South Carolina feels economic pinch

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By Claire Bolderson BBC News, South Carolina

Candace Williams has lost regular clients at her beauty salonYou can tell from the handsome buildings in downtown Florence, South Carolina, it was once a prosperous little city.

But its heyday is long since over and now the shop fronts are shabby. Many of them are closed and boarded up.

South Carolina has been shedding its old manufacturing jobs for years.

Locals complain that free trade agreements have encouraged the textile industry that was once the backbone of the state to go overseas.

The unemployment rate, at 5.7%, is a whole percentage point above the national average and unless you are in the medical or biotech businesses associated with the universities, well paid jobs are hard to find.

Nervous market

Locals had hoped that was changing. They had seen new employers moving into the area and South Carolina's growth prospects were looking healthy. Now nobody is feeling quite so certain.

"It's slow," says Candace Williams, a nail technician, as she does my nails at Xscape Hair Salon in Florence.

The 27-year-old mother has lost four regular clients in the past month.

[People] have felt comfortable in spending more - well, that is going to come to an end John Spratt, Democrat Congressman

"One of them just called and said she'd had her hours cut at work so she couldn't afford to come in," she said.

It is the same story in the farmers market on the other side of town.

Traders complain of business having slowed down. And they say locals are reluctant to drive out to the market because of the high price of fuel.

It is not yet a crisis but there is a distinct nervousness in the air. The collapse of the sub-prime housing market is starting to send ripples out to the broader economy.

"Over the last 10 years people have felt the wealth effect of the increasing equity in their homes" says John Spratt, the Democrat Congressman for the Florence area and chairman of the Budget Committee in the House of Representatives.

"They have felt comfortable in spending more. Well, that is going to come to an end," he adds.

House price fall

Even in Charleston, a booming city thanks mostly to tourism and high tech industries, there are signs of a slowdown.

Charleston has been a magnet for skilled workers from other states and there has been a building boom to accommodate them.

But home sales across South Carolina started to slow earlier this year.

Last month they were down by 17% compared to 2006 and in Charleston some brand new family homes that would have been snapped up in days are now sitting on the market for weeks, even when the estate agents start to drop the price.

The Bush administration says frequently that soaring stock markets and strong corporate profits show the economy is in good health.

In the shops, markets and estate agencies of South Carolina, experiences suggest that may not be the case.