Local residents worry of recession

March 19, 2008 11:26:25 AM PDT
Faced with the possibility of slipping into a recession, if we're not already in one -- the Federal Reserve on Tuesday slashed a key interest rate to the lowest it's been in more than three years.

For the second time in three days, the Fed lowered its "federal funds" rate -- the rate at which banks make loans to each other -- by three quarters of a percent.

In doing so, the Fed warned "the outlook for economic activity has weakened further," and that "downside risks to growth remain."

Still, Tuesday's action triggered a euphoric buying spree on Wall Street -- the Dow rose 420 points today -- three and a half percent. But turning the economy around may depend on you.

The one thing that the Fed and even Washington can't stimulate is confidence -- the confidence it takes consumers to pull out their wallets and purses to spend money.

In San Leandro, there is plenty of concern the economy is worse than many will admit.

"Everything is pretty much uncertain now, and it's a scary feeling," said construction worker Douglas Galvan.

Scary is not a word you hear a construction worker say very often.

However, there is definitely concern in this city of 79,000 people among working age residents and the retired, like 82-year-old Laura Hesson.

"It is terrible, I think," said 82-year-old Laura Hesson.

The troubled economy is the main topic of conversation at Richie's Barber Shop.

"The President just said on the radio we're going to be okay, but the sentiment is we're not going to be okay. Most people think the truth is not being put out there about how bad the economy really is," said San Leandro barber David Edwards.

Vincent Castillo is convinced the country is in recession, even if no one in Washington is willing to say so.

"I don't see how we couldn't be in one because it seems everybody, Wall Street's going down," said San Leandro resident Vincent Castillo.

Shopkeepers tell us business is way off.

"My business is about half what it was," said gallery owner Ginger Grow.

ABC7's David Louie: "That's quite a drop."

"It is quite a drop," said Grow.

Psychologists who study consumer behavior say it's a sign of lost confidence.

"If consumers lack confidence, they're going to pull back spending now, even though they might actually have plenty of money to spend because they're afraid of what's going to happen in the future," said Golden Gate University consumer psychologist Kit Yarrow, Ph.D.

At the Pelton Cafe, the Gudgers speak proudly about their son, an airline captain. But even he could be facing economic turbulence.

"You hear about people losing their homes, jobs. I'm concerned about my son's job, you know, so that he has to turn to us and we would have to help him also," said retired store owner Lucille Gudger.

Uncertainty over the economy exists, and on East 14th Street, it's real.

"Hang around a barber shop for a day, and you'll see what's really going on with the economy," said Edwards.

Almost everyone in San Leandro told us they've cut back spending ? from going out to the movies, to eating out and weekend trips.

That can lead to a down spiral that can only further harm the economy.