It’s a bit too early to call the bottom.
But as a new fiscal year begins, “green shoots” might be sprouting through the cracks. The pace of large-scale layoffs has slowed. In May, there were 1,066 mass layoffs in the region. None were announced in June or so far in July. And most of the remaining companies seem stronger – at least profitable – than those that went belly-up in the past 12 months (Circuit City, LandAmerica and Qimonda).
It’s also possible those green shoots are a mirage. More than 50,000 in the region are unemployed, according to May data from the Department of Labor. That is enough to fill the Diamond more than four times over.
And the fallout from job losses, mandatory buyouts and furloughs is begetting more job losses, which is leading to more pain. Small businesses are shedding an employee here and worker hours there, or cutting back on spending, which is slowing demand at other businesses around town. And then there’s the sticky credit situation, which is preventing many small businesses from purchasing equipment or hiring new workers.
For people who live paycheck to paycheck and who rely on credit cards, the tight job market has meant one option: bankruptcy court.
Personal bankruptcies filed in U.S. bankruptcy court in Richmond have risen 120 percent since last year. And the numbers are rising practically month-to-month, from 392 in January to 713 in June. The highest month was April, when 755 people or families filed for bankruptcy protection. That’s more than three times the average per month in 2007.
“I don’t see any change in the day-to-day business cycle to see a slowdown [in bankruptcy] filings as this point,” said Lynn Tavenner, a bankruptcy attorney with the firm Tavenner & Beran and a trustee for the bankruptcy court.
“Our telephones are still ringing constantly.”
Meanwhile, business bankruptcies filings are up from about one business a month in the first quarter of 2008 to three a month for the same quarter of 2009. In June alone, Toad’s Place and Prospect Homes both filed for bankruptcy protection. (You can read about that here and here, respectively) And builders have said they expect a few more like Prospect to file bankruptcy before the economy rebounds.
Tavenner said that she doesn’t keep an exact tally of businesses calling for counsel but that there has been no noticeable slow-down in businesses needing support.
Most small businesses sell to local customers, whether consumers or other businesses. And the economy likely hasn’t turned here yet. The unemployment rate continued to rise in May, reaching 8.1 percent in the Richmond area, about 1percent higher than the rest of the state.
“[Unemployment] will continue to rise until sometime in the first quarter next year before it peaks,” said Will Mezger, chief economist for the Virginia Employment Commission.
More than 20,000 workers are drawing unemployment benefits, according to VEC data.
Richmond has been hit harder than in previous recessions. Some of those dismissed from jobs at Qimonda, LandAmerica and Circuit City have left Richmond for work in other regions. That means fewer consumers for everything from restaurants to dry cleaners. Many of those who are still here are looking for work and spending cautiously.
And although the rate of increase of unemployment has slowed, it will keep rising. Roughly 500 more blue-collar job losses are coming when Reynolds Packaging closes it facilities in downtown Richmond this year.
“Richmond really used to be more or less immune to downturns, because you had a bunch of conservative local and regional companies,” said Mezger. “Over the last 20 years, most of those companies have expanded nationwide and got in trouble like Circuit City, or been bought up by national companies.
“Now when recession comes, we get hit like every one else.”
The city itself is among the hardest-hit localities. Richmond City hit an unemployment rate of 10.2 percent in May. Unemployment in Chesterfield and Henrico was 7.2 percent and 7.5 percent, respectively.
During the past 12 months, employers in Central Virginia have announced they would cut 8,659 jobs through mass layoffs or plant closures, according to state filings. Companies are required to file notice with the State Dislocated Workers Unit if they plan to eliminate more than 50 jobs.
The announced layoffs are more than double the 2,435 announced during the previous fiscal year. More jobs were lost at Qimonda (2,550) and Circuit City (2,491).
MeadWestvaco, DuPont and Reynolds Packaging Group also shuttered local plants and cut jobs this past year. Mezger said manufacturing has been one of the hardest-hit industries, along with construction, motor vehicles and finance.
Trouble at Employment Commission
The prolonged period of continued job loss is not just hitting consumers. It has also started to eat away at the state fund for paying unemployment benefits.
“At the present rate, the Virginia system will probably go broke in the early part of next year if not before,” Mezger said.
As of the first quarter, Virginia had almost $404 million in its unemployment trust fund, and the average weekly payout was $289.42 to each recipient according to data compiled by ProPublica.
So far 14 states have depleted their trust funds and had to borrow money from the federal government to cover benefit payments.
In Virginia, the state is only obligated to make pay benefits for the first 26 weeks. In April, the House of Delegates rejected $125 million in federal stimulus money that would have temporally funded extended benefits for out-of-work Virginians. The legislature did accept $62.8 million to replenish the trust fund.
But with a third of the unemployed collecting benefits and their numbers continuing to climb, Virginia is expected to borrow money sometime soon. States that pay off the loan within a couple of quarters don’t have to pay penalties or interest.
Perhaps one of the most promising signs is the fact that a handful of local companies don’t seem to be in as bad shape as Qimonda, Circuit City and LandAmerica were in before their demise. Now we have a guide to what sick companies look like, and no other in the area seem to be in a death spiral.
Philip Morris already completed a round of buyouts and has not – to our knowledge – started another round. And although Genworth and MeadWestvaco cut personnel, both companies are profitable, and their stock prices are not in the scary zone of trading below $1.
Several companies are also setting up shop, including hummus maker Sabra and European-based insurance company Admiral Americas, which will add more than 250 jobs when fully ramped-up.
Mezger said the expansion of Fort Lee, which will grow from 4,000 to more than 10,000 personnel, will also help reduce unemployment. The expansion will not only create more government jobs but also construction and local services that will crop up to support the base.
Rosalyn Key-Tiller, director of the Capital Region Workforce Partnership, said she is beginning to see a turnaround in the number of people finding jobs.
“We’re just beginning to get our head above water to call back customers that we haven’t seen in a while,” Key-Tiller said, “which usually means they have gotten work.”
The partnership currently oversees four regional workforce centers that offer job search, testing and career counseling.
Key-Tiller said demand for their services has sustained into the summer, with a 15 to 20 day waiting list to see a job counselor.
“Our counselors for the most part are dealing with people more than eight hours a day,” said Key-Tiller.
She said one thing she has noticed is that many people are deciding to pursue new career paths.
“They may not be going back to manufacturing, so they spend time evaluating what other skills are in demand,” said Key-Tiller.
Al Harris a BizSense reporter. Editor Aaron Kremer contributed to this article. Please send news tips to [email protected]
A worthwhile analysis. The answer to the question your headline offers is, alas, no. As this data below shows, this time is different. I’ve left off the City of Richmond to make it more clear that even the typically stable suburbs are being hit like never before. http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&idim=state:ST510000&idim=county:PA510750:PA510700:PA510960&tdim=true We’re at the point where we need to be looking for green shoots. But, there is zero growth and we are beginning to see cutbacks from medium and small firms in the area. Also left out of this analysis (yeah, I know, this is business news, but…) are the cutbacks in state… Read more »