Amid mixed reports about whether the recession is easing its grip on the nation, the Vineyard economy remains in decline and has yet to hit bottom, merchants, tradesmen and bankers said this week.
Unemployment on the Island is still high — especially among contractors — while many businesses ended the calendar year with sluggish sales and little hope for a better spring or summer. In Edgartown alone at least 10 retail stores have closed their doors for good this winter, and some observers put the number closer to 20.
Chris Wells, president and chief executive officer of the Martha’s Vineyard Savings Bank, said he expects unemployment to remain high through 2010, and said consumers will likely face inflation both here and across the country. Taxes may also increase this year, as state, federal and town governments scramble to balance budgets.
“All you have to do is turn on the news to see that money is tight all around. Meanwhile we have a troop surge in Afghanistan, economic stimulus, health care reform — that all needs to be paid for,” Mr. Wells said.
Looking back at the decade that just ended, Mr. Wells said the Vineyard economy has seen its ups and downs — but mostly downs. After the dot.com bubble burst in 2000, the economy took a hit following the terrorist attacks of Sept. 11, 2001. Then came the sub-prime mortgage crisis in 2007 that led to the collapse of Wall Street in the fall of 2008.
“It was one tough event after another. As soon as we got through one crisis there was another one waiting,” he said.
And despite all this, the Vineyard economy has showed some positive signs. Deposits increased over the past year, as did the amount of lending by Island banks, and for the most part people are keeping up with their mortgage payments. But there are also reasons for concern.
The Vineyard economy is especially vulnerable to downturns in the national economy for a number of reasons. The cost of living differential between the Island and the mainland remains high, and the Island economy is overly reliant on tourism and construction.
Mr. Wells said new construction is down overall, and many builders are worried things will get worse before they get better. “Wall Street may be improving, but I’m still not convinced Main street is,” he said, adding: “There is a sense that people will be spending less over the next year.”
Steven Bernier, owner of Cronig’s Markets, said there were markedly fewer people in his store over the holidays than last year, and those who did go shopping spent less. He predicted that in the coming months more people will struggle to find work and dip into their savings to make ends meet.
“I think a lot of people — from business owners to carpenters — managed to hold the line throughout 2009. But you can only hold the line so long,” Mr. Bernier said.
He said he worries shrinking revenues will put a strain on state and local government.
“Just watch the news; how many states are close to bankruptcy? We aren’t the only state struggling to balance the budget . . . state aid to towns and cities keeps going down, and you can bet that will lead to higher unemployment,” he said.
And Mr. Bernier said people should alter their expectations when talking about economic recovery, especially on the Vineyard.
“The mistake that people make is they expect a big uptick; they expect the economy to suddenly repair itself and get back to where it was before. But maybe we shouldn’t expect that, maybe getting back to normal will be 15 or 20 per cent less than what it used to be,” he said.
The construction industry, a key cog in the Vineyard’s economic engine, struggled all the way through 2009, and many contractors have a dim outlook for the year ahead. One builder who asked not to be named said many subcontractors left the Island this off-season for lack of work.
And while this has opened up some jobs, the number of new construction projects is still way down.
“People just aren’t building new houses right now. And people who already own [seasonal] houses aren’t doing any work [on their homes]. It’s made things really competitive. Bigger companies are bidding on smaller projects that they probably wanted no part of just a few years ago,” the builder said.
Edgartown building inspector Leonard Jason Jr. said the number of building permits actually increased from 227 in 2008 to 264 in 2009, and the number of permits for single family homes increased from 31 to 41. And while he took this as an encouraging sign, he said most contractors he has talked to remain worried.
“I don’t want to sound like a pessimist, because people don’t seem as concerned as they were six months ago, but lots of builders are still nervous. I can say the construction boom of a few years ago is long gone. And I’m just not sure those days will return again,” he said.
Sharon Purdy, owner of Sandpiper Realty in Edgartown, said the real estate market also continues to be sluggish. Total sales were down five per cent in 2009, and gross revenue from real estate sales was down about 25 per cent, although some of that can be tracked to falling values.
But things are not all bad, she said. Only a small number of sellers have lowered their prices — which stands in stark contrast to the economic downturn of the early 1990s when many people who bought homes only as investments quickly sold their properties at reduced prices.
“We have very strong sellers this time around. And we have people who are committed to the Island who are more financially stable. This bodes well for the Island over the long-run, it means that people will purchase homes who want to be here,” she said.
Mrs. Purdy predicted this will be a “year of stabilization,” meaning sales will plateau instead of continuing to decline.
“If we’re near the bottom of the curve, which I hope we are, then we may be in a healthy place. That way the sellers are better able to read the market and make the correct decisions. Can I predict the bottom of the market? Of course not, but I do believe 2010 will be a stable year,” she said.
Charitable organizations and nonprofits are also feeling the pinch.
Peter Temple, executive director of the Martha’s Vineyard Donors Collaborative, said in a recent informal poll of Island nonprofits, two-thirds said their financial situation was as bad, or worse, than the previous holiday.
Although many have made changes to adapt to the tight economic times, he predicted most will continue to struggle this year.
“Many larger nonprofits like Martha’s Vineyard Community Services had to make further cuts in 2009. Still others had to dip into their reserves just to get through 2009, and that isn’t going to get them through 2010. But they are making changes . . . they are responding to the economic realities,” Mr. Temple said.
And he agreed that it is wise to temper expectations when evaluating the Vineyard economy.
“When we look at how much people have donated in the past, we need to consider that we may not get back to that level anytime soon. Two years ago the economy was a very different animal, and the amount that people gave might have been inflated. We may have to change our expectation levels,” he said.