common, Brown said.

"It just seems like everybody is losing out," she said. "I'm looking more and more at the middle class."

Street-level view

The Rev. Jim Minor, who runs Harvest Tabernacle Church on Lime Avenue in Sarasota, has a street-level view of the economic slump.

Just within the past few months, he said, the number of families using the food pantry has risen from 75 per week to more than 250.

"These are not street people," Minor said. "A lot of the people who were working, subcontractors, the work is not there. They didn't have anything put away for difficult times and they were kind of riding the wave. And now it is kind of still. The waves have stopped."

Helping others help themselves is enlightened self-interest, Minor said. "If you get desperate enough to feed your family, you might do things you would not ordinarily do," he said. "You might go into a food store and see if you can boost something. You might rob your neighbor.

"I don't think the guy building an $8 million mansion on Longboat Key is bothered by this," Minor said. "The trickle-down effect is if his wife gets her necklace torn off her neck while she is walking down the street."

Just getting by

Garnet and Dolores Atkinson, who live in a mobile home park in Manatee, both work. They are not lining up at a food pantry for groceries.

But their life did not get any easier when Garnet, age 60, was laid off as a cement truck dispatcher in late April.

The layoff came five days before he was to go to the hospital for heart catheterization. It turned out his heart needed a pacemaker, too, so he got that done in September.

Now he has a new job, driving a truck up and down the state of Florida, often in the wee hours, delivering bottled water. He makes roughly what he made as a dispatcher.

His wife still brings a check home, too, as a beautician in Bradenton.

Still, when the couple started running out of savings in September, Garnet was not in shape to go back to work. "I couldn't raise my arm up because it would move the wires running out of my heart, until they were healed."

The new job is taxing. Often, Garnet's overnight odyssey takes him on a round trip to Miami, where Carnival Cruise Lines is a customer. One day recently, Dolores reported that her husband was home asleep.

"Last night he left about 8:30 and he got home this morning at 8:30. He went right to bed. He didn't even take his clothes off."

"I just kind of worry about him," she said. "They just put him with all these different hours."

Separately, they both said they expect to work until they cannot work anymore.

"We've had to dig into savings to make ends meet," Dolores Atkinson said. "I'll probably never retire now."

25 tons of food

On Friday, volunteers for the Mayor's Feed the Hungry Program were sorting out 25 tons of nonperishable food items on the lawn in front of Robarts Arena in Sarasota.

"Demand is up," said Scott Biehler, co-chairman of the group, which will hand out that food plus thousands of frozen turkeys in the next few days. In addition, the group takes donations and turns them into $10 gift cards at Publix.

"In addition to the homeless, this year we are seeing working families in the construction industry and service industries that were gainfully employed last year, and now they are out of work. Working people who find themselves out of a job, and they've still got their expenses to meet."

In Sarasota County, All Faiths officials estimate they will disburse 4 million pounds of food this year, twice as much as in 2004. In Manatee County, Meals on Wheels Plus will hand out 2,000 emergency food baskets, nearly a third more than last year and 43 percent more than in 2005.

Said Alberto Suarez, executive director of United Way 211 of Manasota: "In my 16 years in this industry, I can't remember a time like this."

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