Home Economics

Scenes From the New Recession in Knoxville

Daru Burdge of Consumer Credit Counseling Service: 'Typically we see people for three reasons. One is that the person is going through the bankruptcy process. ... The second reason is that they are delinquent with a house payment, or a lender has sought action against them. ... And the third is credit card debt.'

Photo by Sheena Patrick, Sheena Patrick

Daru Burdge of Consumer Credit Counseling Service: "Typically we see people for three reasons. One is that the person is going through the bankruptcy process. ... The second reason is that they are delinquent with a house payment, or a lender has sought action against them. ... And the third is credit card debt."

National headlines tell of record-breaking unemployment levels, Ford, Chrysler and General Motors teetering on the verge of bankruptcy and lobbying for federal support, waves of home foreclosures, large banks failing, stock markets in cruel decline here and just about everywhere else that matters. Oil and gas prices now fluctuate for reasons that seem to have nothing to do with supply or demand, and though unleaded is below $2 a gallon as this story goes to press, no one can relax much after the $4.99 spike in September.

In some ways, Knoxville is doing better than the national trends. Nationally, unemployment is 6.5 percent and rising. Some forecasters expect it to peak around 10 percent. Though Tennessee suffers from 6.9 percent unemployment, Knox County has one of the lowest unemployment rates in the state, at 5.3 percent. (That reflects 12,020 workers unemployed. The figures reflect September, 2008 Tennessee Department of Labor statistics released in October. Updated, higher figures for October are expected to be released while this issue is on the stands.) Such numbers are cold comfort. It’s certain that you and others you care about are affected. Even if your own situation is stable, you probably know people at risk of job or home loss, or living in diminished circumstances.

Trying to find the big picture beyond the mixed meanings of statistics, we spoke with Knoxvillians who see the local economy from a wide variety of perspectives. Here’s how the recession rests upon folks you know. Some are getting by, some are not, and some are actually doing better in spite of the crunch.

DOLLARS AND SENSE

On a chilly November evening at the Cansler YMCA, off Jessamine Street, folks are still getting used to the fact that it’s now dark at 5:45 p.m. The non-profit Knox Housing Partnership has organized a free foreclosure counseling workshop. At a half-dozen tables, experts offer one-on-one advice on topics ranging from the tax complications involved in foreclosure to homeowners’ legal rights.

Marcy Frankel and Daru Burdge are here to represent Consumer Credit Counseling Service. They acknowledge that the name of their group is perhaps too similar to the predatory debt consolidation services that advertise their toll free numbers on talk radio. But CCCS is certified by HUD to advise on housing and financial matters. If you dial the HOPE Hotline (888-995-HOPE) touted by Oprah and Dr. Phil, you stand a 1 in 10 chance of being connected to Frankel, Burdge, or one of their colleagues.

Although CCCS has an online presence and offers many of its services over the phone, Burdge, CCCS president, says gatherings like this are exactly why the group operates offices in cities like Knoxville.

“The reason we have local offices is so we can offer the services locally,” she says. “We still want to be available to meet face to face for those who aren’t technologically savvy.”

There is an unusual tension in this meeting room. The advisors strive to seem congenial and approachable, and there’s free pizza and soda. Those seeking advice, men and women, some in dress clothes and some in dungarees and work uniforms, are smiling but seem terrifically fragile. They are speaking with strangers about what may be the worst thing imaginable, besides grave illness or the loss of a loved one.

“Typically we see people for three reasons” Burdge says. “One is that the person is going through the bankruptcy process. It’s mandatory that they attend a counseling session. The second reason is that they are delinquent with a house payment, or a lender has sought action against them. Those are relatively new. And the third is credit card debt.”

According to Burdge, the current financial crisis as many people are experiencing it is not so much the result of a stock market glitch as it is an ill-advised widespread lifestyle.

“We promote an earn-and-spend economy,” says Burdge. “Then the bottom fell out. Even people who had good budgets in place are having a hard time affording gas and necessities. Think about that stimulus package. What good was it to give people that money, then encourage them so strongly to spend it immediately?

“I worked with Nine Counties-One Vision. One of the things I found very interesting is that we’ve known for seven or eight years that the trend for the majority of households is living from paycheck to paycheck. They’re just one mini-disaster—anything from car trouble to a failed furnace—away from financial disaster. A survey completed this June showed that 68 percent of Americans have no emergency savings fund.”

BIKE LANE BOTTLENECK

With gas prices swinging high and unpredictably, you might imagine that this would be a good time to own a bike shop. People are switching by choice or necessity from petroleum to human power. A growth market, right? Yes and no.

Tennessee Valley Bicycles and the Bike Zoo both report typically strong sales over the summer, but saw a greater increase in repairs, new tires, and tune-ups for bikes coming out of retirement. So even though there are more bicycles on the streets, that trend is not a goldmine for anybody in particular.

“Greenlee was my maternal grandmother’s name,” says Conrad Majors, the current owner of Greenlee Bicycle Shop on Broadway, which is 108 years old. Majors himself may be the best advertisement for his product; he’s 72 years old and still bicycles.

