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Not much holiday joy in the Rust Belt

Strikes and layoffs mean workers will pinch pennies and retailers won't profit.

By ASSOCIATED PRESS
Published November 28, 2006


AKRON, Ohio - A few steps from Goodyear Tire & Rubber Co.'s hulking headquarters, striking factory workers marked a month off the job in early November by erecting a lopsided Christmas tree.

Red and white bulbs join sparkling gold garland. Instead of a star, a tiny wood block reading "USW L2" - United Steelworkers Local 2 - tops this plastic pine. Beneath, instead of presents, there are cardboard headstones with the names of the 16 plants in the United States and Canada that are on strike.

"As I looked at that, I said, 'Oh, my God. I hope we're not here until Christmas," said Joe Locascio, who's made a decent living working for the world's third-largest tiremaker for more than three decades but worries about holiday shopping on a striker's budget.

He's not alone. This holiday season, there's plenty of belt-tightening across the Rust Belt, from anxious auto workers in Detroit to striking tiremakers in Ohio. And small-business owners, especially, are feeling the pain.

"Nobody takes this as a paid vacation," said Jeff Berger, who spends some of his time on the Goodyear picket line worrying about gift buying. "A lot of people aren't sleeping lately."

Many aren't spending much, either.

Goldman Sachs and other analysts predict layoffs, high gas prices and other economic struggles will hit the Midwest the hardest this holiday shopping season, a period when retailers nationwide usually rack up about 20 percent of their annual revenues.

Unemployment is fairly low nationwide, at 4.4 percent, and holiday sales are expected to be robust - up 5 percent to $457-billion, according to the National Retail Federation.

But times are tougher in some Midwestern areas.

In Akron, the unemployment rate is 5.4 percent. It's 5 percent in Cleveland, the nation's most impoverished big city where steel and other manufacturing jobs have been lost. Detroit has the nation's biggest unemployment rate, 7 percent.

More than half of Ford Motor Co.'s 35,000 to 40,000 white- and blue-collar layoffs are in the Midwest, and that will be especially challenging to stores such as Kohl's Corp. that have a heavy presence in the region, Goldman Sachs points out in a report to investors.

The Midwest hasn't benefited from some of the national economic trends, said Karl Bjornson, a strategist at retail consulting firm, Kurt Salmon Associates. He forecast the region will see holiday sales growth of between 4 and 4.5 percent, lower than what's expected nationally.

"I don't predict it to be a dismal Christmas but it certainly isn't going to be a Christmas like we saw last year," Bjornson said.

While higher-end retailers and department stores stand to hurt the most, Goldman Sachs analysts Matthew Fassler, Margaret Mager, Adrianne Shapira and John Heinbockel wrote, discounters such as Walgreen Co. might do better.

"Some of the discount players in the region could see a potential lift as laid-off workers seek greater value during such challenging times," they wrote.