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BusINess » BusINess Story of the Week Business » Economy drove news in 2010

Economy drove news in 2010

Jesse Paloger holds up a sign while standing on Wall Street as he hopes to find a job, in New York. Paloger, who has an accounting and economics degree from the University of California, Santa Barbara, has written on the bottom of his sign, “Go-getter from California looking for my shot!” Fewer people applied for unemployment benefits during the first full week of December, the third drop in the past four weeks and a sign that the job market is slowly improving. (Photograph by Mark Lennihan/Associated Press.)

Jesse Paloger holds up a sign while standing on Wall Street as he hopes to find a job, in New York. Paloger, who has an accounting and economics degree from the University of California, Santa Barbara, has written on the bottom of his sign, “Go-getter from California looking for my shot!” Fewer people applied for unemployment benefits during the first full week of December, the third drop in the past four weeks and a sign that the job market is slowly improving. (Photograph by Mark Lennihan/Associated Press.)

Dismal signals mixed with glimmers of hope as the U.S. economy drove the news in 2010; the nation began a fledgling recovery from the worst U.S. recession since the Great Depression.

From charitable giving to local government, from real estate to transportation, all eyes were fixed on the economy’s twists and turns—which had the potential to spell ruin or salvation for companies, governments and people’s lives.

“We’ve seen people who previously were donors becoming recipients of many of the services we provide,” said Lou Martinez, president of Lake Area United Way. “There’s just a lot of folks that need assistance, a lot of people that need help.”

The unemployment rate in Northwest Indiana hit 11 percent in the early part of the year, home foreclosures were at record levels and industries such as construction hemorrhaged jobs. There still were 31,912 people unemployed in Northwest Indiana in October, compared to 15,181 when the recession began.

When it came to the region’s steel industry, however, the other shoe never dropped. Steel mills laid off hundreds in 2009 but began restarting blast furnaces and recalling workers in 2010.

Many had feared it would be like the 1980s when tens of thousands of steel jobs disappeared, or like the painful consolidation of the industry less than a decade ago. But none of that happened.

“The consolidations that followed the layoffs and the bankruptcies of 10 years ago, that is what positioned steel mills to come through this recession,” said Mark Maassel, CEO of the Northwest Indiana Forum. “And by all accounts, this was a pretty bad recession.”

ArcelorMittal and U.S. Steel consolidated much of their U.S. production here during the recession, pointing to a long-term commitment to the region on the part of those companies, Maassel said.

But other industries had profound changes that many were dubbing the “new normal.”

Stalled development

Some big commercial real estate developments in the region continued to fall victim to the slowing economy and tight credit.

The Silverstone Crossing development in Hobart bit the dust just months ago, with the city retaking control of the site north of U.S. 30 and east of Mississippi Street. Investors had planned to build three connected sports domes and a seven-story hotel at the site.

In October, the developer of Oak Street Commons, a planned lifestyle center in Schererville, told town officials he planned to revive plans for the site after it fell victim to the recession two years ago following some early earth-moving activity.

“We are no longer in a build-it-and-they-will-come environment,” said David Bochnowski, CEO of People’s Bank. “There has to be a strong record of occupancy and leases for something to get built.”

Budget cuts

Local government probably was the sector of the economy that felt the strongest indirect effects of the economic slowdown, said Michael Griffin, Highland’s clerk-treasurer.

And no one felt it more than schools, which the state last year began funding with volatile sales and income tax receipts instead of the local property tax collections that had buoyed them through previous recessions.

Local school districts across Northwest Indiana laid off teachers, froze or cut wages, and increased class sizes after Gov. Mitch Daniels cut $300 million from kindergarten-through-12th-grade funding. Staff cuts are expected to continue this year.

“When your funding goes from a pretty substantial base of property tax values to something as volatile as sales tax, which depends on who shops and how much, that money just doesn’t come in,” said Ryan Ridgley, president of the Munster Teachers Association.

City and town governments were in a similar position, with state-mandated property tax caps combining with the weak economy to pinch and, in a few cases, devastate, local coffers.

Gary had it hardest. Just this month, it made its third appeal in as many years to the Distressed Unit Appeals Board to tax its residents at a rate higher than the state-mandated caps to raise $11.1 million more for city services.

Gary’s tax revenue has been cut by more than half since tax caps were put in place in 2008, and the poor economy has led to property tax collections in the 80 percent range. The city has closed fire stations, taken civil cases out of city court, put workers on furlough and transferred services to Lake County.

Donations also down

Charitable giving took its own hit from the lingering recession in Northwest Indiana at a time when needs for services ranging from help with home heating to help getting food was soaring.

The United Way-funded 211 phone help line has had a 77 percent increase in calls seeking unemployment assistance, a 58 percent increase in calls for food assistance and a 47 percent rise in families seeking foreclosure prevention counseling.

“When the economy goes down, demand for our services just goes up and up,” Martinez said.

If the rate of pledge-fulfillment holds for the rest of the year, Lake Area United Way will be about $100,000 short of its $5 million goal, Martinez said.

Ridership numbers reflect economy

Transportation across the region and nation took a hit from the recession, but some of the decline in mass transit ridership numbers abated in 2010.

Overall ridership year-to-date on the South Shore commuter railroad is down 4.4 percent compared to last year, according to reports from the Northern Indiana Commuter Transportation District. It was down 7 percent last year.

“Our ridership is declining because of the economy, pure and simple,” said John Parsons, NICTD planning and marketing director. “Fewer jobs in Chicago mean fewer riders going into Chicago.”

One of the best indicators of vehicle travel on Indiana roads had its first blip upward in three years in 2010. State gasoline tax receipts increased 0.15 percent to $536.7 million. Still, that was 7.8 percent lower than the decade’s highest-grossing year for the tax, which was $582.6 million in 2004.

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