“I noticed we had more sales among the students,” he says. “They want used bikes. I did notice a bump. Summer sales are always heavy, so it’s hard to tell.

“I think the students have put their cars up. That may change now that gas prices are back down.”

On the subject of bicycling out of necessity, TVB owner Scott Smith cites an article he read recently in a trade magazine. It describes a worst-case scenario of unaffordable gas, and streets full of inexperienced bicyclists on bicycles in poor condition.

BALMS AND DISTRACTIONS

The standard and perhaps easiest reference for comparison with the 2008 recession is the Great Depression of the 1920s and ’30s. Black and white photos come to mind of unemployed workers and displaced farmers bumming smokes and passing pints while idling around soup kitchens. Are these decidedly troubling times knocking neighbors off the wagon? Again, it’s hard to say.

“I haven’t seen that people are smoking more,” says Buffy Miller, manager of the Smoke Stack on Chapman Highway. “The biggest jump I’ve seen is people who used to buy cigarettes going to rolling tobacco. You can save money that way. And some of the rolling tobaccos are better than what you’ll find in some filtered and packaged cigarettes.

“I’ve also seen folks changing brands. If they smoked Camels or Marlboros, now they might be trying bargain brands.”

Little John’s Liquor Store on Magnolia Avenue shares a parking lot, lineage, and owner with Scruggs Barbecue, which has the larger sign of the two businesses. Little John’s liquor license dates from 1933, when Prohibition was lifted.

“This economic downturn is the first time that I’ve seen people really buying very little,” says Janet Roberts-Morgan, the current owner. “And they’re buying very inexpensive products.”

“I’m the Queen of Cheap,” she says. “I sell only small bottles and miniatures. You might want to ask someone else.”

The manager of an upscale Knoxville spirits shop in a different part of town, who asked that he and his store not be named in an article that wonders whether Knoxvillians are drowning their financial sorrows in alcohol, says that sales are in fact up over his counter, but it’s impossible to pin it on the economy.

“You’ve got more people moving to Knoxville,” he says. “And prices are going up. Here, I’d like to think that we’re doing better business because we’re impressing and earning more customers. When money’s tight, people become more discerning about what they buy, and where. That raises the level of competition for anyone who has something to sell.”

Tennessee’s Department of Revenue, in Nashville, reports growth in alcohol-related income from 2007 to 2008 that is consistent with inflation, population changes, and normally desired growth. In an official written response to our query, the office says, “People tend to shift buying patterns due to a difficult economy. It appears that consumers are putting off large ticket items such as automobiles and durable consumer goods. However, the challenging economic situation has not impacted alcohol and wine purchases.

“The 6 percent increase from FY 07-08 comes on the heels on a 5 percent increase from FY 06-07. This seems to indicate that wine and spirit purchases are not significantly impacted by changes in the economy.”

Those who have lived long enough to remember or who are familiar with the history of the film industry also know that the Depression was a boon for film theaters. For pocket change, the under-employed could escape reality for an hour or so of riding the range or harem romance. Are Knoxville’s theaters providing a quantum of solace for those with realities to flee? It would seem so.

“Historically our business has been recession-resistant,” says Dick Westerling, Senior Vice President of Marketing and Advertising for Knoxville-based Regal Entertainment group, via email.  “The National Association of Theatre Owners (NATO) compiled statistics showing that in five of the last seven recession years, box office increased over the previous year while the economy declined. Cumulative box office numbers for this year are comparable to 2007, which was a record year.  More recently, since mid September when the nation’s economy began making headlines, box office numbers have gone up approximately 10 percent compared to last year. Many of us turn to the movies as an escape and perhaps more so when times are tough. 

“Our Knoxville theatres closely follow the national trends. The Pinnacle Stadium 18 continues to be very strong and often ranks nationally.  We have also seen increases in Knoxville attendance as the new Riviera Stadium 8 continues to grow downtown.”

 INSUFFICIENT FUNDS

Jeff Denton owns three East Tennessee recovery companies, including Knox Recovery in Oliver Springs. Recovery is probably the most polite term used for repossession, and the street slang for Denton and his drivers is, of course, repo men.

“We’re covered up,” says Denton, who is well-spoken and polite. Frankly, Denton, or someone he’s hired to represent him, is probably the best you could hope for if you were involved at either end of the recovery process. “They’ll send me after anything,” he says. “I’ve repossessed cattle.”

Denton describes recovery as essentially a diplomatic/negotiation situation, and says it bears no resemblance to what you might see on TV.

“You can’t beat people up,” he says. “You can’t pepper spray somebody. You can’t hold somebody back while you repossess their vehicle.

“I require my drivers to respect the debtor. They are not allowed to carry weapons.”

Denton says that last year Knox Recovery owned two trucks. Now it owns six trucks, and they’re on the road seven days a week. Again, these are not hired toughs who make off with someone’s car under cover of night. Denton talks to the people forced to surrender cars they can no longer afford.

