A year into the worst economic crisis since the Great Depression, Sacramento is undeniably starting to feel the hurt
In the green, open space of southern Elk Grove is an image of the Sacramento region’s future. There, on 105 acres of land, rests a skeleton.
The skeleton is made up of concrete blocks and steel beams, topped by a few corrugated metal roofs. The beams stand in geometric patterns, Elk Grove visible in strips through the lattice. Silent. More than 1 million square feet of planned shopping mall. Abandoned. The skeleton is surrounded by chain-link fence. But the building equipment, the construction workers, even most of the security guards are gone. If there is life inside, it’s hiding. Perhaps there are some homeless squatters—partially constructed buildings make for good shelters; unfortunately, they’re also notorious fire traps—or nesting animals. But they’re keeping quiet.
Until the early autumn, more than 230 construction workers were employed at the site, earning between $25 and $35 per hour, with benefits. Then, when the financial crunch hit, the developer, Chicago’s General Growth Properties, pulled the plug. “They said they need to wait,” explains Matt Kelly, business manager of the Sacramento Sierra Building Trades Council, an umbrella group for unionized construction workers, as he drives his gray Ford Explorer slowly past the fenced-off remains. “They didn’t want to open the stores up in a poor economy. They told the contractor to stop the work and basically mothballed the project.” Now the Elk Grove Promenade is deserted. In theory, when the good times return, the mall will get the go again; in practice, that’s very likely just a pipe dream.
East of the city, on the outskirts of Roseville, a similar scene holds. A partially built hotel add-on to the Thunder Valley Casino is also eerily quiet, huge building cranes motionless against the suburban sky. As with the abandoned mall, so with the multistory hotel: Everything’s reinforced concrete girders and beams and open space where the walls should be. It looks like a scene from a bad B-movie, where a community has been abandoned all of a sudden as malicious aliens descend from outer space. Through August, the crews were going like gangbusters, putting in six 10-hour shifts per week. Now: nothing. Up to 300 skilled workers were laid off when the hotel project was put on ice.
In strip malls throughout the Sacramento region, vacancy signs have proliferated.
The Mervyn’s department-store chain is going out of business, taking nine large regional stores out of action; Circuit City’s in bankruptcy, as is Linens ’N Things; and many other chains are also in crisis mode. As of early November, nearly 9 percent of the region’s major shopping-center space was vacant; the Christmas holidays now past, that number could easily head further south. Expansion plans for Lowe’s and Home Depot have been put on hold. Auto dealers from Elk Grove Ford to the Great Valley Chrysler-Jeep-Mazda-Isuzu dealership on Fulton Avenue, from Paul Blanco’s Chevrolet lot to the Auburn Nissan dealership, have all bellied up. And given the current travails of American car manufacturers, this is likely just a foretaste of more closings still to come. That all adds up to an awful lot of vacant commercial real estate.
Drive out to many of the city’s suburbs, to communities strung along the Sacramento-Stockton routes in particular, and you’re looking at levels of home foreclosure and abandonment amongst the very highest in the country. Perhaps as a corollary to this, stop under freeway overpasses or spend time exploring river parks, and you’ll notice that there’s an abnormally high number of people living in makeshift homes barely protected from the elements these days.
The moldering corpse
First there was the housing bust; then there was a period of roaring inflation triggered by out-of-control oil prices; then the financial system collapsed like a house of cards; now the manufacturing sector is in the doldrums, and instead of inflation, the country’s in the early stages of deflation, that rare moment when consumer prices actually fall month on month. Put it another way, we’ve run the gamut from stagflation to depression in a matter of a couple years.
“Perhaps it’s the rise of the Internet and jet travel,” says Jock O’Connell, international trade and economics adviser at the University of California Center in Sacramento. “All of the trends of the past now move a lot faster. We see not only time being compressed but these enormous [economic] oscillations. Like commodity prices over the past year.” Shake up the economy that much and a whole bunch of structures are bound to buckle. Hence all the empty real estate in town.
This is the geography of Sacramento one year, maybe two into the worst economic crisis since the Great Depression. (The duration depends on whether you consider the housing bubble bursting in 2006 as the start of the recession or merely a prelude to it.)
It is also a harbinger of things to come. Over the next year, despite months on end of emergency interventions both from Congress and the Federal Reserve Board, most economists predict the country’s economic health will continue to worsen. Absent nearly $1 trillion in federal stimulus spending, President-elect Barack Obama’s economics team have concluded, the national unemployment rate will rise above 9 percent and stay there for years to come.
