We’re supposed to be in a recession. But does it feel like one?

In housing it does. But everywhere else, the American consumer is still spending pretty freely.

Take Best Buy (BBY). The company reported earnings today and beat analysts estimates by six cents. The numbers weren’t as good as a year ago, with earnings declining by $13 million, but given that we’re in a “recession” they were pretty solid. From Reuters:

Total sales rose 13 percent to about $9 billion, better than the $8.6 billion expected by analysts. Same-store sales, at outlets open at least 14 months, rose 3.7 percent overall. Same-store sales were up 3.5 percent in the United States and 4.7 percent internationally.

Best Buy is selling more flat panel tvs, notebook computers and cellphones.

Hmmm…yes- just the items that are “must have” if money is tight.

But then there is Williams & Sonoma (WSM). On June 4, the company reported sales that fell from a year ago. From the Memphis Business Journal:

Williams-Sonoma’s sales fell 4 percent to $781.8 million in the quarter ended May 4, down from sales of $816.1 million a year ago in the first quarter.

Profit fell to $10.5 million, or 10 cents a share, in the first quarter, down from $18.2 million, or 16 cents a share, a year ago.

The average estimate of 19 analysts was for earnings of 1 cent per share on revenues of $776.9 million.

But in the northern suburbs of Chicago, there is a different story.

I know someone who works in one of the stores and the past two weeks have been records for the store.

Could it be the stimulus checks?

It seems unlikely. Who is using a stimulus check to buy a $3000 coffee machine, one of which they sold just last week? Or a $900 copper pan set, which they also just sold?

These are items that are “luxury.” We all can admit it- that everything they sell at Williams & Sonoma you can buy for cheaper in a not-so-luxury brand at another store.

So if you MUST have some pots, Williams & Sonoma isn’t necessarily the place where the struggling person goes to purchase them (and I’m not comparing quality here- just the prices.)

Therefore the question must be asked: in this time of “struggle” and “recession” and high gas prices- why is someone buying a coffee pot for $700?

They sold one of those last week too.

As my friend who works in the store said:

“We don’t see a recession at all. In fact, it’s just the opposite.”

Obviously, this is just one store as the last quarterly numbers reflect that some of Williams & Sonoma’s stores are struggling. But maybe not as much as everyone assumes.

And maybe the American consumer isn’t as bad off as everyone assumes either. Or their charge cards are still healthy.

What IS a $3,000 coffee machine like?

I’m sure it’s a thing of beauty.

Only in America. During a “recession.”

Allegedly.

As the government trumpeted the economic stimulus plan today of at least $600 to “most” families in the country, there is a dirty little secret.

The upper middle class gets the shaft.

If you are single and make over $75,000: too bad, so sad.

If you’re married and make more than $150,000, you don’t qualify either.

It’s not that I’m crying in my coffee for the upper middle class. Do they “need” the $600 or $1200 a month? Will they spend it or save it? If they save it, it does the economy little good.

But the plan’s limits do make me think that there are quite a few families in the high income metropolitan areas (Chicago, NY, LA, San Francisco etc.) who could actually use that money because the money situation is tight.

These are families who live in bigger homes and drive bigger cars in very expensive areas. With gas prices so high, that $1200 could have gone to filling up the SUV a few more times. Or it could have gone to furniture for the expensive little cottage or condo.

Aren’t these good causes too?

The rich don’t “need” the stimulus. But is $150,000 rich now?

Many people living in the Chicago area would laugh at the idea that $150,000 is “rich”.

And I personally know several people who are upset that they don’t qualify for the stimulus checks. It’s like hearing about a cool party and everyone is invited except you. How annoying!

Are they just greedy rich people or is their disappointment justified?

I guess there has to be a cut-off for the stimulus at some income level. Too bad for those who are “rich.” Sorry upper middle class workers. That would be you.

It used to be that economists could look at Wal-Mart’s sales numbers as indicative of what was happening in the economy. Wal-Mart’s target customer has an average income of $35,000. That is solidly Middle America. If those shoppers were holding up, then the country was doing okay.

Recently, Wal-Mart’s retail sales numbers have been pretty good. The company has struggled in recent years as Target stole some of its customers and took over the more lucrative $55,000 and up category with its discounted designer clothes and furniture. But in the last year, Wal-Mart has stayed on course and actually posted decent Christmas numbers this year, when some of its competitors faltered.

Wal-Mart stores, then, don’t seem to be signaling that the regular American is struggling.

Except for this:

10,000 people turned out over four days to apply for a job at a new Wal-Mart in DeKalb County, Georgia. Wal-Mart was hiring 350 to 400 workers.

Wal-Mart didn’t even advertise the job fair. It was simply word of mouth that got the crowds to show up.

From the Atlanta Journal Constitution:

Christine Roberts, a 39-year-old married mother of six, is hoping to get a job at the Wal-Mart deli. Roberts, who has long worked as a nursing assistant in Sandy Springs, wants a job closer to her Decatur home. At the Memorial Drive store, “I could walk to work,” she said Thursday after filling out her application.

According to the article, Wal-Mart never discloses what it pays for the jobs. The prospective employees who showed up that day to apply had no idea what the pay was. But rumor has it that pay starts around $10.65 an hour.

10,000 people.

This Wal-Mart indicator is not a good one.

Another big turnout was expected for the jobs at the new Kia plant in Georgia. From the Columbus Ledger-Enquirer:

Preliminary estimates from the Georgia Department of Labor indicate as many as 30,000 people will take part in the scramble to fill roughly 2,500 jobs up for grabs at the Kia auto assembly plant being built in West Point, Ga., off Interstate 85 between LaGrange and the Alabama state line. It’s the automaker’s first such facility in North America.