“I brought in 40 vehicles one month without using the truck,” he says. “That means I talked to the debtors and persuaded them to give me the keys. It’s basically from people losing their jobs.”

Most of what Knox Recovery recovers goes to auction in other states, in hopes that whoever owned the lien might receive something for their risk. Campers, for instance, go to South Carolina.

BUY LOCAL

“Recession is a good descriptor for what’s happening,” says Jim Clayton, retired manufactured-home magnate and president of the bank and trust that bears his name. (In 2005, Clayton Bancorps opened its home offices in Knoxville, while purchasing a line of banks that has served Tennessee almost exclusively since 1889.)

“It’s bad news and some good news,” Clayton says. “The good news is that regional banks are pulling out due to lack of capital. You can’t take in deposits unless you can support them with capital. We have the edge over other banks because we can add capital.

“Our growth this year will be 30 percent.”

Clayton is an iconoclast in the world of high finance. He was born to sharecropper parents and has become one of the most successful businessmen, and most generous philanthropists, in East Tennessee. When he says he knows what people are going through, he has a different level of credibility than many other bank CEOs might have.

“Let’s say there are two classes of people,” says Clayton. “There are those people who have reserves and a funded retirement. Those people are concerned about the extent of their reserves, because they’ve seen them decline by 40 percent with the stock market. Then there’s the people who are heavily in debt and concerned about their job future, for good reason. Layoffs have been announced and others will be announced soon. Businesses are revising their overhead, revising their headcounts.

“To those who have money, I would tell them that a window is starting to open now. This is a good time to start a structured investment program that could pay off well. I’m bullish and expect the market to improve over the next year. Certainly over the next two to five. We may not have hit the bottom yet, but most analysts agree that by seven years out there will be good growth.

“For the people who have it tough now, about all you can suggest now is talk to your lender and try to work out a different schedule. And adjust your standard of living. If you’re worried about your job security, maybe look into a fallback job you could go to. Understand that you might make less money for a year or two.”

ON THE SHELF

Are people liquidating their valuables in order to buy necessities? Based on streetside signs, one gets the impression that there is a good market for gold in Knoxville these days.

What about first editions and antiquarian books?

“We’re seeing a few more rare and collectible books,” says John Coleman, owner of Book Eddy on Chapman Highway. “But it’s a very slight increase. What we’re seeing mostly is just tired retail stock, books that were over-printed and should have been removed from circulation or sent back to the publishers. People buy those cheap and bring them in after they read them. People are trading more, rather than buying with cash.”

The used-book business is that rare combination of barter and speculation.

“We’re adapting by lowering our prices,” Coleman says. “One thing about used books, once you buy somebody’s book you own it. I might have given somebody five bucks for a book thinking I could sell it for $15. If that proves not to be the case, I still have to sell it, even if it’s for $7.50. Since we’re lowering our prices, our customers benefit. Per dollar, they stand a better chance of finding something interesting to read. It’s slow. But I’m not complaining. I know there are other businesses doing much worse.”

The national trend for booksellers like Coleman is to go virtual.

“Going completely online is always a temptation,” he says. “There have been months this year when our online presence outperformed the store. But I still say the same thing I’ve been saying for 17 years: I want to live in town and work in an open bookstore.”

ELECTROPLATE SILVER LINING

There are probably as many takes on the economy here as there are people. Is there one person at one desk whose job it is to digest all the ups and downs—the foreclosures, the layoffs, the store openings and closings, the people moving here and moving away—and come up with something like a “state of the union?” Yes. Of course there is. Surprisingly, it’s not at City Hall. City Hall sent us to Garrett Wagley, director of communications and government relations at the Knoxville Chamber of Commerce. Interpret this as you will, but the first call to Mr. Wagley found him away from his desk. He was attending a ribbon-cutting at a new business.

“I think we’re facing a short-term challenge,” says Wagley. “We’ve seen a dip in and around Knoxville, but nothing like what they’re seeing in other parts of the country. To some extent that’s due to the large, stable employers we have here that aren’t going to shift their operations. Places like UT, TVA, ORNL. That helps support retail and things like car sales.

“We’re going to feel it as long as the nation feels it. When the swing up starts, we’ll probably swing up a little faster. That insulation works both ways. When things are bad, we don’t dip as deep, but we don’t hit those high peaks either.”

The ribbon-cutting last week was for a new facility at Forks of the River, operated by Green Mountain Coffee Roasters. Wagley says the site will eventually employ 300 people.

“And they’ve got the Volkswagen plant coming to Chattanooga,” he says, referring to the announcement made this fall. “VW will employ 2,000 people alone. And Volkswagen will be needing automobile parts from other suppliers who need not be in Chattanooga. As you can imagine, we’re chasing a bunch of them around. And we already have several auto parts manufacturers here.

“I think a lot of people are concerned about unemployment. We all have to be concerned about that. What I would tell people is that if you have good skills, or use this time to get good skills, then you will be employable. I do feel confident about that.”

© 2008 MetroPulse. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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