Photo by Robb Long

Brian Fesler of the Church of Scientology on Nicollet Mall said while his church hasn’t been impacted by the recession, individual parishioners have been hurt by the downturn.

By Michelle Bruch

Who is sitting in the safest job Downtown right now?

We polled a sampling of Downtown's major industries and found that no one feels too comfortable at the moment.

Nonprofits and architects are already hurting, retailers report slow traffic, and attorneys are bracing for smaller workloads. On the upside, enrollment is higher at some Downtown colleges, and Downtown's major banks avoided the subprime mess that other financial institutions fell into across the country.

The unemployment rate in Minneapolis is currently sitting at 6 percent, up from 4.6 percent at this time last year. The Federal Reserve Bank on Hennepin Avenue projects that the downturn will continue well into 2009. Here's what a few Downtowners and industry reps had to say about how they're sitting.

Law firms

Steve Cooper, owner of the Cooper Law Firm near Loring Park, said he expects the economy to hit lawyers hardest about a year from now.

"I think the legal profession probably is temporarily doing OK," he said. "Most all of us are still working on cases that came through the doors a year ago."

He said cases will take longer to resolve, however, because litigants won't be in a position to move them forward.

Twin Cities-area law firms tend to be more conservative in hiring and firing, said John Matheson, a professor at the University of Minnesota's Law School. And large firms can simply focus on different areas of practice depending on what's in demand. When transactional business slows down, people start suing each other to pay up.

"While that may make more money for individuals within the firm, it doesn't hurt the firm overall if the partners share the profits," he said.

Banks

Minnesota banks tend to be more conservative lenders. They don't enjoy robust booms in good times, but they also take a smaller hit during the tough times.

"Minnesota's only had one bank failure in the last eight years, and it was a smaller bank in rural Minnesota," said Brad Ruiter, director of communications for the Minnesota Bankers Association.

Our banks aren't immune to the sluggish economy, however.

"Some banks are losing money. ... There are not very many people that are doing well in this economy," Ruiter said. "[But] the types of losses that we're seeing within Minnesota banks aren't really anything for people to panic over."

Downtown financial institutions like Wells Fargo and US Bank are also feeling fortunate that they didn't dip very far into subprime loan products.

"We didn't feel it was in the best interest of our customers or shareholders ... even at the expense, at the time, of losing some market share," said Debra Paterson, Wells Fargo's regional president for community banking. "Hindsight's 20/20; it was one of the best decisions that our company could have ever made."

Retail

Retailers had a rough holiday season this year, and even Target Corp.'s December same-store sales were down 4.1 percent from December 2007.

Susan Zdon, the owner of Corazon on Washington Avenue South, said the holiday shopping could have been worse, but it seemed like "something needed to change."

"People were just spending with abandon," she said. "I think in a lot of ways, people kind of are assessing their lives and their needs, and maybe they're figuring out they didn't need as much as they thought they did."

Quyen Witthuhn owns Pacifier stores at Gaviidae Common and East Hennepin Avenue. She said temporary deals on the Pacifier website for free shipping or discounts on big-ticket items are getting snatched up right away.

"They are looking for every deal they can get," she said.

Restaurants

Terry Keegan, owner of Keegan's Pub and The Little Wagon, said business has been slower since the middle of last year.

"People are still coming in, but they're eating and drinking less; they're spending less money," he said.

The National Restaurant Association forecasts modest growth in 2009 sales, but when adjusted for inflation that amounts to a 1 percent decline.

The general manager of Basil's said power lunches and breakfast meetings are still going strong, but social dinners are tailing off a bit.

On the flip side, Morton's recently shut down its lunch service, and a spokesman for the restaurant said lunches weren't as profitable as they would have hoped.

"Certainly the economic downturn is affecting restaurants everywhere," said Spokesman Gary Young.

Creative firms

A Federal Reserve survey of professional service firms last summer found that most expected flat earnings in the year ahead.

Staff at Duffy & Partners are optimistic that they have just come out of a dry spell, however. Right around Thanksgiving, the phone started ringing off the hook with calls from national and global brands.

"There are people in lots of different categories who are looking at how [they can] take this downturn and make something good come of it," said Managing Partner Tricia Davidson.

Christine Fruechte, president of Colle+McVoy, said industry trade publications are all predicting that marketing expenditures will go down this year, particularly in the automotive and financial arenas. Staff aren't too concerned at the moment — Colle+McVoy expected to end 2008 with revenues at an eight-year high.

"We feel very fortunate that we have a very diverse client portfolio," Fruechte said.

Architects, on the other hand, have been hit hard by the downturn.

"I have the sense that our industry has been hit harder than the general numbers in the economy," said Tom DeAngelo, a Downtown-based architect and outgoing president of AIA Minnesota. Shovel-ready projects aren't getting financed, he said. Whereas the city's unemployment rate is at 6 percent,
DeAngelo estimated it could be as high as 10 percent and climbing for architects.

Nonprofits and churches

For this industry, the downturn has been atypically quick and sharp. Nonprofits usually see 12–18 months of lag time between a sluggish economy and funding shortages, but not this year. More than half of the state's nonprofit groups reported a decline in total revenue, and a quarter have already reduced their staffing levels.

"All [nonprofits] are expecting to lose some funds during the course of the year," said Frank Forsberg, senior vice president of community impact at the Downtown United Way office.

Meanwhile, the demand for services that nonprofits provide has gone up. United Way reports that food referrals between September and November were 17 percent higher than the average demand over the last three years.

Staff at Westminster Presbyterian Church are also seeing much higher demand at area food shelves, although the future doesn't look too bleak for the church itself. Westminster finished 2008 in the black, and pledges are fairly strong for 2009. Members with strong incomes appear to be giving more, offsetting commitments from people who have lost their jobs. Minister Brian Fesler of the Church of Scientology said the economy hasn't hurt his church yet, but said it's definitely hit parishioners individually.

"Often I think the commitments that people make to religious organizations tend to be those that are closest to their hearts, and ones they give up last," said Westminster Senior Pastor Tim Hart-Andersen.

Education

It looks like the tough job market might be ushering more people into the classroom. Student enrollment is increasing at the Minneapolis Community and Technical College.

"Right now, what we've noticed is a lot of students that maybe have been out for a while are now wanting to come back," said Kerri Carlson, director of admissions.

Enrollment numbers haven't been finalized yet at the University of St. Thomas.

"I think everybody is still holding their breath at this point," said COO Mark Dienhart. They expect that some companies will scale back subsidies for MBAs, and the university is waiting to see if students have difficulty securing money for school.

"Higher educational institutions survive rather well during recessions because people tend to go back to school," Dienhart said. "Are the rules of the game the same, or have they changed? The availability of loan dollars might be the key factor in all of that."

Another unknown is how state funding will impact schools.

Metro State Spokesman John Hendrickson said higher education funding has been reduced over time.

"We've never shut down buildings or had mass layoffs or anything like that, but you will have to watch finances across the board in general," he said.



Reach Michelle Bruch at 436-4372 or mbruch@mnpubs.com