The pay for the Kia jobs will be higher. Pay will range from $14.90 to $23.50 for “team members” whereas tool & die makers will start at $20.80 and top out at $27.00 an hour. Ironically, one job seeker said:

“I’m taking automotive manufacturing technology, basically trying to get a job with Kia. That way I can improve on my financial status,” said Spearman, 34, who now works at a nearby Wal-Mart Supercenter for $10.30 per hour. The divorced man has three young children.

Well, we know there are 10,000 other people waiting to take his Wal-Mart job if he’s successful getting the Kia job.

Right now, the employment reports have been pretty decent. Nationwide unemployment is only 5%, which is historically pretty low. But I fear that may be ticking upward in the next few months.

I spent Thanksgiving in Allegan, Michigan, a town of about 5,000 in Southwest Michigan. It is nestled between Kalamazoo and Grand Rapids near Lake Michigan. It is the county seat of the county of Allegan, founded in 1833, making it among the older American settlements in the state of Michigan.

The town grew because of the timber and other natural resources in the area. Located on the banks of the Kalamazoo River, which flows to Lake Michigan, big timber mills sprang up in town. Town history says that Allegan was instrumental in rebuilding Chicago, with its timber shipments, after the Great Chicago Fire.

Today, the town has been a bit left behind. It isn’t on Lake Michigan so the gentrification (or Starbuckification, some might call it) has passed it by. Sagautuck, Holland, and South Haven all became hip and cool. Yet Allegan has a fine collection of civil war era homes in its downtown and a cute, still intact downtown with antique shops, a five and dime and a few restaurants. Hollywood could film movies in the downtown. There are no Gaps, Starbucks or Banana Republics there (only a Pizza Hut, that has been there for about 20 years.)

Oh, and Kay’s Beauty Boutique.

My grandmother and mother had hair appointments the day after Thanksgiving at Kay’s Beauty Boutique. My grandmother got a shampoo and a set.

Price? $12

My mother had a shampoo and a cut.

Price? $15

Kay, a woman in her late 40s or early 50s, has been in business for a few decades and the beauty boutique looked it. But it was homey, with a small tv at the front of the store so that customers could catch Ellen, The View or Oprah. Kay also keeps several bookcases of books for her customers to take, read and exchange. And they do. Kay is quite the expert on the latest bestsellers. When the books get a little old, the librarian stops by from the Allegan library and takes them to add to the public collection.

Who better to know what is going on in Middle America then Kay?

The largest employer in Allegan is Perrigo. Perrigo is the world’s largest generic drug company. Perrigo is listed on the Nasdaq (ticker PRGO). you know that Walgreens brand toothpaste or Wal-Mart brand vitamin you buy? Odds are it was made by Perrigo.

The company has long roots in Allegan, having been founded there in 1887. It employs about 3,000 workers in Allegan and another 2,000 in overseas operations.

Another big employer is Haworth, an office furniture and workplace architectural interior company. They are headquartered in Holland, 16 miles to the north, but have other facilities in the area. The company surpassed $2 billion in sales in 2000. They are still privately owned.

No recession to be found in Allegan

When asked how the local economy was doing, Kay said that the downtown businesses were having their problems (several storefronts were empty) but that wasn’t a cause of the local economy but more a cause of the wrong stores in the spaces. One recent store closed because the “prices were too high” for the area, she said.

Allegan’s median family income is $45,000 with 11% of families living below the poverty line. There are ritzy houses on the shores of Lake Allegan, but you can still buy an older historic Victorian for $110,000 near the downtown. And there are older, not so nice homes, for sale for even less.

Kay said that Perrigo was doing great and that there were no signs of a slowdown at that company. Same with Haworth. Everyone I talked to seemed to know someone at Haworth and who loved it. No one was worried about their job security.

Michigan continues to struggle

Allegan seemed to be doing alright, but people there were in agreement that Michigan, as a whole, was not doing well. Young people are fleeing the state. In general, the job market is horrible. The worst of the pain seems to be focused on the eastern part of the state however (near Detroit.)

The housing market is bad everywhere

One thing Kay did concede was that the housing market was awful. There are simply too many homes on the market. But, as she put it, “it’s like that everywhere.” It’s not an Allegan specific problem.

Out of a town of 5,000, there are about 540 homes on the market. That is an extraordinarily high number. Several have been on the market for years. One house, down the street from my Grandmother’s, had been on the market for over 2 years before they recently finally found a renter for it.

Black Friday seemed slow

We went to Holland on Black Friday (population of 35,000 in the city limits or 95,000 in the metro area) that is north of Allegan. They have a small mall, a Wal-Mart, Kohl’s, and Sam’s Club. We went to the Sam’s Club and were stunned at how dead it was. Granted, we did not go early in the morning (we got there at 12:30 pm) but it pretty darn dead inside.

We didn’t go into the mall, but we drove by the parking lot (on both sides) and it wasn’t full to the brim either.

Again, maybe we simply missed the mad rush of the doorbuster crowd.

Or maybe not.

I was surprised at how calm the Holland shopping scene was. But this was, after all, one of the most depressed states in the country.

Could it be that the Michigan consumer was finally pulling back? It appeared so to me (in my non-scientific observations.)

Still, for those thinking the “end is near” on the US economy, I didn’t see that in small-town Allegan in a state with the highest unemployment rate in the nation. There was no recession in Allegan.

Not yet, anyway.

Perhaps the US economy is stronger than the “experts” think.