How Badly Are We Doing? : California’s in a slump. The good news: Some say it may not be terrible. : Chief Executives Are Pessimistic, Survey Reveals

For some business leaders in Southern California, there is no doubt about whether the country is headed for a recession. In a survey by The Times of chief executives of large Southern California companies, 27 of the 28 who responded said they think that the United States has already entered one.

Yet the executives are not all doom and gloom. Most said they expect the recession to be relatively mild and to last no more than a year.

To prepare, executives said they already have tightened the lid on expenses throughout their companies. Two-thirds said they had instituted cost-cutting measures; others said they had frozen employment levels, pared inventories and shelved expansion plans.

Nearly half the respondents said they expect to reduce staffing levels within the next year; two said they already have.

Stephen Levy, senior economist with the Center for the Continuing Study of the California Economy in Palo Alto, said the pessimism of the chief executives does not surprise him. “We’re finding pessimism all over. Many other regions have been in slowdowns . . . and it has finally come to California.”

Levy is perplexed, however, about the source of the pessimism. The traditional measurements, he said, do not yet point to a recession. Still, Levy and other economists say chief executives’ attitudes and actions usually are responsive to recessionary trends; they do not begin the cycle.

“Chief executives don’t make a recession, and CEOs don’t set the confidence level,” Levy said. “They may exacerbate it, though.”

Economists believe that it is reduced consumption that creates recessionary conditions. And in that regard, “the weight is on what households--not chief executives--are doing, although they are interwoven,” said David Hensley, acting director of the Business Forecasting Project of UCLA’s Graduate School of Management.

“Still,” Hensley allowed, “confidence is a pretty important (component)” in determining whether a slowdown is nudged into a recession.

Confidence-building is something that is also on the chief executives’ minds.

When asked what the federal government should do to assure that any recession is short-lived, William S. Mortensen of Santa Monica-based First Federal Bank of California echoed many of the other respondents’ views. Government, he wrote, needs to straighten out the fiscal crisis, “show some leadership (and) exhibit courage . . . so the country feels a sense of security and confidence that leaders are in charge and have a plan.”

Among those executives offering public-policy prescriptions, resolving the budget crisis and reducing the deficit were chief priorities. Part and parcel of those goals, the executives said, are such measures as lowering interest rates, reducing federal spending and even raising taxes. The five executives who favored tax hikes disagreed, however, on which taxes should be raised.

Such suggestions put the chief executives in good company, said economist Levy: “That mirrors the thinking of most economists on what should be done.” On taxes, he said, the executives were “right on target and reflect the (national) dilemma,” Levy said. “Almost everyone is agreed that higher taxes are necessary but can’t agree on the specifics.”

The chief executives also seem to mirror the general public’s frustration with the way that Washington has been handling the budget and deficit issues.

W. D. Godbold Jr. of Zero Corp., a specialty metals company in Los Angeles, wrote that Congress and the Bush Administration must “reduce federal costs--don’t just play politics. Come to grips with the real spending problems of the United States and deal with them, not the polemics.”

Others said politicians should “manage the affairs of state in a professional, responsible manner and stop worrying about their own personal, private interests” and “stop delaying essential decisions.”

Gordon S. Marshall of Marshall Industries, a wholesale electronics firm in El Monte, put it most succinctly, writing: “Balance the budget!!”

The Times asked 75 chief executives to answer the survey during the week of Oct. 15. The companies on the survey list were drawn from The Times 100, an annual listing of the best-performing companies in California, and other lists of major Southern California businesses.

All 28 chief executives who responded answered five brief questions about their expectations of a recession. Those answering included leaders of financial institutions and of energy, retail, manufacturing and medical-technology companies.

Times researcher Kathie Bozanich in Orange County contributed to this story.

Contributing to this report were Times staff writers Jane Applegate, James Bates, Alan Citron, Maria L. La Ganga, Patrick Lee, David W. Myers, Jube Shiver Jr. and Linda Darnell Williams in Los Angeles; Cristina Lee, Dean Takahashi and Chris Woodyard in Orange County; Patrice Apodaca, James F. Peltz and John Medearis in the San Fernando Valley; and Greg Johnson in San Diego.