Pawnshops paint picture of softening U.S. economy

Thursday, Nov. 1, 2001 | 9:54 a.m.

Las Vegas pawnshops in tourist corridors are shelling out a high number of loans in the wake of thousands of layoffs at Strip resorts, while sales of pre-owned merchandise have been slow.

However, local pawnshops in residential corridors are reporting that while loans are strong, sales of items like TVs, VCRs, videotapes and DVD discs have been on the rise, as Las Vegans seek inexpensive entertainment alternatives in the midst of the economic crunch.

The trends seem to reflect the softening Las Vegas economy, though experts say it's an indicator that isn't always reliable. But pawnshop operators say they see subtle changes in local and tourist lifestyles as customers walk through their doors.

"When we handed out fliers on the Strip and in other parts of town announcing we were having a big discount sale, we had our best weekend for sales (since the Sept. 11 terrorist attacks)," said Mitch Halsell, store manager of Gold & Silver Pawn Shop on Las Vegas Boulevard.

"Sales have been slow, yet we steadily have been writing about 100 loans a day. We depend on sales for income to make loans 24 hours a day. We recently had to put a sign in the night window saying we had run out of money."

Economists say that a look at pawnshop loan and sales activity gives an anecdotal picture of the economy, but is not a reliable barometer of trends throughout the retail industry.

"What is happening at pawnshops is consistent with an economy that is softening," said Keith Schwer, director of the Center for Business and Economic Research at UNLV. "But one should be leery of drawing sweeping conclusions from that sector of the retail industry.

"To get a more accurate picture, we use reliable sales tax data of the major retailers. However, the trend with pawnshops may suggest that people are trading down. We may be seeing people who regularly shop at Dillard's going to Wal-Mart and those who regularly shop at Wal-Mart buying at local pawnshops."

Steve Mack, owner of 22 Southern Nevada Super Pawns, most near residential areas, said his "loans have been strong" and sales of previously owned TVs, VCRs and tapes are up.

"This is our third recession, and it appears to be soft," Mack said. "Many of our customers have told us they believe things will turn around soon."

Las Vegas City Councilman Michael Mack, owner of First Class Pawn on West Flamingo Road and Steve's brother, said his company's situation is similar.

"There is a misconception that all pawnshops rely mostly on tourist trade," Michael Mack said. "For me it is 75 percent locals."

Halsell said because his shop's location is close to downtown and the Strip, a great number of his customers are tourists looking for good deals on jewelry and other items, while much of his local clientele uses the pawn service, where they pay 10 percent interest per month for 120 days.

"A misconception about pawnshops is that a majority of customers are gamblers hocking expensive jewelry for large sums of money to gamble, but in reality most of our customers are ordinary people willing to part temporarily with some of their valuables for small loans to get them through," Halsell said.

"More than 90 percent of customers redeem their items, and most of our loans are for less than $100 -- money used to buy gas for the car or pay bills. Bank loans can take too long to approve. People come to a pawnshop because they need money now."

Eric Garman, district manager for EZ Pawn, which has 300 outlets nationwide including four locally, agrees that loans have been brisk in recent weeks.

"There is no question that, based on what we have seen, Las Vegas has been one of the hardest economically hit parts of the country," Garman said, noting that merchandise sales are OK in some areas and in other areas are bad.

"What we have been seeing in this (Las Vegas Boulevard) store is more of the TVs and VCRs sold as well as old movies and tools -- the regular stuff that people use -- but not high-ticket items like Rolex watches and big diamonds."

While handing out sale fliers, Halsell said he was shocked when an angry woman accused him of holding his sale to liquidate the possessions purchased recently at a sacrifice from out-of-work casino employees.

"The law requires us to hold an item we buy for one month so Metro Police can check if it was stolen," Halsell said. "So none of the items during that sale came from area workers who lost their jobs. Besides, the vast majority of the workers have pawned -- not sold -- their items."

Halsell said the business he runs also has made him aware of just how widespread the economic slowdown is nationwide, as Gold & Silver does a lot of sales over the Internet.

"eBay (auction website) has really saved us, but even sales over the Internet are down," Halsell said. "Five months ago we were doing $55,000 a month in sales through eBay. Now we are down to about $18,000 a month."

Still, a sale is a sale, and Halsell admits that in tough times any income is welcome.