ONCE ISOLATED, GRAND VALLEY BEGINS TO FEEL EFFECTS OF STALLING ECONOMY
The Grand Valley, of late an island of prosperity in a national storm of economic woes, is starting to feel buffeted by the slowdown.
Energy companies have hit the brakes on drilling plans as fuel demand slips worldwide, and the construction sector now is taking the brunt of the storm.
The trickle-down effect is expected to work its way into the retail and service sectors, and the Mesa County Work Force Center already has seen layoffs in the manufacturing sector, Director Sue Tuffin said.
The Mesa County unemployment rate was 3.8 percent in September and 4 percent in October. The November rate comes out later this week.
“I anticipate it will be up, but I’m not sure by how much,” Tuffin said.
The numbers are one thing, reality another, said John Davis of Blue Star Industries, a Grand Junction home builder.
“The government, the city, you guys don’t realize how bad it is,” Davis said of economic conditions on the Western Slope.
Blue Star already has had layoffs and probably will have a couple more as the new year dawns, Davis said.
He’s not alone.
The Marillac Clinic made staff cuts in recognition of the prospect of a continuing downturn in the economy, eliminating the equivalent of six full-time positions, including three full-time employees. The others were part-time employees.
“It’s not like closing the door on new patients at all,” Marillac Director Steve Hurd said.
If anything, Marillac is gearing up to do more with less by cross-training its staff and other efficiencies, he said. Looking down the road, Hurd said, there’s the possibility more people will need Marillac’s services “because of hard economic times. We really have to be proactive and enhance our operational efficiencies right now.”
What it comes down to is “I don’t want Marillac to have to cut back on services,” he said.
Hurd and Davis have company already and will have more, according to a survey of its members by the Grand Junction Area Chamber of Commerce, which found significant pockets of pessimism about the Grand Valley economy’s immediate future. Many respondents, 23 percent, are girding to lay off employees with the new year.
Caution is the word at Mays Concrete, said Dan Roberts, vice president of finance and administration.
To be sure, “We are in layoff mode,” Roberts said. “Several people will be laid off in the next few weeks.”
Still, the company is going into winter “with a reasonable backlog, and it appears that the work is holding.”
Revenue next year likely will be flat, he said, but there’s “an amazing amount of stuff that’s coming across the desks to bid. It’s not black out there. We’re just being very cautious and conserving resources. We recognize it all could stop with a phone call.”
As 2009 approaches, “some revisions are going to be necessary,” said Chris Reddin, director of the Business Incubator Center.
“Revisions,” Reddin said, generally means layoffs.
Just how deep and how long the economic slowdown will last remains to be seen.
But at the work force center where Tuffin works, which is one of the first places laid-off workers head, “We’ve been busier in the last two months than we were all last year,” she said.
“The next couple months will tell us a lot about the direction of the economy.”
The speed at which the economy seems to have reversed has been head-spinning, said Diane Schwenke, president of the Grand Junction Area Chamber of Commerce.
“This year we went from ‘Happy Days are Here Again’ ” as 2008 started, to end-of-year layoffs, she said.
“We went from being the life of the party to the hangover in one year,” Schwenke said.
Some hangovers could hurt more than others, Reddin said. In some cases, employers will have to lay off employees who are more than just hired help.
“We’ve coached these people to develop close relations with their staff,” often people who opted to forgo the possibility of big paychecks in the energy industry, Reddin said. “For our clients, this is not an easy step at all.”
Layoffs, however, can make the difference between a company’s survival so it can hire another day or going under itself, she said.
Threatening as the clouds might be, longtime Grand Valley business people said they have the peculiar advantage of having seen worse.
Davis of Blue Star Industries, who already has laid off several employees, said he’s still selling houses.
“Still, it’s not as robust as it was a year ago,” he said.
Local government could help by holding the line on fees and other costs it controls, he said.
“I think it’s going to take another six months to a year” to revitalize the housing and construction industry, Davis said. “They’ve got to loosen up the mortgage loans for people to get houses.”
The drilling slowdown likely will result in activity by mid 2009 being about half what it was during the past three years in the Piceance Basin, said Carter Mathies, a principal in Arista Midstream Services. The Colorado company provides producers with services such as gathering, treating and handling natural gas, crude oil, water and condensates, and carbon-dioxide sequestration.
Three factors are at play in the energy slowdown in the Piceance Basin and the rest of the Intermountain West, Mathies said: slackening global demand for natural gas and other energy sources; the industry’s inability to raise capital quickly; and the difficulty of transporting natural gas from isolated areas of Colorado, Utah, Wyoming and other western states.
A slowdown could prove beneficial in the longer term, Mathies said, by allowing pipeline capacity to catch up with drilling and reducing the pace of development to more manageable rates. That could mean the region will end up with somewhere between 70 and 80 rigs working in the Piceance Basin, “like we saw in early 2007 versus over 100 rigs working earlier this fall,” he said.
In the meantime, cuts in drilling budgets will play out mostly among contractors in the industry and ripple out from there.
“Real estate, sales of televisions and all forms of recreational vehicles are all going to take a hit,” Mathies said. “Who do you think has been buying the ORVs anyway? It’s the oil and gas guys. They like their toys, they love the outdoors and like to hunt and fish.”
In one sense, the timing of the slowdown isn’t unusual, said Jamie Hamilton, chairman and CEO of Home Loan State Bank and Home Loan Investment Co.
“Oil and gas usually slows down this time of year anyway,” Hamilton said. “It’s a definite hunker-down time for a number of businesses. It affects restaurants, retail outlets, everything across the board.”
There’s nothing like a slowdown to revive old memories, though.
“We’ve already been through one depression” with the bust of the Western Slope economy in 1982, Hamilton said. “What’s another one?”