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Some shopkeepers sensed an instant reaction last week. Helen Rickard owns the Olive Tree, a clothing and gift store in Rockford, Ill. "I find people coming through here and looking and saying 'Just browsing, thank you,' " she says. "It used to be that at this time of year they would at least try things on and put things on layaway to pick up as Christmas presents. But now everybody's apprehensive about turning loose their dollars." She estimates that her sales last week fell by 25% to 30%. "If it's a soft Christmas, I'm in trouble."
Falling sales could lead manufacturers to hold off on expansions. Rather than building factories and buying new equipment, businesses would look for bargains in used plants and machines. That would mean less work for contractors, carpenters and other members of construction crews. Richard Snow, director of the Associated General Contractors of Greater Milwaukee, conceded that area contractors were worried. "No hardhat is going to take a dive off an unfinished apartment building," he said, "but this crash could have serious effects down the road."
John Pratt, 54, who owns a service that supplies temporary industrial workers in Los Angeles, was less concerned about his long-term personal investments than about his business. "If the market hasn't recovered by the time I'm ready to go off into the sunset," he says, "this country is really in trouble. But I suspect that we could see a 10% to 20% drop in demand for our temporary labor as firms start to tighten up."
Owners of new businesses felt the pressure last week as well. Renee Ickson Young, 27, opened her own public relations firm in Manhattan last year. When she heard the news of last Monday's mayhem, she realized that she would have to adjust her business plan. "In a crunch," she says, "the extras are the first things to go at a company, and public relations is considered an extra." Until last week, Jo Ann Coogan, 30, of Dearborn, Mich., was planning to open a small brokerage. But her start-up money was heavily invested in the stock market. "I'm numb," she says. "All of a sudden you see how all of your life is affected by something like this."
Millions of Americans were concerned about what the market decline could do to their profit-sharing, pension and retirement plans. Some people have their Individual Retirement Accounts, for example, heavily invested in the stock market. Of the $1.4 trillion held by the nation's pension funds, roughly half was in stocks before last week. Retirees who are already collecting pension payments under defined-benefit plans are in no danger because of federal pension-insurance guarantees. Nonetheless, most pension funds have taken a beating over the past three months. A firm that finds its pension plan underfunded might have to dip into earnings or borrow from outside sources to meet its fixed obligations in the short term. Since pensions are based on salary scales, companies may choose to hold down wage increases to lower pension costs. Over the longer term, if the market stays depressed and squeezes earnings, many firms might be forced to reduce benefits for future retirees, postpone new investment or even cut their staff to restore solvency.