In A Stormy Financial Climate—

Piecing Together

A Financially Secure Future

By Nancy K. Crevier

Once upon a time, in a land that stretched from sea to sea, people dished out money on a whim, indulged in lavish vacations, shopped till they dropped, and traveled independently in vehicles big enough to house a third-world family. Credit offers fell like rain into mailboxes, encouraging excessive spending, and the temptation of a home loan for a house realistically out of reach was too hard to pass up. People bought, and bought, and bought, and bought, and the storekeepers smile and moneylenders rubbed their hands together. The future seemed far away and securely sheltered beneath a giant, happy bubble.

But one day, a storm began to mass on the horizon. At first it seemed small and easily ignored. But it moved rapidly, buffeting that thin bubble, leaving great populations feeling vulnerable and wondering how they might once again piece together a financially secure future.

If the fairy tale seems vaguely familiar, it is because some version of it has been passed around towns all over America in recent months, even Newtown, where the poor economy is on the minds of most — from teens to retirees.

The National Bureau of Economic Research (NBER), which published its first business cycle report in 1929, ascertained in early December 2008 that the United States was in a recession that had begun one year previously. A December 11 business cycle dating committee report of the NBER noted that the payroll employment measure, considered by the group to be the employment estimate with the broadest scope, had reached a peak in December 2007 and had declined every month since. While many look at the rate of unemployment as a gauge for the health of the economy, unemployment is actually considered by NBER to be a secondary indicator as to economic health.

Other numbers that NBER takes into consideration are personal income levels, industrial production, and wholesale sales, all of which peaked between November 2007 and June 2008, according to this organization, and have since shrunk. NBER also noted that while the common definition of a recession is when gross domestic product shrinks for two quarters in a row, this time around that number was erratic. Still, enough evidence was in place for the monster to be named and for people to begin rethinking lifestyles.

How the recession is viewed in Newtown varies somewhat from generation to generation. The concerns of teenagers and young adults are different than those voiced by older residents.

Alex Kron, Sarah Ferris, and Matt Iassogna are all juniors at Newtown High School who say that while not affected as directly by the recession as older people, they are still very much aware of the impact of the poor economy.

“The problems of the economy are everywhere,” said Sarah, “so it’s hard not to notice.” As a member of several youth groups at school and in the community, Sarah said that this year has been more difficult so far as soliciting donations. “We have to be a lot more careful this year about which businesses we ask to donate and it’s just harder to get businesses involved than it has been other years,” she said. Sarah also worries that as adults lose jobs, the part-time jobs traditionally held by teens will be swallowed up by them, eliminating opportunities and experience for young people.

With more students applying to the less costly in-state colleges, posthigh school options weigh on Sarah’s mind, as it does for Alex, as well.

“My biggest concern with how bad the economy is, was in September. I was starting to worry about postcollege job opportunities four and five years down the line. A lot about the economy comes up in school classes,” Alex said. But as teachers’ conversations began to calm down in recent weeks, said Alex, his own fears have been calmed. “I’m less worried now.”

Matt noticed over the holiday season that his spending money was not going as far as he had hoped, even taking advantage of big sales. Rather than providing relief, though, Matt said the fact that stores were slashing prices even before Christmas was “Scary. They just needed the sales, at any price.”

The other place that Matt said teens felt the pinch of the economy was this past summer when gasoline prices were more than $4 a gallon. “It’s nice that gas doesn’t cost that right now. That was bad for someone who works only a few hours a week.”

The bad news for retailers is that all three of the teenagers said that they and their friends have curbed their spending habits since last year. Rather than going out to the theaters or out to eat, they now tend to gather at each other’s homes to watch movies, play video games, and hang out.

“My friends and I are improvising. Last week, we went on a scavenger hunt at the mall. We had a list and would take a picture of the item. It was free, and it was fun,” said Sarah.

How long will it be before they spend freely again? “I think the economy will be okay eventually,” said Matt. “I think by the time I get out of college, it will be fine.”

