Job applicants waiting to speak to recruiters in Georgia. Studies suggest the recession brought a shift in the geography of growth.
CLINTON, Md. — Half a decade has passed since crowds of lunchtime workers regularly packed the Fish Market restaurant, a popular fixture of this southern Maryland crossroads known by the lighthouse on its roof.
Rick Giovannoni, co-owner of The Fish Market in Clinton, Md., chats with lunch customers.
Sales representatives for drug companies no longer buy hundreds of dollars in food for workers in the medical offices across the street. The private dining room, once a popular spot for business meetings and family parties, was closed in the fall.
The official statistics say that the national economy has been growing for almost three years, and that Maryland is growing faster than most states. But in Prince George’s County, where housing prices have fallen more than anywhere else in the state, there is scant evidence of renewed prosperity.
Auto sales are slowly improving nationwide, but car dealers here say the arrival of spring and tax refunds are failing once again to bring buyers to their lots. Contractors who built homes say they are glad for work fixing roofs.
“I don’t think you’ll find anyone in here who will tell you that it’s over,” said the Fish Market’s owner, Rick Giovannoni, gesturing at the half-empty tables.
He paused, then added: “Well, we are selling more drinks.”
A growing body of research suggests that the recent recession may have brought an enduring shift in the geography of American growth. Places like Gwinnett County near Atlanta, Lake County, north of Orlando, and San Joaquin County in California’s central valley, where housing booms were fueled by borrowed money, may now become long-term laggards under the weight of those debts.
Various kinds of economic activity, including auto sales, fell more sharply and are rebounding more slowly in areas that had the highest debt burdens at the peak of the boom in 2006, according to a series of recent studies.
Jobs that depend on local spending, in restaurants and retail stores, were eliminated in larger numbers in high-debt areas. And the latest available data suggests that those jobs are returning more slowly, too.
“Typically where the recession hits hardest the comeback is more vibrant,” said Amir Sufi, a finance professor at the University of Chicago who is an author of several of the studies. “We’re not seeing that this time around.”
This debt hangover has its strongest grip along the western and eastern coasts, where the scarcity of land helped to drive housing prices and debt burdens to extreme levels. Prince George’s, which fits like half a doughnut around the eastern side of Washington, was particularly vulnerable because it is the least affluent of the Beltway counties. People here, as in other less affluent suburbs, tended to have few investments beyond the equity in their home.
Housing prices in Prince George’s more than doubled from 2001 to 2006, reaching an average of $341,456. The average household, in turn, accumulated debts exceeding 2.5 times its annual income. The crash, when it came, wiped away much wealth and some income — but none of those debts.
Greg Howell, who runs an auto finance company that works with Washington-area dealerships, said sales remained particularly depressed in Prince George’s and across the Potomac River in Prince William County in Virginia, an area with a similar boom in housing prices.
Sitting in a back office at Driveline Auto, a Prince George’s dealership in which he owns a minority stake, Mr. Howell said that business had “hopped” in the years before the crash. Since then, he said, a lot of dealerships had closed.
People who need cars are buying, he said. People who want cars are not.
“When a customer points at a shiny BMW, there’s more margin there,” he said. “Until the want comes back, these businesses will struggle.”
“It hasn’t been fun in five years,” he said. “And it’s going to be awhile.”
It may sound obvious that people with debt problems will spend less. But it is less obvious that this would weigh on growth. According to standard economic theory, if some people borrow too much and reduce their spending, prices and interest rates should fall, inducing other people to increase spending.
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