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The Modesto Bee, Calif., David W. Hill column: Hill: Loss of retailer may turn to good
Apr 05, 2009 (The Modesto Bee - McClatchy-Tribune Information Services via COMTEX) --
The loss of Gottschalks is another body blow to the Northern San Joaquin Valley economy.
When an already struggling region loses another major employer and anchor tenant in scores of shopping centers, it just means more good people have lost their jobs and the business climate isn't what it should be.
As hard as it is to watch Gottschalks go away, it doesn't mark the collapse of the business community in the valley. Far from it. Amid all the bad news, it's critical to remember what the region has going for it.
Gottschalks' misfortune undoubtedly will create opportunities for other retailers. The chance to expand their market share by picking up some of Gottschalks' loyal customers could allow these businesses to gain some needed strength and sustain them in the tough times still to come.
That might not be much consolation to Gottschalks' fans and displaced employees, but it's what happens in any business environment. Even in good times, businesses fail, and those that don't often get stronger because of the failures.
Who knows, there is even a chance that Gottschalks, name and all, could be resurrected at some point. Everyone knows the chain's real strength was its valley stores. What that should tell other retailers is that people are still spending money here. They are still shopping, still going out to dinner, still planting flowers, still celebrating special occasions, still doing business and, yes, even buying cars.
Jeff Michael, director of the Business Forecasting Center at the University of the Pacific in Stockton, said consumer spending continues, albeit at a more cautious and conservative pace.
After the runaway spending and running up of debt thanks to the ridiculously easy availability of credit, from refinancing homes to the explosion of credit card offers, people had to scale back to regain their financial footing. As that happens, they'll inevitably start spending.
"I expect most consumers have reached an equilibrium," said Michael, who has a doctorate in economics.
Consumers are also saving more these days. That's not going into business coffers yet, but it's important for the long-term health of the economy. It provides stability and creates the confidence people need to get out from under the negative clouds that have gathered over their finances.
Perhaps the best thing to come out of the economic pummeling people have endured is that it will make them better consumers. Who knows, maybe people will keep looking for bargains, asking tougher questions about the lending terms they're offered, resisting the urge to run up their credit cards, doing their homework before buying anything and even continuing to save.
Savvier valley consumers are likely to discover that businesses are more willing to deal. Prices are dropping for a lot of things, from retail goods and services to cars and houses. Loans are available again for those with good jobs and good credit scores.
Unfortunately, the valley's staggering unemployment rates remain a drag on the economy, and Michael doesn't see them returning to single digits until at least 2011.
That possibility is sobering. But it also creates a large pool of very talented workers eager to find jobs. That could help attract outside companies and allow valley businesses to add exceptional people to their staffs, something J.C. Penney in Modesto plans to do.
As bad as the unemployment numbers are, it's important to remember that more than 80 percent of valley residents are working. While many are worried about the future of their jobs, they still have them.
Certainly, the liquidation of Gottschalks is another bump in the road to economic recovery for the valley.
But don't lose sight of the positives: People are still spending; they are being better consumers; most folks are working; it's a good time to buy a lot of stuff because prices are falling; businesses have the chance to grow their markets; and the work force has never been stronger.
Yes, there will be more bumps ahead. But there's a lot to feel good about, and that should help to smooth out the ride.
Bee business editor David W. Hill can be reached at dhill@modbee.com or 578-2336.
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