 

A Longer Perspective

At the other end of the spectrum are those who are retired. They are veterans of the economic cycles that have affected the country, but all agree that this recession is serious.

“I would hate to see anything like this too prolonged,” said Stanley Polcyn, a retired CEO who remembers when the cost of money was more than 20 percent in the 1970s. “I don’t think that those times will return, but I’ve gone through other times of recession. It’s unpleasant and certainly affects us all, but it’s also cyclical,” he said.

“People who shouldn’t have taken out loans made ridiculous economic decisions, and now it has to be tightened down. People have to reduce spending,” he said.

Reducing spending is not just an individual mandate, though, said Mr Polcyn. Local and state government also needs to make cuts in spending. “All they know is raising taxes. Many of my friends have had to move because of the high taxes here. Then a young family moves in, with children, and that creates more expense for the town,” he said.

His outlook, overall, is positive, though. “I hope that our new president will really do some of the things he is planning,” said Mr Polcyn. There is a time, he said, when government must intervene for the better of the country.

He feels fortunate that his lifestyle continues to be comfortable, despite a drop in income. “When you’ve raised six kids and have 16 grandchildren, and you have a home, two cars, and a TV set, life is pretty grand,” he said. “I believe good times will return, slowly, and in a different form, but the future looks great.”

“We are Depression children,” said Evie Watts, speaking for herself and her husband, Bill. It has worked to their benefit during this recession and others through the decades, said the retired couple who owned and operated Newtown Manufacturing until 2000, in that they have basically continued along the same track they have been on all along. “We save first, and spend later,” said Ms Watts. “We’ve lived conservatively and that has worked for us.”

Neither of them dwell on the state of the economy, Ms Watts said, “My concerns are the easy credit that was available; the deficit spending by individuals and by the government; the high debt of individuals and the government; and the fact that the safeguards and regulations in place were ignored by corporations and the government. These have put us in the position in which the country now finds itself.”

Like Mr Polcyn, the Watts remain upbeat about the future of the economy. “We are on a fixed income and our investments took a huge hit, but I think things will be positive in the end. A lot of things were out of whack and needed to be straightened out. The economic issues, I think, pinpointed the problem areas,” Ms Watts said.

Paul Gehrett worries about the economy getting back on track. “Loans are difficult to get; very few people are pumping money into the stock market; business is not coming back; and people are losing jobs and therefore not buying at retail,” said Mr Gehrett, who at age 80 has seen other dips in the economic cycle of the country.

“The worst one previously was in 1974, but it recovered quite quickly. Employment, spending, and credit bounced back quickly, but I don’t see those drivers happening yet this time around,” he said.

Like the Watts, he and his wife, Ellyn, have watched their investments take a hit this past year. “That’s part of my retirement income, so that’s a big concern for me,” Mr Gehrett said. He does count himself fortunate that General Electric provides him with a good health insurance plan and a pension that he hopes will remain solid, but the Gehretts are paying more attention to budgeting for personal expenditures in 2009 to offset the increasing cost of living.

“I am concerned, but I’m very positive [about the future of our country’s economy],” said Mr Gehrett. “We have a smart, new president who hopefully will surround himself with good people and there are going to be changes. Whether those changes will work is to be seen,” he said.

Life In The Middle

In between lie the twenty-somethings, the new college graduates, the families with young children, and the people not yet retired. The recession is truly a monster to be reckoned with.

“My concerns are that the government institutions be kept sound, so that confidence in them remains by the time I have more of a personal concern,” said Kate Sullivan, a political science major at Notre Dame in Indiana. “I guess my concerns are less than some, as I don’t have a house or investments yet, and I’m glad I am still in college,” said Kate. “People my age still have so much more time to save. Those closer to retirement, it’s more of a worry right now, from what I hear,” she said.

Like her teen counterparts, Kate is more careful about spending these days, believing that it may be even more than five years before the economy improves. And that improvement, she believes, will have to come in the way people view money and spending, and not just upon whatever fixes economists come up with in the meantime.

