In past economic slumps, the Nashville area's Goldilocks economy — never overheated, but not too cold either — has usually experienced shorter dives and quicker recoveries than the nation as a whole because of the region's diverse economy and well-educated work force.
That history has left many forecasters and business leaders here optimistic that a national recession triggered by a widespread housing meltdown will deal a much softer — and shorter-lived — blow to Music City business owners and job hunters than to the country as a whole.
"We've got our issues and problems, but it looks like we're in a very positive position right now," said Ron Samuels, chairman of the Nashville Area Chamber of Commerce. "We've got the fundamentals still strong to weather this downturn."
A recent report by Garrett Harper, the chamber's research director, shows that Nashville's economy may stumble when the nation's does, but it generally rebounds faster coming out of an economic slump, with stronger job growth about a year after a U.S. recession ends.
"Nashville may enter recessions a bit earlier, but (it) also recovers quickly and much more robustly than the nation in many instances," said Harper, who studied economic data from the early 1970s until the present day to reach his conclusions.
Other experts caution that every recession is different. And they add that a prolonged housing and credit crisis, as well as poor auto sales that could slow vehicle production at manufacturing plants in Middle Tennessee, might delay a local recovery.
But Harper and other economic observers insist there are a number of reasons for hopefulness, among them:
• While home sales are down in the Nashville area, as in the rest of the nation, local prices have remained relatively stable. The median price of a single-family home was just under $170,000 here in September, down 7 percent from a year earlier but far from the double-digit declines seen in many harder-hit cities.
• A shift away from overdependence on manufacturing jobs in the past 30 years makes the eight-county Middle Tennessee region less prone to economic downturns. Diversity of jobs is key to the area's resilience. Manufacturing employs about 10 percent of the area's work force, down from 14.1 percent in 2000.
• The presence of numerous universities in and around Nashville gives the area another source of highly skilled workers, even if it doesn't always lead directly to local job growth.
• One in five Nashville-area workers are self-employed, and that generally helps speed economic recoveries. Others who lose corporate jobs start their own businesses, and that helps as well, said Jeff Cornwall, director of the Center for Entrepreneurship at Belmont University.
Owners stay upbeatMany Nashville-area business owners say they've weathered the economic downturn pretty well.
Bobby Campbell, owner of Campbell Glass of Brentwood, said he hasn't seen a sharp drop in his firm's work installing interior shower doors and insulated windows for homeowners.
"I'm in a good place," he said, adding that residents in neighborhoods such as Bellevue, Crieve Hall, Green Hills and the northern parts of Franklin in Williamson Country are still remodeling homes.
Bobby Joslin, owner of sign manufacturer Joslin and Sons Signs, said lower gas prices could be a key to rekindling consumer spending and aiding the economic recovery.
"If they can get fuel prices steady in the low $2 range, that's a built-in stimulus that will accelerate us coming out of this downturn," Joslin said.
Other business owners remain cautious, though, saying past resilience in the Nashville economy doesn't guarantee a quick recovery this time.
Consumer confidence is at a historic low locally and nationwide. That's based on the most recent local poll by Middle Tennessee State University, which gauges consumer sentiment in Davidson, Rutherford and Williamson counties.
Nationwide, confidence plunged in October and new data released last week showed consumer spending dropped 3.1 percent — the first decline in 17 years and the biggest drop in 28 years. Much of the dip in spending was in big-ticket categories such as cars, home furnishings and appliances.
"You've got a lot of people whose 401(k) has become a 201(k) and their IRAs have become an IOU because of stocks being down," said Bill Ford, a professor of finance at Middle Tennessee State and a former Federal Reserve Bank president.
"History is worth looking at, but it's a much different recessionary environment than any of us has seen in 25 years or more," said Tony Heard, a principal in NMG Advisers, a Nashville-based consulting firm.
"It's unprecedented since the Depression to have so many major U.S. corporations in financial crisis," he said. Heard expects lending standards of major banks to remain strict over the next six months as the banks anticipate more losses on real estate loans nationally.
Alexander Miron, an assistant economist with Moody's Economy.com in West Chester, Pa., expects Nashville to see job growth again in the second half of 2009, although in the short run there could be an increase in local layoffs.
Car dealers are among those who hope that area consumers start spending again. Sales at Neill-Sandler Buick Pontiac GMC in Murfreesboro have dropped 20 percent over the past six months, said Gary Beeler, the general manager.
"This is the most challenging time I've ever seen in the car business," Beeler said.
"If consumers keep pulling back, I think we're looking at really rough waters coming up," said David Penn, director of Middle Tennessee State University's Business and Economic Research Center.
Home data offer hopeConsultant Edsel Charles of the MarketGraphics research firm studies real estate for a living. And from what he sees in tracking new home sales across 21 states, Nashville hasn't entered a housing recession.
"We're selling more houses than we're starting," he said, citing more families moving into new homes here compared with building permits pulled.
Across 21 states, Charles said, the inventory of new homes has fallen from a 13-month supply to an 11-month supply, and that's a positive sign. The Nashville area has seen a similar freeze in new home construction, and that has allowed sales to catch up a bit here as well.
Excess inventory must be absorbed before more new homes can be built. Charles said he expects the area's market to improve by late spring to early summer 2009.
Downtown developer Tony Giarratana, meanwhile, sees recovery in Nashville's broader real estate market starting by next year's second quarter. He said it could take several quarters after that for credit and housing markets to fully stabilize.
A recovery in the housing market is critical to a broader economic turnaround because the impact of that sector stretches from banks to construction companies to homeowners and finally to retail stores that sell furniture and other products for the home.
"To the consumer, it's also an asset," said economist Bill Fox of the University of Tennessee in Knoxville. "When prices of our homes don't grow for some time, return on that asset goes down."
'Made for recession'Sometimes, business creativity is sparked by tough times.
That was true for Jack's Bar-B-Que, whose founder recalls adding $5 barbecue plates to his catering menu after a slowdown 20 years ago weakened demand for pricier items.
Today, Jack Cawthon said, he's investing in his business, including spending $100,000 on new barbecue pits and adding space to one of his two restaurants.
"We're comfort food; it's kind of made for recession," Cawthon said, adding that sales are holding their own. "People can eat barbeque and comfort food and feel like they've gotten value, a good meal and they're happy."
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