A struggling economy is taking its toll on local residents.
Cindy Bell, of Goodrich, is shopping on a recent afternoon at Bueche’s Food World. She notes grocery prices are rising.
‘Eggs are twice as much,? says the mother of three. ‘I don’t know how the chickens know that gas has gone up. Everything has gone up.?
The biggest item taxing Bell and her husband right now is gas. She estimates they spend between $1,200 and $1,600 per month between propane to heat their home and gas getting back and forth to work.
Bell works as a teacher in Flint and her husband works in Auburn Hills for Chrysler, and she is also concerned about remaining employed. The Flint School District recently announced they would be laying off 109 teachers and closing four schools. Bell is non-tenured and says since her husband works for Chrysler, his job is ‘minute to minute.?
Eric Toth, a Brandon Township resident, has already experienced unemployment, several times. As a die designer for an automotive supplier in Detroit, he said work has been ‘on and off.?
‘Our company owner just said layoffs are coming again,? Toth said as he stands outside at Sunoco, pumping some of the gas that costs him roughly $600 per month. ‘I don’t own a home and the job is why. I’m not optimistic in this field.?
Toth will start school in May as part of the No Worker Left Behind Act, in an effort to eventually get a new job in the robotics field.
The move seems to be a wise one. Jonathan Silberman, a professor of economics at Oakland University, says Michigan has been in a recession since 2002.
‘Michigan is much too reliant on one industry, that has been going through structural change, and now is adversely affected by cyclical change,? he said. ‘The rest of the country was growing and Michigan was not.?
Now, he notes, the nation is slowing down and in a downturn, too, primarily because of a shock on the ecoonomy with subprime mortgages that spread to other areas of the financial sector.
‘It was too much risk, and now deleveraging that risk and a credit crisis have adversely impacted housing and construction and financial services sectors and have affected consumer confidence and spilled over into other sectors of the economy,? Silberman said. ‘We will come out of it and the economy will grow again.?
The last two national recessions or downturns, according to the National Bureau of Economic Research, lasted eight months, in 1990-91 and 2001-2002 respectively.
Silberman believes the federal reserve system is taking aggressive action and will mitigate the severity of any downturn. Nationally, he predicts the worst of the downturn will be experienced by this summer. He expects the economy to level off, if not grow slowly, in the second half of the year. The housing market and Michigan are different stories. He said it might be another two years before the housing crisis bottoms out and turns around, and predicted that in Michigan 2008 will not be a good year because of declining automobile sales, but very slow growth is possible in 2010-2011.
‘If things are difficult or people can’t clearly see the future, the first things to go are discretionary expenditures, things that can be postponed,? Silberman said. ‘Unfortunately for Michigan, that means automobiles. Instead of replacing your car this year, maybe you wait until next year.?
Heidi Rice, a Brandon Township resident, said she and her husband got rid of their leased cars and bought used ones. She has noticed a lot of people doing the same, or holding on to the cars they’ve had.
Rice’s husband is a self-employed contract worker, who does a majority of his work with automotive companies. To have a steadier income during the current economy, Rice, a former stay-at-home-mother, returned to work.
‘It’s feast or famine,? she said. ‘You save up while you can to ride through the tough parts. It’s how you deal with the rough that makes you stronger.?
Rice has taken several steps to deal with the tough times. Her family of four is eating out less, and she said she is always thinking of what home repairs have to be done now and what can wait.
Thomas H. Dorr, vice-president and chief financial officer for Oxford Bank, said this is typical behavior as individuals stop purchasing luxury or non-essential items and also become more cost conscious and look for sales or saving opportunities on necessary goods such as groceries and gas.
To get through hard times, Dorr said it is imperative for consumers to have a comprehensive understanding of their financial position, knowing how much income they earn and how much money they spend. Once they understand these items, they will have all the information necessary to create a detailed budget.
‘A budget is essential to surviving difficult financial circumstances and provides a framework to help individuals prioritize their financial objectives,? he said. ‘People get into financial hardship when they overextend themselves. They spend more money than they earn. This can be avoided by creating a budget and developing a financial strategy to help avoid excessive spending. Individuals need to monitor the amount of money they spend compared to their income and adjust their lifestyles to fit within their financial means… Start eliminating non-essential costs, reduce discretional expenses and look for opportunities to save on necessary items.?
Rice is keeping a positive outlook.
‘In times like this, people appreciate things they took for granted before,? she said. ‘It could always be worse. You make the best of what you have.?
Bell, who has been in her home for 16 years, feels fortunate not to be in a position where she would have to give up her home if things get worse. Her neighbor wasn’t so lucky. Without healthcare after a job change, he was faced with paying the doctors when his wife got sick or paying the mortgage. He paid the doctors and they lost their home.
‘Any way you look, it’s got to get better in January,? she said. ‘We’ll have a new president then.?
Silberman said the election this year may still play a role.
‘This is a political year, and sometimes you get political stimulus rather than economic stimulus,? he said. ‘There is certainly a problem with the housing crisis and foreclosures. My expectation is there will be more from Washington about helping the housing market because it’s an election year. Whether it helps or hurts the situation will be difficult to assess.?