By Erik Potter, Post-Tribune staff writer
While the steel industry is no longer the singular component of the Northwest Indiana economy, it's influence is still large.
And that influence is not likely to be positive this holiday season, especially in light of the nearly 500 layoffs early next year at the ArcelorMittal plant in Burns Harbor.
"It couldn't come at a worse time," said 42-year mill Burns Harbor veteran Mike Walters.
With the Christmas shopping season officially begun, mill workers are looking at the possibility of reduced hours and voluntary layoffs, which would leave them with 60 percent to 80 percent of their regular paychecks.
"As far as Christmas shopping, I'm in the fortunate position; my wife's a school teacher, so it's not going to effect me as much as it is other families who are supporting themselves on one good mill job," Walters said.
Wider impacts
Beyond just the steel market, widespread insecurity about the economy and employment has put consumers in a cautious mood.
Darrel Libel, the manager at Sun Appliance & Electronics in Valparaiso said he's noticed fewer middle- to high-end purchases of appliances and electronics this season as consumers move instead to no-frills washers, stoves and TVs to conserve their cash.
"Probably the biggest change of late is people are coming in saying, instead of looking for the best product, they're looking for the best price," Libel said. "In the past there were other issues; now, it's, 'How much does it cost?'"
The instinct of everyone, from the big banks to the small retailer to the individual shopper, is to hoard cash during bad times. This drop in economic activity can then itself become a drag on the economy. This is the phenomena President-Elect Barack Obama cited Monday as the reason a second stimulus package is needed.
And it's a phenomena Valparaiso University's Assistant Economics Professor Daniel Saros says is very real.
"Drops in demand often have a multiplied impact on overall spending," Saros said. "It sets off a chain reaction of spending cuts throughout the local economy. ... I don't think that it's too unreasonable to think that workers anticipating layoffs in January might scale back spending dramatically just based on those expectations."
Shaky to start with
But even if mill workers have to put a lid on their spending over the next couple months, it would only be piling on to an already major trend toward consumer thrift.
Revised numbers from the U.S. Commerce Department released Tuesday showed consumer spending fell even lower than initially estimated in July, August and September, dropping 3.7 percent versus last year. Initial estimates for consumer spending in October, released Wednesday, show a 1 percent drop for the month.
With consumer spending making up 70 percent of the economic activity in the United States, those numbers paint a gloomy picture.
"Looking at the first quarter of 2009, we have an aggressive advertising program, but we think our business will suffer somewhat due to the economics of Northwest Indiana - and that's due to the mills," said Mel Goldman, owner of the Ace Hardware in Gary and group leader for eight Ace locations in Northwest Indiana. "Gary does not have as many (mill) jobs as they once did, but I truly believe that there's an entire ripple through our community if the mills do indeed lay off the number of people they're talking out. ... Chesterton, Portage - they're really going to feel the pressure, maybe a little more than I would."
Whether all the economic worries turn into realities, however, remains to be seen.
"I think media hypes that and makes people afraid to go out," said Chesterton Dunelands Chamber of Commerce President Bonnie Trout.
But media-inspired or not, Trout said she sees severe weakness in the current market.
"I talk to the retail people a lot, and their business has definitely been impacted. ... People are just not spending like they have in the past. So who knows what happens going into (next year), especially with retail. The first quarter is usually dead - how much more dead can it get?"