A year ago, California’s unemployment rate was 5.7 percent. It’s now more than 8 percent—and that doesn’t count the approximately 6 percent of the working-age population on welfare or those who have simply given up actively looking for work. Add them in and the jobless rate in the state is already getting on for 15 percent.
Two years ago, Sacramento posted 4.7 percent unemployment. A year later, at the end of 2007, the region’s unemployment rate stood at 5.5 percent. By September of this year, it was 7.4 percent. By October it was 7.9 percent, making it the worst employment environment since 1994. By November, as national employment numbers fell off a cliff, it was more than 8.1 percent, and slightly higher within the city limits. From October 2007 to October 2008, the region’s information industries shed 1,000 jobs; manufacturers shed 1,200; financial employers laid off 2,300; the leisure and hospitality sectors hemorrhaged 3,000 jobs; trade and transportation (a sector that includes truckers and warehouse workers) reduced their payrolls by 4,200; and 4,400 construction workers lost their sources of income. In fact, the only employers hiring more personnel were the education and health sectors, farms and the state government—which itself is now under such severe financial stress that it will likely have to start laying workers off, too, sometime early this year.
Not surprisingly, job-training centers are inundated with clients. Since 2006, Sacramento Works, the unit within the Sacramento Employment & Training Agency assigned responsibility for linking the unemployed up with new opportunities, has seen a more than 50 percent increase in the people coming through its doors on Del Paso Boulevard for help. When Blue Diamond almond processors advertised a handful of jobs in the $8- to $10-per-hour range, hundreds of applicants were already lined up by 6 in the morning. “What we’re hearing from our employer-services staff is that the number of job orders has gone down,” explains Robin Purdy, deputy director of workforce development for Sacramento Works. “The problem is how to move folks who are laid off from retail, finance, construction, and give them the skills to be competitive in whatever is the next thing.”
Six months from now, if things continue to head south, there’s a pretty good chance that the official unemployment rate will be in double digits, says Purdy’s colleague Terri Carpenter. Exactly how high or low it will go depends largely on whether federal stimulus dollars released by the incoming Obama administration succeed in putting people back to work, since it’s clear the private sector isn’t going to rebound in the short term.
The last time the region had more than 10 percent unemployment was in 1984; in February of that year, according to the state’s Employment Development Department, it peaked at 10.2 percent. (Data from that period excludes Yolo County; today, Yolo, along with Sacramento, El Dorado and Placer counties, is considered a part of the metropolitan area.) If we head much further into economic decline, if we shoot past the 10 percent unemployment threshold, we’ll be looking at an economic cataclysm that no American under the age of 70 will have lived through before.
What we are witnessing is an extraordinary remaking not just of individuals’ careers and life prospects but of the actual economic geography of cities like Sacramento.
Boosters like to talk of Sacramento being remade as a hub for clean/green technology, for education and for the health-care industries. The Chamber of Commerce touts OptiSolar’s decision to expand a solar-panel manufacturing facility in McClellan Park—although the status of that expansion is currently in doubt—as well as Siemens Transportation Group’s planned expansion of its Watt Avenue facility for producing light-rail cars. They talk of a network of growing community colleges wired to retrain retail workers and other unemployed laborers for the challenges of a new green economic revolution. They applaud the opening of Universal Technical Institute, a large automotive technical school in Natomas, in 2005. And they laud the Philadelphia-based Drexel University for recently deciding to build a large campus just outside of Sacramento. They talk of major health-facility expansions, ongoing despite the construction slowdown. Existing hospitals are adding wings, new hospitals are being sited in the region and UC Davis is planning to build a new nursing school in Sacramento.
For the boosters, the end of strip-mall Sacramento is a good thing, a gateway to more dynamic growth based around more socially meaningful industries.
Can these new jobs replace the ones lost over the past year? “In the short term, probably the answer is no,” says J.D. Stack, CEO of the Sacramento Area Regional Technology Alliance. “In the longer term, we believe the technology sector has great potential to be an engine of economic growth in the region. I would say two or three years out, things should be improving. And in the longer term beyond that, I think we have a pretty bright future for our technology sector here.”
In 2005, the area was home to 29 clean-technology companies; today it has about 100. Years from now, if Stack’s vision is right, it will be a hub for literally hundreds of startup tech firms—many seeking to capitalize on California’s Senate Bill 1, the Solar Initiative—and also larger, more established ventures. In a sense, it will be to clean tech what Silicon Valley was to information technology. “Technology can grow the pie,” says Stack. “And it pays higher-than-average wages, so the dollars filter through the local economy to secondary businesses, like retail and cars and restaurants.”
