Professional Documents
Culture Documents
by David Stanowski
14 January 2008
The loss of population did foreshadow future job losses, because the
number of jobs in Galveston peaked at 30,387 in 1995, and by 2006 stood at
25,912; a decline of 15%! During this same period, the State of Texas added
1,936,038 jobs; an INCREASE of 21.55%. This means that the number of
jobs, in Galveston, declined at twice the rate as the population!
National restaurant chains have been reporting lower sales for some weeks
as consumers tighten their belts on leisure and entertainment spending, as
demonstrated by these two companies:
While there are some members of this industry group that are doing better
than these examples, the fact remains that the Travel & Tourism Index is
weaker than the benchmark, as are MAR, LNY, and RT, which hardly
suggests that Galveston’s tourism industry is going to help prevent the
local economy from participating in a national recession!
Retail:
The Dow Jones Retail Index (DJUSRT) peaked on 04 June 2007, and it is
now down 23%, so this sector topped before, and it is weaker than the
broad market.
National retail data shows that consumers are running out of money, so
they are focusing their purchases on food, gasoline, and other necessities,
but some people believe that more affluent consumers can save the day.
However, an examination of Tiffany’s (TIF) shows that it peaked on 11
October 2007, and is now down 40%.
The weakness in retail sales is also confirmed by the fact that vacancies at
neighborhood and community shopping centers just hit an at 11-year high.
On the other hand, with Galveston retail sales running far below their
potential, this is probably the one economic sector that has the most room
for improvement, and with a renewed effort to turn it around, could actually
expand during a national recession!
Home building:
The S&P Homebuilding Index (SPHB) peaked on 15 July 2005, and is now
down 80%, so the homebuilders topped long before, and are much weaker
than the broad market!
Obviously, the homebuilding stocks are not giving an indication that this
sector will have the strength to support the Galveston economy.
Financial Services:
This sector includes banks, insurance companies, stock brokers,
Realtors, title companies, appraisers, etcetera. The Dow Jones Financial
Services Index (DWCFSV) peaked on 05 February 2007, and is now down
34%, which means that the financials topped long before, and are much
weaker than the broad market!
The Port:
There is no index made up of just ocean-going-shipping-company stocks,
but the Dow Jones Transportation Index (TRAN) has been leading the
broad market lower since it peaked on 16 July 2007, and it is now down
26%.
The Baltic Dry Index is a number issued daily by the Baltic Exchange, a
London-based organization whose members arrange for ocean transport of
industrial bulk commodities from producers to end users. Every day they
survey brokers around the world to find out how much it costs to book
cargoes of raw materials on a variety of shipping routes. The answers are
then reformulated as the Baltic Dry Index. It tracks the actual cost of
shipping raw materials, by sea, based on real cargo bookings, for the
world's 24 key shipping routes, and is therefore considered a pretty good
indicator of global trade volumes.
On 10 January, the BDI had its biggest one-day plunge since 1989,
plummeting 384 points (4.6%) to 7,949. The BDI is now 28% lower than its
13 November 2007 record peak of 11,039.
Since the general trend in all shipping is down, and the BDI appears to be
collapsing, it is unlikely that the Port of Galveston will be a major boost to
the local economy during a national recession.
Conclusion:
After considering what the stock market is projecting for the major sectors,
of the local economy, there seems to be little reason to believe that
Galveston will weather a national recession better than most areas of the
country, because all of the private-sector components, with the exception
of oil equipment and services, are showing below average strength.
Apparently, some years ago, the city government was in a financial crisis,
so it set off on a course to build up its property tax base. The idea was to
increase its operating income, and to bolster reserves, as well as to
insulate it from the ups and downs of the income that it receives through
sales tax. This plan has been fairly successful, but it has strained the
partnership that the City has with local businesses. Now that it has partially
insulated itself from the local business cycle, the City seems to be
indifferent to how well local business is doing, since it believes that its
fortunes do not depend primarily on sales tax revenues any longer.
This disconnect has created a situation where the City government not
only does not assist local business, but places many obstacles in its path.
This condition can be reversed by identifying the problems that the city
government is creating, using an Ease of Doing Business survey, making
the necessary changes, and then getting the City to build and implement a
comprehensive marketing plan through its agency, the Park Board.
If changes are not forth coming, Galveston will not only experience the
recession that is sweeping across the country, the next leg down in the
decline, that started in the 1980’s, is going to be very painful.