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Can We Call It a Recession Yet?

Unemployment is up and corporate earnings are down. Stores and restaurants are closing, and businesses are fighting for survival.   The latest jobless data from the Virginia Employment Commission  puts numbers on what most of us feel to be true based on personal and anecdotal experience. The economic slowdown is increasingly looking like a recession.

Unemployment in Virginia jumped to 4.2 percent in June, according to the latest data, up from 3.8 percent last month and 3.1 percent a year ago. Unemployment in the Richmond Metropolitan Statistical Area has increased to 4.5 percent. In the metropolitan core, the situation is worst in the City of Richmond at 6.2 percent, but not so bad in Chesterfield (4.0 percent), Henrico (3.9 percent) and Hanover (3.6 percent).

Overall, Richmond is faring better than the national average, where unemployment stood at 5.7 percent in June, but the employment numbers still represent a turn for the worst.

The Richmond area has suffered few mass layoffs like those experienced by the automobile companies. Stories like the recent report from money-losing S&K Menswear , which eliminated 50 jobs from its corporate headquarters, are relatively rare. To this point, it has been more of a creeping recession, as companies trim a few jobs here and there, delay filling job vacancies and put expansion plans on hold.

Many of the major employers in the Richmond region are facing significant financial pressure. Just today (see the posts below) Genworth Financial reported a $109 million loss in the second quarter of 2008, its first loss since going public several years ago, while Hilb Rogal & Hobbs profits shriveled nearly to zero. Yesterday, LandAmerica Financial reported a $50 million loss, despite consolidations and layoffs the length and breadth of its national enterprise.

Circuit City Stores is losing money, fighting to stave off bankruptcy. Where the electronics retailer once looked like a probable takeover target, its franchise has diminished to the point where no one seems interested in buying it anymore. Chesapeake Corporation , the packaging company, is losing money and is desperately trying to renegotiate a line of credit to keep it afloat.  Media General , suffering severely eroding profits, is downsizing across its chain of newspapers and television stations, including here in Richmond.

Meanwhile, the legal and investment banking professions, mainstays of downtown Richmond, are feeling sluggish. As the pace of economic activity slows, businesses are showing more caution and there are fewer financial transactions for deal makers to work on. During recessions, businesses also cut back on advertising and marketing, which reduces the life blood of the region's normally vibrant advertising services sector.

Not everyone is losing money. Medical supply distributor Owens & Minor has reported record revenues. Colfax Corporation , a supplier of pumps and valves, is thriving, largely on the basis of its overseas operations. Profits are also up at MeadWestvaco , a global packaging company. Coal companies Massey Energy and James River Coal , which maintain their headquarters in Richmond, are enjoying record revenues and profitability as the price of coal shoots through the roof.

Indeed, any business that's associated with energy production, energy conservation or the burgeoning "green" sector of the economy is doing very nicely right now. Tridium , a midsized software company, is enjoying record growth this year, largely on the strength of its software platform that is used in building automation -- a market driven by energy conservation.

State government acts as a stabilizer on employment, although Gov. Timothy M. Kaine , CEO of the state government enterprise, has ordered cutbacks in response to less-than-projected tax revenues. Meanwhile, Richmonders can count as a blessing the fact that the real estate market here never saw the sky-rocketing prices experienced in many other cities. Foreclosures, while climbing, are still way below the national averages. And building construction, though slowing, hasn't been hit as hard as in other cities.

I won't be surprised if, before the year is out, one or two of the companies that Richmond has long considered pillars of its business community wind up filing for bankruptcy or are taken over. The big question is, who will rise to replace them? For a region of one million people, Richmond has more than its fair share of Fortune 1000-sized companies. But where are Richmond's fast-growth up and comers -- the so-called gazelles, the Mittelstand? Where are the promising entrepreneurial start-ups? 

Here at R'Biz, we're just happy to be alive. Nothing like starting a new venture just as a recession gets underway! We're tired of all this gloomy news, and we're looking forward to reporting the first signs of an economic turnaround.