For Tripp Kuehnis, of GNT Solutions—a firm that provides high-end computer services to small businesses—the worse the short-term prospects for the local economy, the better the long-term picture. “It’s almost like a survival of the fittest. Evolution. I don’t think that’s a bad thing. It’s a good thing in the long run. In the short term, a lot of people are going to lose their homes. But [in the long run] we’ll see a lot more fiscal responsibility in our youth. That’s a good thing. It’s a great opportunity. When the Depression came along, we had more millionaires after the Great Depression because they were making better products. We’ll see that again. But it’ll take a specific type of character who can weather the storm. Unfortunately, not everyone can be a chief. We’re going to see a lot of people have to accept the $9-, $10-an-hour jobs and not be so picky.”
In part, these claims are true. Technology companies are being drawn to Sacramento and its environs. After all, it’s a government hub in a state that leads the world in passing green technology and pollution-reduction mandates, and its real estate is more affordable than that of more established technology centers in California. And the winnowing process is ensuring that the companies that survive will ultimately emerge stronger from the experience and better able to move into emerging markets.
But a few startups and a whole bunch of booster talk ain’t going to solve the short-term crisis. And as John Maynard Keynes, the great economist of the 1930s was reported to have said when arguing for more aggressive government intervention to break the impact of the last Depression, “In the long run, we’re all dead.”
Feds one, state zero
If the private sector can’t generate the jobs, federally funded projects will have to take up the slack. Obama’s team has proposed releasing huge funds to move American industry into a green age, to rebuild schools, to shore up crumbling roads and sewers, to boost Internet connectivity in rural areas and so on. It’s an ambitious program, arguably as ambitious as the public-works programs at the heart of Franklin D. Roosevelt’s New Deal.
And yet, it might not be enough: In a state like California, it’s not just the private sector that needs to be stimulated; the state-government apparatus itself, victim of decades of dysfunctional politics and irresponsible decisions on taxation and spending, is also teetering on the edge of financial collapse.
As a result, the feds might well channel billions into ready-to-go infrastructure projects; but even while that money’s coming in, state money is still evaporating. California’s political leaders are busy trying to work out how to shed tens of billions of dollars from its budget. And inevitably that’s going to result in state layoffs and job attrition. If deals aren’t cut soon, it might even result in the ugly spectacle of the state paying vendors in IOUs instead of usable cash.
In other words, the federal dollars might prop up some of the jobs shed by the private sector, but they won’t also sustain all of the state jobs put on the line by a stalemated Legislature. The last round of education cuts earlier this year resulted in 10,000 education support staff being laid off statewide, according to David Low of the California School Employees Association. Additional cuts are likely—if Republican legislators have their way on a truly epic scale—and Low believes these will result in “very painful bloodletting.” In the Folsom Cordova Unified School District, for example, nearly 100 school-bus drivers have had their hours cut; some now work less than four hours a day, making them and their families ineligible for health benefits. Some school-bus drivers are literally paying over their entire remaining salary to stay insured on the plans they used to receive automatically as a part of their job and which they now have to buy into as their hours fall.
Last year, six members of the local chapter of the School Employees Association qualified for Christmas aid from United Way. This year, 28 received aid, and, says chapter president Stephen Hanson, “I could have doubled that number. Over half of the 28 are coming out of the transportation department, because of the reduction in hours. They got hit pretty hard. Two single mothers in the union are using the local food closet. Two couples have moved in together to split costs.”
In previous recessions, Sacramento was somewhat protected from the fallout by the fact that so many of its residents worked state jobs. This time around, that might prove to be a poisoned chalice. “In Sacramento,” says O’Connell, “state government’s the equivalent of Detroit’s auto industry. State government’s the big player here, and state government is in need of its own bailout.”
And none of this even takes into account the city of Sacramento’s revenue shortfalls. Sactown slashed spending midyear by 20 percent, and yet its budget gap, like that of the state, simply refuses to go away. As the downward spiral intensifies, more cuts will likely be coming in 2009, and that means more jobs will be lost and fewer services provided.
Federal infrastructure money can stop some of the bleeding, but it won’t be a panacea for long-term local and state failures to tax adequately and spend sensibly.
As the economy deteriorates, and as new federal-state and government-business relationships are negotiated, labor organizations have begun both circling the wagons—trying to preserve existing unionized jobs, especially in the public sector—and also setting out to conquer new terrain. For years, the minimum wage has been squeezed and new jobs have been clustered in low-paying industries such as retail, in particular in nonunion companies like Wal-Mart.
