Recession Reckoning : Finances: For many in L.A., the flagging economy has meant more spaghetti, no new cars and lots more serious worries and heartaches.

TIMES STAFF WRITER

If you're having trouble getting a grip on the economy, you probably aren't alone. Contradictory and confusing items nip at the edge of our consciousness: We're in a recession, we're not in a recession. The real estate market has gone bust, it's only gone squishy. We should hoard our money, we should spend with gusto.

If your job is secure and you aren't about to plunge into a bottomless mortgage or buy a brand-new car, headlines about the economy might sound vaguely like someone else's bad dream.

But for many people--people who have lost their jobs, people who can't sell their homes--the specter is as real, and as frightening, as an Everest of unpaid bills.

Sue Hearon, 32, was riding high in June. She had a new baby boy at home and had just been promoted to a $34,000-a-year job as computer programmer at Gibraltar Savings when the Simi Valley thrift laid her off with no notice and five weeks' pay. Gibraltar was purchased by Security Pacific National Bank, which resulted in the layoffs of about 250 people.

"I was totally stunned," she said. "I was 24 when I first interviewed there. I had just been laid off from Southern California Savings. So I told the guy who was interviewing me that I wanted to see their net worth-to-asset ratio and their financial statement. He just laughed. He told me Gibraltar was so conservative that I would never read about them on the financial pages. As I was carrying my box out after I was laid off, I saw him. He was laid off, too."

Hearon, who lives in Moorpark, has found another job at about the same salary, but she'll be commuting 35 miles instead of three. And in January, because she is no longer a Gibraltar employee, her fixed-rate 8 5/8% employee mortgage from Gibraltar converts to a higher, adjustable-rate mortgage, which will add about $300 a month to her payment. Compounding the family's anxiety, her husband Mark is a machinist at McDonnell Douglas Helicopter Co. in Culver City, where 313 workers have been laid off since March.

For a while, to help make ends meet, Mark Hearon was working seven days a week and rising at 2:30 a.m. on weekdays to get to work by 4, but the company cut off his overtime two weeks ago.

"We're eating a lot of pasta now," said Hearon. "We were going to buy a minivan when the new models came out but that's gone now. My baby needs new pajamas and I'm afraid to spend the money."

Vanyel Parker, 28, and her husband, Michael, were about to adopt a baby when they learned that Vanyel was being laid off June 1 from her $20,000-a-year job as an in-house instructor for Douglas Aircraft Co. in Long Beach. She wept quietly as she recounted how their lives have changed.

"It's something that we wanted for so long and we were so close," said Parker, who lives in Los Alamitos. "Now everything is on hold. I had to stop crocheting things. My savings are cleared out. I'm a month behind in my car note. We don't go out to eat. I cook to make things stretch. I buy a lot of beans. We've had to let other things go to pay rent."

Michael Parker is a union painter who periodically faces layoffs. He takes their one car to work in the San Fernando Valley, so his wife is forced to take buses to job interviews.

"That gets expensive when you have three or four interviews in one day," she said. "I am out every day looking for a job. Everybody wants to pay you $7 an hour. I have 50 resumes out there. I have a stack of letters from people--I've been told I'm overqualified, I'm under-qualified. I try to be strong and I try to be positive but two weeks ago, everything just built up and I went through a depression. I cried from about 3 in the afternoon until 10 that night. This is causing problems for us."

Terry Ballard, a soft-spoken 53-year-old facility engineer, was earning $45,000 a year when she, like Parker, became one of the approximately 8,000 Douglas employees who have been or will be laid off this year. Ballard was let go in June. Her husband, Marvin, is a Douglas engineer, whose job--for now--does not appear to be in jeopardy. But all of a sudden, their lifestyle is.

"In 10 years, we were all set to retire," said Ballard, who lives in Cypress. "This throws your plans totally up in the air. It panics you."

Ballard had already been in the grip of stress from a personality conflict at work, and when she was laid off, her anxiety level rocketed.

