Recession hits immigrant business

Economists worry about ripple effect throughout Austin economy.

By Jeremy Schwartz | AMERICAN-STATESMAN STAFF
Tuesday, June 30, 2009

Evelia Arrellano surveys the empty barber chairs with a worried look. It's 1 p.m. on a recent weekday, and she has yet to see a client at her salon, which also sells phone cards, compact discs and sodas to a cluster of mostly Mexican immigrants in the St. Johns neighborhood in North Austin.

She traces her salon's woes to hard times among Austin's immigrant workers, especially those in the hard-hit construction industry. "If they don't work, we don't work either," she said. "Things are getting worse. It's disillusioning. They say the economy is getting better, but it's not true."

Arrellano is feeling the effects of a recession that is hitting Austin businesses that cater to immigrants with a pronounced fury, according to interviews with more than a dozen managers, cashiers and business owners. With construction jobs dwindling, money is no longer flowing freely through Austin's immigrant community, hurting the many businesses selling Norteño records, phone cards, boots, groceries and other goods.

It's a far cry from the go-go days of a few years ago, when Austin's home construction industry helped power boom times for many businesses serving immigrants.

Austin officials say they don't study the economic impact of immigrant businesses or track business closures. But experts say that declining immigrant buying power has ripple effects throughout the city's economy, driving down tax revenue and sparking layoffs.

A November 2008 study by the U.S. Small Business Administration found that nearly 30 percent of all new business owners in Texas are immigrants.

Nestor Rodriguez, an immigration expert at the University of Texas, said immigrant-aimed businesses tend to provide a clear picture of economic conditions in immigrant communities. "When something is happening among immigrants — either prosperity or economic restrictions — they are the first to feel it," he said. "These mom-and-pop immigrant stores are on the front lines. They trust those places, they speak the same languages."

Construction work has decreased in Austin, with jobs in the sector dominated by construction

falling 6 percent in May compared to 2008, according to the Texas Workforce Commission.

Austin is on pace for its slowest year for new home construction since 1995, according to Metrostudy, with new home starts expected to fall from 8,000 in 2008 to 6,000. Nationally, the unemployment rate for immigrants in the construction industry is 20 percent, according to the Center for Immigration Studies, and unemployment rates for immigrants, both legal and illegal, outpace those for the native population, according to several recent studies.

Experts think some immigrants have opted to return home because of the recession, although it's not clear if they are returning in significant numbers or planning to recross the border after the economy improves.

Vicente Limon, an Austin construction worker from Ciudad Victoria in the border state of Tamaulipas, said he hasn't had steady work since December. As a result, his spending habits have changed drastically. "Before I used to buy a new pair of pants or some boots to look good," he said on a recent afternoon. "Now what you earn is for rent, for food. You spend half of what you used to at H-E-B."

Business owners say Limon's story, multiplied by thousands, spells doom.

Jose Manuel Rodriguez used to own five branches of his popular Furia stores, selling high-end belt buckles, Western wear and records. He says he's had to close three of the stores because of the current downturn, laying off a handful of employees in the process. "I've been in business for 10 years, and this is the worst," he said. "This is worse than after Sept. 11."

At the El Paisano used car lot on North Lamar Boulevard, the sales staff has watched sales drop from about 40 vehicles a month to about 20, accompanied by a rise in the number of buyers returning their cars because they couldn't make the payments. "They come to look, but they don't bring money," saleswoman Dayna Salinas said.

In the city's many small grocery stores and meat markets serving immigrants, managers and owners say buyers are sticking to staples such as beans and vegetables and avoiding expensive meats and other luxury items. "It's a chain from the economy to the construction worker to us," said Montana Cooper, owner of La Carreta grocery store on East Oltorf Street. "You're being affected just because these guys don't have money."

According to University of Texas economist Michael Brandl, a lack of immigrant buying power causes trouble throughout Austin's economy, leading to less sales tax money in city coffers, dips in property tax revenue as landlords see their apartments go empty, and layoffs at businesses that serve immigrants.

"No economic group is isolated even though they think they are," Brandl said. "We are all ultimately interconnected."

Rodriguez said stricter enforcement of immigration laws, both among employers requiring valid documents and agents along the border, might also be reflected in the struggles of Austin immigrant businesses. Apprehensions along the border have fallen precipitously, a likely sign that fewer people are trying to cross illegally, experts say. According to the Department of Homeland Security, border agents made 724,000 apprehensions in 2008, down from 1.2 million in 2005. Federal officials attribute the decline to a combination of the bad economy and tougher border security.

Meanwhile, there is little consensus among experts on whether the recession has caused a significant number of immigrants to return home. But immigrant business owners in Austin suspect that's what many of their former clients and buyers have done.

Arrellano says the one thing selling well at her shop are bus tickets to the Mexican interior. "We've talked to them, and they say they're going back because there is no work," she said. "That's what's happening now — there's no money flowing through the community."