For an increasing number of organizers, the economic crisis marks a turning point: Either organized labor will be crushed by the crisis, with remaining well-paid union jobs going the way of the dodo; or, after 30 years of being a punching bag for conservative economists and politicians, it will experience a rebirth.
Talk to Labor Council members in Sacramento, and you’ll hear an edgy, angry language that in some ways sounds like words echoing down from an earlier, more industrial era. People want to unionize big-box stores like Wal-Mart; they want to bring the unions to Sutter Health, the region’s one nonunionized hospital system; and they want to protect union benefits hard won but now under threat in the public sector. These days in union circles, you’ll hear an analysis of how power is divided, of how winners and losers are generated, that wouldn’t have gone amiss in a Labor Council meeting back when FDR was in the White House.
“The problem is fixing what’s broke after 35 years of deregulation,” argues Bill Camp, executive secretary of the Sacramento Central Labor Council. “An unemployment rate of 12 percent just scares the shit out of me. And I really think that’s possible. We don’t change policy without changing the distribution of power. If you want to change the policies of the federal government, you have to look at the fact that we don’t have enough power for working people.”
Below the radar, we are starting to see the re-emergence of a confrontational, class-based political discourse not seen in this country since the end of World War II. It is, if you like, the side product of scarcity, a fighting over increasingly limited resources in a post-abundance era. For despite the boosters’ belief in a green, clean, rejuvenated tomorrow, in the short term, the prognosis for Sacramento isn’t pretty: At the very least, a year from now unemployment and poverty will be worse than they currently are, and economic activity, at least that generated in the private sector, will be even more subdued.
In reality, far more jobs are being lost in residential and commercial construction, for example, than are being created at solar-panel factories and staffing new hospital wings—and that’s likely to continue to be the case for many years. “It’s great that we’re doing high-tech,” says Camp, “but do I think that’s going to be a solution to the evaporation of the retail industry? No. Forty-two percent of economic growth is in retail. When you’re losing all of these shopping malls and the retail trade business, that won’t be made up by whatever happens in the high-tech industry.”
The result will be, Jock O’Connell says glumly, rising homelessness and poverty, and growing social tensions. “Higher crime, more family dysfunction, less ability to deal with this issue because of a lack of revenue to pay for police and social services. So, a coarsening of society. Gun sales will go up. Drug usage will go up. All the normal pathologies will be accentuated.”
The library gallery at CSUS is currently exhibiting a series of Dorothea Lange photos of the Sacramento region during the 1930s and early 1940s. The black-and-white photos show powerful images of gaunt, faces-etched-with-worry farmworkers; grim homeless encampments under bridges; and sprawling shantytowns. There are photographs of old trailers, broken-down wooden shacks, canvas tents; there’s one of the PG&E power plant in Sacramento, its stacks surrounded by makeshift shelters. There’s another of Louis’ Camp, inside the city limits, its hovels bizarrely institutionalized, with homemade fencing surrounding the buildings and cars parked on the dirt streets.
“[Preparations for] this exhibit started in earnest about two-and-a-half years ago,” explains Joe Moore, a 60-something-year-old photographer and exhibit curator whose family worked the fields of the Central Valley a decade after the Great Depression. “I had no idea the economy was going to go the way it’s gone. It happens to be a very timely way to look at the Central Valley. For the most part, the student response has been [that] this is something from the past and we’re not really connected to it. But some really make the connection.”
This Christmas season, the United Way’s Operation Christmas Basket provided toys and food to close to 300 on-the-skids union families, families whose breadwinners were either out of work or down to fewer than 32 hours per week. That was about double the number who qualified for the baskets in 2007.
“It’s tough times across the country,” explains United Way labor liaison Tom Lawson. “I’ve got people who instead of having two full incomes coming in are getting by on a partial income from one of the breadwinners. I know people who’ve had their hours cut from 32 hours down to 24 a week in groceries. And you’re not getting by on 24 hours a week. Some people have lost their dignity. It’s preservation over pride, but it’s hard for people to stand up and say ‘Gee, I need a little help over the holidays.’ I’ve had people end up on the streets. There’s no housing for them. It’s just rough. I’ve had families, three or four people, living out of station wagons.”
In the early 1930s, Americans didn’t know they were living through a Great Depression. It was only years into the crisis that its historical scale became apparent. The same may well be true in 2008 and 2009. We don’t know yet if we’re muddling through a nasty but manageable recession, or if we’re on the cusp of something altogether different. What we do know is that the Sacramento that emerges from the wreckage will look and feel a whole lot different than the city we lived in during the now-departed flush times.