No rebound in sight, say local businesses

Published 11:29 pm Tuesday, October 6, 2009

The recession that swallowed a net total of 6.9 million jobs nationwide and shoved Washington state’s unemployment rate up to 9.2 percent is predicted by finance experts to wind down by the end of the year.

But small-business owners in Snohomish County, who are on the front lines of this economic crisis, have a different perspective. They say that the end is nowhere in sight, pointing to unemployment as the leading cause for sluggish sales.

“It’s awful,” said Angela Rinaldo, owner of Laughing Ladies Cafe in Mill Creek and Shoreline. “I just don’t know what’s going to happen.”

Jobless numbers help tell the story. More than 328,000 Washingtonians were unemployed as of last August, according to the state Employment Security Department. In August, unemployment rates in Washington hit 9.2 percent, an increase from 8.9 percent in July — a dramatic shift from 5.4 percent in August 2008.

Locally, unemployment rates in Snohomish came in at 9.6 percent, an improvement of two-tenths of a percent, thanks to new jobs in government, hospitality, construction and transportation.

The local outlook

Small-business owners point to their own business slippage, ranging from 10 to 50 percent, as a sure sign that a recession rebound has yet to begin.

“Lack of consumer spending, the unemployment rate continuing to rise, and the threat of Boeing leaving the area are all barriers,” said Jan Conner, director of operations for Northwest Country Management, which operates Harbor Inn of Edmonds. “I think the other shoe is about to fall on commercial owners’ foreclosing and their buildings going back to the banks.”

Statistics don’t tell the whole story, added Brad Vorhees of Day by Day Gourmet in Lynnwood.

Unemployment statistics only cover people still receiving benefits, not those whose benefits have run out and who are no longer looking for work.

“By true measures, the unemployment rate is above 15 percent,” Vorhees said. “That will continue to be a huge drag on any recovery. Combine that with the inevitable tax increases that will come because of the catastrophic amount of new debt floated by our leaders and, frankly, it looks pretty gloomy to me.”

A new focus on frugality

Consumers are re-evaluating how and where they spend their money, business owners say.

Dr. Les Griffith, co-founder and president of Nouvelle Weight Loss Systems in Lynnwood, reported sagging sales, as customers have trimmed their purchasing, coupled with a significant drop in new customers.

The Harbor Inn’s Conner said the hotel is seeing regular clients less frequently and guests are sharing rooms rather than booking separately.

One restaurateur in Edmonds, however, is bullish on a rebound.

“Revenues are definitely up since last year’s sales and that is a very positive sign,” said Niko Raptis, owner of The Loft &Lounge. “We opened last year right in the midst of the downfall when everything was going wrong, including the weather. I believe we are still in a recession, but I think we have already hit rock bottom.”

Rinaldo of Laughing Ladies Cafe has seen a 30 percent to 40 percent dip in revenue when comparing this year with last. Days that once brought in $800 now bring in $500.

With students making up approximately 20 percent of her customer base, Rinaldo expected a drop in sales during the summer with a quick recovery come fall. That uptick hasn’t happened. She has cut costs by closing on Mondays, closing an hour early during the week and reducing salaries — and she’s not predicting an end to the hard economic times.

“I’m just not seeing it,” she said.

Earlier this summer, Rinaldo opened her second Laughing Ladies Cafe. The new Mill Creek branch houses the commercial bakery and the coffee roasting plant for items sold in both locations. That operation is financed through a group of investors. To cover two months of expenses, including labor and ingredients, Rinaldo said she had to wipe out six months’ worth of reserves to keep the doors open.

“It’s all a balancing act,” she said.

Enterprise editor Mina Williams contributed to this story.