Evard Financial Advisors, PLLC

The Arizona Republic (Phoenix, AZ)

March 7, 2008

BUSINESSES FIND PROFIT DURING SLUMP

Author: Betty Beard, The Arizona Republic

Trash-haulers and cleaners. Credit counselors, bankruptcy attorneys and support staff. Property managers. Some businesses have taken off as the housing market slumped.

Then there are the evergreen professions, immune to economic downturns. Health-care workers, security personnel, utility professionals and educators.

And because we all like an escape from the bad news, entertainment careers have staying power in tough times as well.

In the Arizona economy, not every sector is down. In January the state had 16,800 more non-farm jobs than in January 2007. And Arizona's unemployment rate remains at 4.3 percent, considered nearly full employment.

But residential construction is in recession, and jobs linked to home building and financial services have disappeared faster than an ice cube in August. Now is the time for opportunistic businesses, and recession-proof occupations to shine.

Liz Morganroth, started her own company, Mosaic Properties in Chandler, to help banks take back homes. She arranges to have the house, yard and pool cleaned up, to start the eviction process with an attorney and to assess the home's value.

"We started our own business because it's so busy right now. More Realtors got involved, and it's starting to become oversaturated right now. There are articles and e-mails about 'how to get rich quick, sell foreclosures, buy our CD for $100 and we'll teach you how.' Lots of Realtors are turning to that," she said.

Another field that is doing well, she said, is property management. Her company manages about 100 single-family rental homes that are doing well because so many people can't afford to buy.

"Trash-hauling companies, cleaners and locksmiths, we spend a lot of money on those three things now. We clean out houses. Lots of (foreclosed) houses are pretty gross. And we probably have a lock changed every other day. We are keeping our vendors busy," she said.

Full-service Gilbert locksmith Laura Cordovano said she has noticed an uptick.

"We do constable meets where the people are evicted. We will meet them there with the constable. The constable reads the papers, and the people are vacated, and we are right there to change the lock," she said.

When the housing market went bust, a number of real-estate agents jumped into the foreclosure market.

Ryan Rosscup is a Realtor who handles mostly Gilbert-area properties for a bank. He said it is now more than one-half of his business and "is probably keeping me afloat." That business is subsiding, he said, because regular housing sales are rising, he said.

Counselors and Lenders

Obviously, with foreclosures up and houses hard to sell, people need help. But companies that help them aren't necessarily doing better.

Al Rock, owner of First Arizona Credit Service in Phoenix, helps people with credit problems get mortgages and has seen his business slow.

"Because we get most of our business from the sub-prime pipeline, it's become much more difficult for people to qualify. And so we slowed down somewhat, but we're still cooking," he said.

In contrast, the nonprofit Consumer Credit Counseling Services has seen a 41 percent increase in clients needing counseling on housing issues this year in the Phoenix area alone. The agency, a division of Money Management International of Houston, saw 1,485 of those clients in January and February, compared with 887 in those two months in 2007, said Tanisha Warner, a spokesperson.

Michelle Evard, a Phoenix financial planner, also has seen her business pick up, mostly from nervous clients wondering how their retirement accounts and portfolios are doing.

"A lot more people are paying more attention to how they are allocated. I am hearing from clients I haven't heard from in years," she said.

Recession-resistant Fields

Some business sectors have shown themselves to be fairly recession-proof over time, including health care and hospitals, discount stores, utilities, fast-food restaurants, movie theaters and professional sports teams.

In addition, every downturn is different, and today's global economy offers opportunities that weren't available in the past, economists point out.

Mining is doing well because of a rising global demand for minerals, and last year added about 1,700 jobs in Arizona. The weak dollar could boost the number of foreign tourists and already has prompted a boom in Canadian visitors and home buyers.

Brian Cary, an economist with Salt River Project, said, "So far we have seen commercial real estate hold up pretty well. That's in pretty stark contrast to where we were the last time we had a real-estate recession in the late 1980s and early 1990s, when the residential segment held up pretty well and the commercial segment took a beating."

Generally, businesses that do the best during downturns are the ones that provide goods and services that consumers can't postpone, such as food, medical services, utilities and educational services, said economist Elliott Pollack. Companies that sell goods such as cars and trucks, appliances and furniture - purchases that often can be postponed -typically do the worst.

"People will save a little on food, but they will probably eat out less and eat home more. They will buy generic brands. But they are really not going to cut down a lot of food, at least not in our society," he said.

Medical Careers

The most recession-proof field of all, economists agree, is the medical field.

Curtis Shaw, a business service specialist for Maricopa Workforce Connections, a Maricopa County program that helps people get jobs or switch careers, said "Health care is really the only industry right now that is showing some signs of life as far as employment growth is concerned."

Health care doesn't just mean changing bedpans or getting a medical degree, said Joanna Abbott, a career guidance specialist with the program. "Obviously, there is the patient care aspect, but there is also technology, lab skills, administration, financial services and a lot of things."

Marshall Vest, a University of Arizona economist, said "Health care continues to see shortages of doctors, nurses, pharmacists, and medical technicians. That's just one industry that is not affected by business cycles. It continues to grow year after year. Employment increases something like five percent a year, year after year."

Entertainment Escape

Those working in entertainment and sports fields often see good business in tougher times, making those jobs more secure.

Tracy Clark, associate director of the economic outlook center at Arizona State University, said that "There is a tendency (during a recession) for people to value escapism. Everything else is so depressing they want to do something that is happier. But obviously you would benefit more if whatever your entertainment is among the least expensive."

Although it's cheaper to rent movies than go to movie theaters, movie theaters aren't doing badly.

Dan Harkins, owner of the Harkins Theatres chain, said movie theater audiences have remained strong through ups and downs for decades. In fact, the Harkins company was founded in 1933, during the Great Depression, and has survived wars and many recessions.

"We fare either from OK to well during economic downturns," he said. "It depends on the nature of the downturns, but usually if people feel like they don't have enough money to spend on luxurious items in their life, the luxurious vacations, something special for the family like a trip to Disneyland or a trip up north, they'd stay home and use going to the movies as a special treat."

Executives with the Arizona Diamondbacks and Phoenix Suns said historically professional sports have not been hurt in downturns, but said there is no guarantee. While ticket sales and TV audiences don't seem to have been hurt so far, they said corporate sponsorships could be affected if companies cut back their marketing expenses.

Suns President and Chief Operating Officer Rick Welts said, "If advertising and marketing dollars are smaller, we are going to have to compete harder for those dollars. I am optimistic that the Suns will do well, but I think there will be teams that won't."

He said historically downturns have not hurt ticket sales but also said "Past performance is not an indicator of the future. At least cautiously we would not expect (downturn) to have a very significant impact."

Welts said that he's noticed a dramatic increase in tickets being resold on the Suns' Web site. Some one may, for example, own tickets for all 41 regular-season games and sell five of them to reduce their investment.

The Arizona Diamondbacks, which sells single tickets for prices ranging from $8 to $200, so far is doing well as it prepares for its season starting in late March, said Diamondbacks President Derrick Hall.

In general, he said sports don't feel economic crises but acknowledged that ticket sales could be sensitive. So far season tickets are ahead of last year at this time, with about 14,000 sold compared with 12,000 at this time last year.

"Regardless of the economic conditions, families are trying to find a way to seek entertainment. And a lot of times if a family is experiencing a financial hardship, they are still looking for an escape, too. And baseball offers an affordable way to do that," Hall said.

Reach the reporter at betty.beard@arizonarepublic.com or at (602) 444-8667.