"It's just devastating to your self-worth. You're in shock. You tell yourself your value is still there, but it's very hard to swallow. My doctor said, 'Now, Terry, what is the worst-case scenario? Would you lose your house?' I had to realize that probably in six or seven months we wouldn't go bankrupt, but we would have to make some changes.

"We were on the verge of buying a new car for me. Well, that won't happen this year. You have to tell yourself that times are different now."

Times are different indeed. After its longest expansion in peacetime history, the economy has slumped into what some economists, and increasingly, average Americans, are calling a recession. A recession is defined as a period of at least six months during which a nation's gross national product stagnates or shrinks.

There is debate among the experts as to whether the word recession applies to the current state of affairs, but everyone agrees on one thing: the economy is listless. One of the reasons it's hard to label a recession as such is that we don't usually know for sure we've been in one until it's over. But the signs are unsettling:

* National unemployment is up to 5.6%--the highest level in two years. Unemployment in the greater Los Angeles area was 6.6% in August.

* The U.S. economy grew only 1.2 % between April and June, and has grown less than 2% for the last five quarters. Growth of 4.5% to 5% is considered robust.

* Between July, 1989, and July, 1990, 300,000 manufacturing jobs were eliminated in the United States. Manufacturing is a job category that is particularly sensitive to shifts in the economy and so is regarded as a bellwether.

* On Aug. 30, the Commerce Department reported that its Index of Leading Economic Indicators, a forecasting tool for future economic performance, was flat in July. Analysts expect it to drop in August.

Perhaps even more worrisome is the fact that Americans are getting downright gloomy about the economy. A recent New York Times/CBS News poll found that six out of 10 Americans perceive the country to be in a recession. A quarter of those polled said they felt an adult in their family may be out of work in the next year, and 4% said someone in their family was already jobless. Polls conducted by other news organizations since May have charted a steady drop in Americans' confidence in the economy.

Adding to the confusion, two days after the New York Times/CBS poll was released, officials of the Federal Reserve Board said they do not believe the economy is recession-bound.

"I'm more optimistic than most people that a recession isn't baked into the cake right now," said one member of the Fed's Board of Governors. "I'm optimistic that consumer confidence will improve."

If it doesn't, said David W. Stewart, a USC professor of marketing and an expert on consumer behavior, that could spell trouble.

"One of the great dangers is that people will believe there's a recession and they'll act accordingly and make it worse," said Stewart, "It's almost a self-fulfilling prophecy. If they believe the economy is turning bad, they behave in a way that's consistent with that, and lo and behold the economy turns down. If people panic, any downturn will be worse than it has to be."

Panic, said Stewart, "is when they draw in the reins and stop spending, stop buying cars, stop taking vacations. We've lived with bits and pieces of bad news for eight years. The savings and loan crisis has been around for a while. Certainly parts of the U.S. have been in virtual recession--the Southwest and now the Northeast. There were periods of concern about inflation reigniting. We've lived with constant concern about the national debt. The U.S. economy has tended not to act in unison in the last decade. California has been relatively resilient, but in all likelihood, this may be the (downturn) that we will feel."

Three recessions of the last two decades--1973-75, 1980 and 1981-82--were sparked in part by oil shocks. (The current crisis in the Persian Gulf is more like icing on an already-collapsing cake. Gas prices have risen sharply, but the downturn was already well under way.)

The worst was the recession that started in 1973. Late that year, oil prices quadrupled--zooming from $3 to nearly $12 a barrel. Inflation rose to 8.7% from 3.4% the year before. By 1975, the unemployment rate had reached 9%.

In 1979, after the American hostages were taken in Iran, President Jimmy Carter cut off Iranian oil imports. By the end of 1981, prices had risen from between $12 and $15 per barrel to $41.

And anyone who nursed dreams of buying a home in 1980 will not soon forget the depressingly inflated interest rates of the day--the prime rate topped out at 21.5%. But not even the glummest experts say the current downturn will be as severe as those.

