There is blood in the streets of America’s businesses both small and large. On Wall Street, the collapse of financial institutions, the bailouts of Freddie, Fannie, Bear Sterns and now AIG. 500 point daily drops in the Dow Jones Industrial Average with investors fleeing to cash and US treasuries. Sure there has been the rapid decline of the price of a barrel of oil, but that has been the effect of sinking worldwide demand (and strengthening the US dollar), which are ripples from the US economy swelling to tsunamis world wide.
Sound familiar? Unless you have been under a rock it has been hard to miss. Even The Daily Show’s John Stewart is taking a break from beating up Sarah Palin to focus on the economic forces playing out in front of our very eyes.
On Main Street, here in the Red River Valley, community leaders and spending scads of time and money trying to convince citizens that all is well. And, for the most part, they are right:
- $130 dollar oil has reopened the capped stripper wells in the western part of the state, spurring the drilling of new wells and huge land deals such as the Bakken shale formation.
- The same high price of fossil fuels and government tax credits have spurred growth in wind energy boosting many of the areas manufacturers who develop the towers, blades and components. Many of the completed wind turbines won’t travel very far as the valley has some of the windiest accessible terrain in the US including the Pembina Escarpment. The glaciers that carved this valley flat leaving rich soil deposits also had the latent benefit of leaving vast barrierless plots of land to collect wind gusts and transform them into electricity. While transmission remains a formidable barrier the future for wind energy here in the Great Plains is bright.
- A final latent benefit of high energy prices and government subsidies pushed the demand for ethanol to new heights. Many company laid out grand plans for new multimillion gallon plants only to be hampered by ever higher corn prices delaying construction on some projects and tightening the belt of others.
- The same demand for corn and other cash crops have produced record farm incomes and record prices for farm land the valley. After years (decades perhaps) of living hand to mouth on farm subsidies the reward has been reaped for area agricultural industry. We will see how long it lasts with record increases in inputs.
- Manufacturing exports are up sharply due to the weak US dollar and strong demand for agricultural implements.
The boom however has not been shared by all sectors of the local economy. Retail and service companies have slowed an average of 15%-20% or more according to an informal study of my active client base. At least once a week I receive calls from worried shop keepers proclaiming that this last summer has been the worst they have experienced. Trips to the lake and students returning home have always had a dampening effect during the summer but school is officially back in without a bounce reported.
Commercial realtors are experiencing longer than average listing days with more spaces coming on the market weekly. New developments that filled up in a couple of months following completion are now half or more empty and the phones are far from active. Office space however appears to be steady as usual with lead by the continued demand for essential services. Coffee houses, flower shops, restaurants and retail stores are burdened by the lions share of American’s belt tightening. Essentially, anything related to discretionary income is suffering.
How long will this last…certainly not as long as the nationwide slowdown but long enough to see quite a few casualties in the marketplace, even here in the valley.