Experts say impact of recession could be minimal, but that's not necessarily a good thing

HUNTINGTON -- Local residents might not feel the pinch of the looming U.S. recession at all.

But that might not necessarily be good news.

Experts are saying the local economy is so lackluster already, that it's hard for it to sink any lower.

"I almost consider West Virginia recession-proof and boom-proof," said Joe Randolph, branch manager of AG Edwards in Huntington. "In other areas, building slows down and unemployment goes up. But in an area that's already economically depressed, I hate to say it, but you can't really kick us in the pants any more than we've already been kicked."

Some of the things that hurt West Virginia and Huntington economically, like not being tied to an overload of thriving industries, also protect it from the effects of a recession, Randolph said.

"If we had some multi-national companies located here, we would feel the impact, but we really don't," he said.

Allen Wilkins, a professor of finance and economics with Marshall University, had similar thoughts.

"I think we're relatively insulated from a big impact," he said. "Marshall is a big economic force in the community, and it's doing fine. I don't think the demand for coal is going to slack off, either."

Wilkins said the coming recession is more linked to credit and the slumping housing market than economic slowdown in industry. Huntington might have seen some local impact in this area with the announcement that the SNE plant, which produces windows for homes, is shutting down in May, costing hundreds their jobs.

But Wilkins said it is more tied to mortgage investments, and speculators not knowing what they had in their portfolios.

"It's surprising to me that the sub-prime mortgage thing got as out-of-control as it did," he said.

Wilkins explained that as the housing market grew, it began to draw interest from speculators, who bought up bundles of mortgages from banks as investments. But many of those mortgages were sub-prime loans, meaning they had been issued to borrowers who were at higher risk of not being able to make their housing payments, leading to foreclosure.

"What they did, is they created slices, and, in the lowest slices, they had some really sub-prime stuff," Wilkins said. "The institutions that invested in these things didn't know what they had, and it created a real cash problem in terms of making loans.

"Banks have found themselves holding a lot of this stuff, and the big investment houses have taken a real dive in the value of their stocks."

What that amounts to, Wilkins said, is banks wanting more security for their loans. With businesses and individuals finding it harder to get credit, business has hit a slump.

"Everywhere that credit is an important lubricant in business, it causes a slowdown," he said.

Economic growth has all but disappeared, companies are reporting big losses and Wall Street had been tumbling day after day until Wednesday's hopeful talk about a government economic stimulus deal.

Under an agreement announced by the White House and Congressional leaders, individual taxpayers would get up to $600 in rebates, working couples $1,200 and those with children an additional $300 per child. The rebates would phase out gradually for individuals whose adjusted gross income exceeds $75,000 and for couples with incomes above $150,000. Contributions to IRA and 401(k) retirement accounts and health savings accounts would not count toward the income limit.

While local residents said they'll take the money, they questioned whether the plan was really about stimulating the economy.

"You want give me a check, fine, that's wonderful. But, to me, it seems you're trying to buy my vote," said Robert Fisher.

Fisher, a Charleston resident who was having dinner in Huntington on Saturday, said he thinks all the talk of recession is simply about promoting fear.

" 'Looming' doesn't mean anything," he said. "It's like saying there are some clouds looming when it's 90 percent sunny outside."

Gesturing to all the storefronts at Pullman, Fisher said he believes business is doing well locally.

"Look at all that's new," he said. "There will be businesses that stay and businesses that go. There's a looming recession, but it's going to come back."

He also said he doesn't see many signs of a slowing economy with what people are buying.

"Think about all of the money people are spending," he said. "Look at the cell phones, cable television, Internet, new cars; I'm looking around, and everyone and their brother has nice stuff."

But others said they can see a difference in spending habits.

Gary Keesee, who drives a horse-drawn carriage for shoppers at Pullman, said his business has been slumping, and is the perfect example of the ripple effect of recession.

"If people don't have the extra money to spend, they're not going to spend money on us," he said. "And we've been seeing it. It hurts everyone.

"Even with things like gas prices, it hurts us," he added. "People have been saving their money because gas is so expensive."

As for the government's rebate plan, Keesee was skeptical.

"I think it's coming up on election time and they're trying to draw the Republicans back in," he said. "I think Bush has waited a little too long this time."

The Associated Press contributed to this report.