Economists may not be able to predict exactly what the economy will do, but they can predict how people will behave in these times of uncertainty. Mostly, says USC's Stewart, people will refrain from discretionary spending.

"If something breaks down in the middle of the freeway, they'll buy a car, but if the car is 3 years old and they want a new one, they'll postpone," he said. "They also do a lot of trading down. Instead of taking a vacation to the East Coast, they may go to Yosemite. If they are people who go to Yosemite, they may go to Disneyland. We even see this with restaurant patronage. People who go to an upscale restaurant may go more frequently to a family-style restaurant. People who buy fast food may stay home."

People most affected by an economic downturn, says Stewart, "tend to be in the more modest range. The individual who is wealthy won't be affected by the vagaries of the economy. It's the middle class that will postpone the luxury items."

Jim German, owner and president of Admiralty Yacht Sales in Ventura, agrees. "We're on somewhat of a different plane," said German, whose new boats cost an average of about $120,000. "Our customers may pause momentarily, but people who are buying yachts are not too affected." German is opening a new store in Newport Beach. He expects his company's annual sales to double, swelling to $6 million a year from $3 million.

Members of the non-yacht buying public, such as Julie and Gene Gonzales, 27 and 28 years old, are far less sanguine about their immediate financial prospects. Three years ago, Julie, then a pregnant law student, and her husband, Gene, a certified public accountant, figured if they didn't buy right now , they'd be locked out of the real-estate market forever. They traded their West Los Angeles rental for a $93,000 condo in Van Nuys, let out a sigh of relief and watched their equity grow. This year, with Julie just out of law school and the baby now a toddler, the couple has decided to move to Sacramento, where the air is cleaner, the commutes are shorter and housing prices don't make you sick.

The Gonzaleses found new jobs in Sacramento. Then they found a house--a wonderful house--quite a stretch for them at $256,000, but worth it. They were confident. After all, they had all this equity from their condo for the down payment.

"I remember the real estate agent in Sacramento saying, 'Do you think you'll have trouble selling your condo?' " said Julie Gonzales, 27. "And I said, 'Oh, no, not at all. It'll sell in two weeks.' "

The Sherman Way condo has been on the market since May. The price has been slashed from $138,500 to $128,500. They haven't received a single offer. The Gonzaleses, who left for Sacramento last week are in the frightening position of being on the hook for two mortgages.

"A lot of people have come through here," said Julie Gonzales. "Most are first-time buyers. But they're all afraid--they think they'll lose money, it'll devalue, they won't get the appreciation. We lowered the price by $10,000. We'll pay the closing costs. What else can we do?"

What strikes fear into the heart of Temmy Walker, a Studio City real estate broker, is the way the word recession is being bandied about in the press. The very word, she says, freezes home buyers in their tracks.

"People really watch the headlines, and when the press comes out with tales of bad tidings," she said, "then it comes true. We have never had as big an inventory of homes as we have right now--we have 14,155 (San Fernando Valley) listings. Everyone should be out buying houses right now and instead, they've got their purses clutched to their chests."

When asked, six agents in Walker's office easily came up with up with the names of clients who, like the Gonzaleses, are stuck with two mortgages.

The Gonzaleses have rented out their Van Nuys condo, but for $300 less than their monthly payments. "I get very scared," said Julie Gonzales. "My student loans come due in February and we're hoping to have it sold by then. We are really going to be strapped. But we've decided we won't go out for a year, we'll just stay home.

"I guess I just have to have faith and hope," she said. "But then I read that New York law firms are laying off first-year attorneys. . . ."

If he were to give advice, said USC's Stewart, "I'd say you've got to look at your own situation. If you're in a job that is less secure, you may want to think about saving more. If you have high debts, you may want to pay them off. On the other hand, if you're in a secure job and your debts are not too high, get on with life and spend, because spending is what drives the economy."

All of which offers scant comfort to Vanyel Parker, who has postponed adoption plans and is living on beans. "It's hard for people on my level," she said. "I am trying to hold on to every cent I've got."

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