As national economy slows, local businesses remain hopeful

Latasha Webb

Chris Bates doesn’t see too many people shopping lately.

Bates, the assistant manager at CD Warehouse, said he’s concerned about the store’s recent drop in sales.

Business was good in the weeks directly after the Sept. 11 attacks because people look to music for solace, he said.

“But it has dropped off, especially since Sunday,” he said. “That was probably our toughest day.”

Sales were approximately 40 percent lower than usual, similar to those in the summer when most students are off campus, Bates said.

His concerns are aligned with Minnesota’s top economists, who predict the country’s already slowing economy will come to a crawl.

Small-business owners such as those in Dinkytown might be most heavily affected by the economic slowdown, said Beth Allen, a University economics professor.

“Each small business is going to be affected differently,” said state economist and University professor Tom Stinson. “Dinkytown retailers may be hit a little less hard than retailers in more traditional, say suburban areas.”

The economy as a whole might not be growing, but it’s not contracting either. Growth rates have remained the same, said Michele Boldrin, a University economics professor.

“I wouldn’t even call it a recession,” Boldrin said. “A recession means two quarters or six months in which economic activity as a whole decreases.”

But Bates’ report of slowing sales is consistent with Boldrin and Allen’s expectations.

When people hear a recession is coming, they begin to prepare for it and act as though it has already happened, Allen said.

“Anything viewed as an optional purchase, a luxury, will be experiencing smaller sales,” Allen said.

Some Dinkytown cafe and restaurant owners do not expect to experience a drop in revenue.

“I think it depends on the business you’re in. I’d say other coffee shops are going as usual too,” said Toby Mroczek, general manager for the Purple Onion in Dinkytown and Espresso Expose on Washington Avenue.

“People still want a place to study, drink coffee. It’s very different than going out to buy a washer or dryer,” he said.

Boldrin and Allen said Mroczek’s prediction of steady cafe business is sound.

“Cafes and regular stores will do pretty well,” Boldrin said.

“People might not cut back on small luxuries, like sitting in a cafe,” said Allen.

And if they do cut back on those small luxuries, a war could help bring the economy back to normal, she said.

“You don’t really associate wars with recession,” Allen said.

Companies in the right industries are going to flourish, she said. Companies that are defense and security related, sell life insurance, rent movies, or sell newspapers, magazines or gas will see a rise in customer interest, Allen said, because they are associated with increased interest in news, family life, ground travel and patriotism.

Businesses dealing with large crowds or big entertainment shows might notice a decline in demand. Car dealers, expensive restaurants and firms specializing in large household appliances might also experience slower business, she said.

“What’s one person’s luxury is another person’s necessity,” Stinson said. When the economy weakens, each person cuts costs in different areas.

But even though companies in certain industries have laid off workers, Boldrin said there is no need to panic yet.

Usually, after a recession, a company will rehire laid-off workers within the year, he said.

“One month you get $1,000, the next you get $980. That’s the extent to which things will go down on average,” he said. “It’s not some disastrous event where everyone goes bankrupt.”

Both professors and International Style & Tan owner Terri Mau, said consumers ultimately decide who stays in business.

“People have to decide if they want the business to stay,” Mau said. “If they want them to be viable and available, then they have to start patronizing them in Dinkytown.”

 

Latasha Webb welcomes comments at [email protected]