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Spa Economy hitting head winds

Yes, things here have slowed, but recession not imminent

When the local and national economies start slowing, John Shearer is among those who see it happening first.

Shearer is the plant manager for Cincinnati Foam Products in Colerain Township, which makes foam inserts used to ship everything from food to pharmaceuticals. When other companies start seeing orders drop, they have less to ship — so Shearer’s company feels the effects immediately.

Local businesses and economists say the signs of a cooling economy are unmistakable across Greater Cincinnati and Northern Kentucky as the economy becomes the central topic of the presidential campaign with candidates heading toward Ohio and its March 4 primary.

Economists can’t agree on whether the downturn has turned or will turn into a recession.

• Local economic indicators

A recession – defined as six months of shrinking economic activity – is something of a paradox because experts often don’t have enough data to know the country is in one until a good part of the shrinking is over.

“We can be in a recession and feel bad – but we don’t officially know it,” said Gary Clayton, chairman of the Economics and Finance Department at Northern Kentucky University.

SLOWDOWN AT THE SALON

How much of the spending slowdown is due to economic weakness or just a hangover from holiday spending isn’t clear.

Joe Johnson, the owner of Ritual Salon on Covington’s MainStrasse, says customers pinching pennies are finally using salon products properly.

A large bottle of salon-quality shampoo should last six to eight months if people use the recommended dime- or nickel-sized dollop, he said. Yet customers typically use three or four times as much as needed for each shampoo – and go through a bottle much faster.

But lately, “they’re making the bottle stretch a lot longer,” he said.

Johnson said he also has seen a drop in spa services: “The people who got fake nails are now just getting manicures. People who got manicures are buying polish” to do their own nails at home.

The weak housing market also has put the brakes on spending at other businesses.

NOT ALL ARE SUFFERING

Not all sectors of the local economy are seeing a slowdown.

Dr. Devinder S. Mangat, of Mangat-Kuy Plastic Surgery Centers in Kenwood and Edgewood, said the clinics’ schedules are still packed.

But patients are turning away from big-ticket items – such as elective surgeries – in favor of lower-ticket items such as Botox and micropeels.

“People still want to feel good, particularly during bad economic times,” Mangat said.

Added Dr. Peter J. McKenna of Cincinnati Institute of Plastic Surgery, Montgomery: Appearance “is something that people can control, and so many things in life – when you’re talking about what happens in the nation and the economy – are things they can’t control.”

REPORTS POINT DOWNWARD

Two recent compilations of leading indicators suggest a downward trend to the local economy.

First, the Purchasing Managers Index: Cincinnati measured 49.5 for January. Any value under 50 represents a shrinking economy.

The index here had stayed above 50 since January 2003 (with the exception of December 2006 and October 2007). The information for the index – created by the National Association of Purchasing Management-Cincinnati chapter and the Applied Economics Research Institute at the University of Cincinnati – comes from purchasing managers at firms of all sizes in various industries in the region.

The index data indicate that local businesses are grappling with declining employment, production and orders as their prices increase.

The second, released earlier this week, was a compilation of regional economic indicators for December.

Economists with the Ohio Department of Job & Family Services say these data show a growing chance that the region might fall into a recession. December’s data show a decisive uptick in claims for unemployment on top of increasing weakness in the value and number of housing permits, as well as sluggish salaries and employment.

“Increased unemployment claims suggest a general weakening of the economy,” said Keith Ewald, chief of the department’s bureau of labor market information.

He also noted that Greater Cincinnati and Northern Kentucky, as all of Ohio, could be vulnerable if the national economy declines because both the region and the state have failed to replace jobs lost in the last recession.

“If you’re not growing, the economy can be hurt more in a downturn because you don’t have the ability to absorb job losses,” he said. The region’s jobless rate has been higher than the nation’s for three years. The local rate in January was 5 percent, compared to 4.8 percent nationally.

If a recession does occur, Clayton said its impact will be felt selectively, with more harm to the middle and lower classes.

“Others talk about (a recession) but go on with their life,” he said. “They have jobs and can make payments on their mortgages and cars.” But those who least can afford it – the unemployed, underemployed or those already struggling financially – are hit hardest in a recession, Clayton said.

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