“We are seeing a pretty big increase in students applying, and this year, we have to be conservative as to how many are accepted,” said Bethany Ober, a recent college graduate who works in the admissions office at the University of Connecticut. “I do think about the economy quite a bit, and in the admissions office, we talk about how it is going to affect the kids who are applying,” she said.

She is fortunate to not have any student loans to pay off, she said, and that may be one reason that she is not losing sleep over the immediate future. “I knew when I took this job that it was only an August through March position, and I’m starting to think about what I’m going to do next. But I think that if I start looking for a job early enough that I’ll find a good job.”

Nonetheless, she is disturbed by news reports that hers is the first generation in American history that should not expect to live at the same standard as their parents have. And in case her job search takes longer than expected, Bethany has been saving more than she ever tried to do during her college years. “Hopefully,” added Bethany, “people who remember this crisis will learn from it.”

“I would have to say my top concerns are the growing number of unemployed and the increased competition in the job market,” said Sarah Gutbrod, a junior majoring in engineering at Johns Hopkins in Maryland. “I have watched many seniors this year struggle to secure a job for next year, especially those interested in financial consulting. On-campus recruiting has decreased this year in comparison to past years, putting much of the job search on the individual students,” she said. “Not much has been compromised academically,” Sarah went on to say, “however, I am working on a design project with a team of undergraduates and I would say that some of the academic departments were more cautious with how they chose to distribute their money when we applied for funding.”

Rob Kaiser and Marc D’Avola both have young families and both are small business owners in Newtown. When a poor economic outlook and job losses affect their clients, their own livelihoods are threatened, as well.

“The economy seems to be front and center in people’s minds. It’s affecting everyone,” said Mr Kaiser, the owner of Mocha Coffeehouse on Glen Road. “My primary concern is a drop-off in business in one that relies on people’s discretionary incomes,” he said.

Mr D’Avola is a home improvement contractor, and the recession is constantly on his mind. “Clients who get laid off aren’t going to do new construction or work on the house unless it is absolutely necessary and that’s a real concern,” he said. He also worries about the educational future of his girls, one who is 16 and the other who is 11 years old. “We started a couple of college accounts a few years ago, but all of a sudden it’s harder to keep building those accounts. You definitely have to make sacrifices somewhere,” said Mr D’Avola.

Both small business operators have implemented flexibility and creativity into keeping their businesses on an even keel. At Mocha, said Mr Kaiser, he is now bundling items, such as muffins and coffee, cutting back on inventory, and trying to make sensible decisions. “My confidence has been severely shaken, but I’m an optimist. It’s like we had a big party and now it’s over. The recession is a hangover, but a hangover does subside quickly….” he said.

Mr D’Avola finds that he is collaborating more with clients and doing more of a “sort of hands-on consulting” to help clients defray costs. “I think that short term, it will be difficult, but you have to keep muddling through,” said Mr D’Avola.

Donna O’Connor is a single parent of three teenagers, one in college and “two coming down the pike.” Their futures in a poor economy concern her greatly, with the affordability of college being of grave concern to her right now. “Even if you have money invested somewhere, it is worth half of what it was,” she said. She worries about the job prospects for her oldest, as well, and that segues into her worries about health insurance. “Colin will be 21 next year, and then he won’t be covered by family insurance. He needs to find a job with benefits or not have any health insurance,” said Ms O’Connor. She has watched her own health insurance costs skyrocket, too, going up $50 every year for the past four years.

As a single-income household, Ms O’Connor said that the family has had to make adjustments this year. While never over the top before, vacations are shorter and closer to home, or are day trips only. “I’m looking more carefully at bills, especially things like cable TV, and rethinking them. And with the grocery prices, especially, increasing, using coupons more is a change I will be making,” said Ms O’Connor.

History has always proven that there is an upturn after a downturn, though, she said, and she remains hopeful that with a new president in office, things will get better.

It would be nice to end the fairy tale with the classic, “And they lived happily ever after,” but for now, the debris from the storm remains scattered about, and the cleanup crew has not yet arrived.