Small Businesses Heard Sounds of Recession

By Gordon Tokumatsu
|  Monday, Jan 26, 2009  |  Updated 1:22 PM PDT
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Small Businesses Heard Sounds of Recession

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Small Businesses Heard Sounds of Recession

Brian Kim says he knew something was up 13 months ago. He could hear it in his customers' comments.
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SANTA MONICA, Calif. -- Brian Kim says he knew something was up thirteen months ago. He could hear it in his customers’ comments.

"Price range …what they’re looking for goes lower, lower, lower," said Kim, owner of Newman’s Vacuum and Appliance on Santa Monica Boulevard.

People were simply less likely to spend as much as they used to, said Kim. He added that fellow business owners shared similar stories with him.

When asked if things have gotten worse or stayed the same since then, Kim replied, "It’s worse, of course."

And Monday, Kim’s suspicions were confirmed. The U.S. economy has been in "recession" since December of last year, according to the National Bureau of Economic Research (NBER), a non-profit group of economists in Washington, D.C.

"It explains the pain we’re seeing," said Jack Kyser, senior economist at the Los Angeles County Economic Development Corp. "The high unemployment rate, the slowdown in sales."

Kyser said the government refrains from using the "r" word for various reasons, chief among them: The psychological impact.

"Somebody might say, ‘Gee, I was going to buy something new. I’m not going to do it now because we’re in a recession'," said Kyser.

Government economists are reluctant to push that possibility along, especially in a presidential election cycle.

But there’s no doubt now. Economists say "recession" occurs when there are two quarters in a row of declines in gross domestic product, providing you adjust for inflation.

Kyser said the NBER then adds such trackable trends as unemployment, slumping sales -- even as the holiday season kicked off four days ago -- and personal income declines.

What’s more, smaller businesses are finding it harder to get loans, often because struggling banks are unwilling to offer them. That means some merchants - unable to pay employees or operating expenses - may be forced to shut down.

Many business owners are already looking forward to that other "r" word: Recovery. When will it begin? And how long might it take?

Kyser predicts southern California will come back in geographical increments.

"The end of 2009 looks plausible for LA County; 2010 looks plausible for Orange County; 2011 looks very reasonable for the Riverside-San Bernardino area," he said.

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