OK, let’s be transparent with one another for a while, shall we? How many of you in the service provider industry know anyone who is still working full time who hasn’t taken a pay/perk/benefit reduction of some kind over the last 18 months? For those of you who haven’t, kudos and congratulations, and may the force be with you. For the rest of us, who, from what I can tell, constitute the vast majority of all professionals, sacrifices have been made in the interest of mutually supporting our peers, or in some instances, even our organizations.

Here in California, as you may have heard, our state leaders struggled mightily but ultimately produced a new budget that reduced state spending (at least in theory) by enough to close our highly publicized $24 billion deficit. (Yes, that’s for ONE YEAR.) Despite any other judgmental misgivings about the results, the governor and legislators are at least to be commended on the fact that THEY GOT THE DARN THING DONE.

Ahem. Now comes the screaming part. There was, as might be expected, a group of people who screamed long and loud over the period of months in which we went without a budget (to the point that the state was issuing IOUs, even for income tax returns in some cases. Sure glad I filed, and received my refund, early.) The approaching financial “event” (I can’t even find the right word here, exactly: Fracas? SNAFU? Tsunami? Armageddon? Mere words don’t seem to do it justice) was daunting to all, so in the end, our fractious lawmakers finally cobbled something together, albeit with a substantial serving of smoke and mirrors by some accounts. (What else might you expect from the state that is home to the motion picture industry?)

Ah, but the screaming. Last week there were several reports on the public radio station of employee unions who were already threatening to sue the state over the proposed pay cuts they were going to have to take, which in some cases amounted to nearly 15% of their pay. While the dispassionate NPR reporters, I’m sure, endeavored to remain neutral in reporting this phenomenon, I believe a little of their agony crept into the accounting of the situation. Perhaps I have already been hardened by the current economic predicament, but I must confess that on some level I felt a bit cynical about the whole business. Typical of my thoughts about this was, “Hey, what are you griping about? Many of my peers have been laid off or taken pay cuts, and they can’t sue anybody. What’s up with that?!”

Which brings me to my point: we’re all in this together. Like the awe-inspiring daily draining of the Bay of Fundy, all boats have sunk in sync. Well, at least most boats. The public employees sector, which is typically abnormally resilient to these economic cycles, has finally felt the pain and humiliation of the kid left standing when the music stopped. In my brief twenty-three year career, I can’t remember when I ever saw this happen before. (Which is not to say it didn’t happen. The most likely time was back in 1991-92, but I was so pre-occupied with my own under-employment that I may not have noticed.)
Credit was the tide that retreated. For a while, it was funding everything, and it seemed like an epoch of unbelievable opportunity. Well, sadly, I guess unbelievable was the operant phrase there.

But back to the point. As the resumption of job creation in these cycles typically trails the bottoming of the S&P 500, surely the constriction of government payrolls and services has got to signal the end, or nearly the end, of our current melt-down. With this final piece of the puzzle finally tightened at the same level as everyone else, perhaps the field has finally flattened enough that some upward progress might be discernable, though at a re-set rate with very different expectations.

I don’t mean to begrudge the real pain and suffering that will befall our civil servants as they, too, look at personal and family belt tightening to endure the remainder of this downturn. And, naturally, as they were late to the party (so to speak) in terms of layoffs and concessions, I know they will be some of the last to return to business as usual when events finally turn around with certainty. Nevertheless, I think the symbolic importance of the “business” of government coming to terms with the same issues that have plagued the rest of us bodes well for determining where we are in the cycle of this drastic downturn.

After all, is there anybody left to be affected? With the other positive economic indicators we’ve see this month, I think there is real reason for our hope to get some grounding.

C’mon, tomorrow I love ya. You’re only a day away.

(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)

So it’s come to the end of another gorgeous holiday weekend, right here in the middle of the summer of our discontent. I don’t know what happened—from everything I read and heard, I had come to believe the third quarter would usher in the recovery, albeit mild-mannered, from just whatever it is we’ve been going through. Hey! We’re almost a week into the Q3, 2009! Where’s the recovery?

Well, perhaps as Jeff Immelt said, this is not so much a recovery as a “re-set.” To me that always conjures the picture of returning all the Monopoly money, markers and cards back to the box and starting all over again—it’s the same general setting and rules, but maybe fortune will smile on me differently this time around. Perhaps at best it is at least a new hand in an ongoing card game—see above for details.

OK, then. With this concept in mind, I’ve been thinking about the possible advantages that could emerge from everyone taking a new position at the card table. As Chris Thornburg recently pointed out, while the dizzying drop of home values has caused real pain to many, many people at the same time, it has re-created an environment of “entry level housing” for a bunch of others, even here in pricey southern California. The data would prove this out, as more and more first time buyers are moving on properties whose prices make it feel like 2004. And good for them! (Even though many of these homes were sadly lost to foreclosure by the departing former owners.)

The dark cloud out on the horizon, as I hear it, is the large number of prime mortgages that are moving ever closer to default and ultimate foreclosure. In this case, more middle-of-the-road families, or even “up-and-outers,” are gazing down the barrel of bank action on their properties. Probably some of these folks over-leveraged their homes in the financing frenzy that affected all of us to a greater or lesser extent. Or even more unfortunately, someone has lost a job and ends no longer meet. For whatever sad reason, many homes will need to be given up. In some cases, there are no buyers for these properties due to the high price tags and inaccessible credit. It’s another big mess waiting to happen.

So, call me crazy, but I’ve been seeking for some upside in this approaching cranky cumulus, and I think I may have come up with something: better garage sales. Seriously, I’m saying this without the least bit of cynicism or sarcasm. In my first dwelling following college, if it weren’t for garage sales and charity I would have lived like a monk—sleeping on the floor and crafting my late night missives longhand by the glow of a bare lightbulb. Over a period of few weeks I managed to upgrade from futon (hand-me-down) to a chaise lounge (rummage sale) that got me up off the floor. (This piece of furniture–believe it or not—is still with me. It has such a great form that some years after we purchased our house my wife had it recovered, and it is still essential to our décor.)

Anyway, in the early years of our marriage, we often shopped at yard and garage sales, and occasionally scored some real finds. Then it seemed, over the years, the general quality of the content of these impromptu swap meets seriously declined, and eventually, we stopped looking. (One could argue that our tastes changed as our incomes grew, but that would be quibbling.)

Now, I see the same experience opening up for a whole new generation for first time homebuyers. As some of the prime-mortgage homeowners need to either “stage a liquidity event”, or in dire cases move out to smaller quarters, I have to believe that some of the stuff that was acquired in the “house-as-ATM” stage will find its way to the driveway or curb. Young “garage salers” (as we used to call ourselves) could pick up some great bargains on quality merchandise. Not only would this be a good deal in many cases, but it is also certainly more sustainable than sending stuff to a storage facility, or, worse yet, to a landfill.

Some of the dislodged owners will probably need to rent for a while, and I’ve heard they typically look for somewhat higher-end rental properties. This migration may help take some of the pressure off dropping rents, which would be good for the multifamily sector.

I would never want to make light of anyone’s misfortune or hardship, but sometimes these things just have a crazy way of sorting themselves out.

(Daniel Gehman is principal at Thomas Cox Architects. He can be reached at DanielG@tca-arch.com)