Of Southland Counties, Those Inland Are Likely to Weather Storm Best
As the economic thumbscrews begin to turn in Southern California, some counties will feel the pain more than others.
Los Angeles County will probably get the worst of it, primarily because of the downturn in the aerospace sector, said Jack Kyser, economist for the Los Angeles Area Chamber of Commerce. And although no county will escape the recession’s wrath completely, Riverside and San Bernardino likely will fare the best.
Look to Burbank and you will see contrasts that mark the current economic health of Los Angeles County.
In one corner you will find Lockheed, which this year laid off nearly 2,000 workers from its Burbank-based aeronautical group. In another, Disney Studios whistles while it works; the company has no plans to alter film production schedules because of the looming recession.
The problems of Lockheed and other aerospace companies clearly will be the key factor depressing the county’s economy. Generally, the county’s manufacturing sector, which includes aerospace, has lost jobs so so far this year, according to Kyser.
Overall, jobs have actually been added during 1990, thanks largely to the service sector. But the county’s unemployment rate is up as well, indicating a mismatch between jobs and job seekers’ skills.
The construction industry is well into a slump, with new building permit values declining since the beginning of the year. The once-overheated real estate market, Kyser says, “is going to slog along for a while.” And tourism, another big industry, did not enjoy a summer to brag about.
The good news for Los Angeles County is that some sectors continue to be strong, including the entertainment industry, Pacific Rim trade and investment and parts of the high-tech industry.
Plus, there is some hidden vigor not measured by government data.
“Many in the motion picture and high-tech industries are independent contractors who aren’t tracked by anyone, and you just know there there’s a major underground industry in Southern California that’s hidden from us” and operates strictly on cash, Kyser said.
Orange County
At first glance, there is little wrong with the economy in Orange County. But beneath the shiny veneer of low unemployment and high personal income is the same general unease that is affecting the rest of the Southland.
Consumers aren’t jamming the malls. Manufacturers aren’t stocking up on raw materials. The construction and auto retailing industries--major bellwethers of Orange County’s financial direction--are in turmoil.
At a recent economic outlook conference sponsored by the Orange County Chamber of Commerce, a panel of economists predicted a national recession by year-end. That was no surprise. But they also warned that upscale Orange County would be hit harder than most places because of its heavy dependence on construction and consumer spending.
Gene Silva, who has operated a commercial collection agency for more than two decades, says the hit is already being taken.
“I’m getting accounts from people whose customers normally don’t get behind, (such as) car dealers and real estate agents,” Silva said. “And when you get a run against real estate agents, like you did in the early ‘80s, that’s an indication that something’s wrong out there.”
James Doti, an economist at Chapman College in Orange who analyzes the Orange County economy, agrees that the first signs of trouble are appearing. Figures, he says, show that builders have all but stopped undertaking new projects as the market for housing and commercial construction dries up.
And although Orange County still posts the Southland’s lowest jobless rate--3.8% in September--lines at the state Employment Development Department offices have been lengthening.
Inland Empire Businesses in the Inland Empire have heard about this thing called recession. But they haven’t been formally introduced.
Indeed, the factors that made San Bernardino and Riverside counties among the fastest growing in the nation in the 1980s--cheap and plentiful land, affordable housing and a pleasant living environment--remain a powerful magnet. They may well insulate the area from the harshest effects of the economic slowdown.
“The concept of a recession suggests a sliding backwards, and that term is just not appropriate for the Inland Empire for the foreseeable future,” said Steve PonTell, president of the Inland Empire Economic Council, a nonprofit organization in Ontario. “There will be ripples and adjustments by companies, but we’re still a vibrant, growing region.”
One recent ripple: A major materials-handling company that once was interested in building a 250,000-square-foot plant employing 600 people shelved its plans indefinitely earlier this month, according to David McElroy, managing director of the Riverside County Economic Development Agency.
A big challenge facing the Inland Empire is creating jobs for the swarms of people moving in to enjoy relatively cheap housing costs. An estimated 300,000 residents commute each day to jobs in Los Angeles and Orange counties, creating not only traffic and smog problems but a heavy dependence on the rest of the Southland.
“We like to think of ourselves as this independent, mature region, but we’re not quite there yet,” PonTell said. Consequently, “if L.A. has a crunch, we’ll feel the repercussions of that.”
Ventura County
Ventura County’s diversified economy--a busy mix of retailing, service industries, government, agriculture and light manufacturing--has strengths that will help it resist a recession longer than many parts of the country, business leaders say.
But the county’s economy nonetheless is slowing under the weight of a sluggish real estate market and a slumping construction industry. Other frailties show up in the oil industry and among defense contractors.
The sluggishness was evident in Ventura County National Bank’s semiannual survey of county business. Three years ago, 78% of the 500 businesses surveyed reported an increase in sales. That figure dropped to 55% for the first six months of this year.
“We are slowing down because of a lack of consumer confidence,” said William E. McAleer, the bank’s chairman. “But we are not seeing homes being foreclosed and cars turn(ed) back in as you would see in a recession.”
McAleer points to his own Oxnard-based bank as an indication of the area’s strong economic base. The Ventura County National Bank has its lowest level of defaulted loans in years. The same holds true for the Bank of A. Levy, based in Ventura, which has posted record earnings for the last six quarters.
Agriculture, one of the county’s strongest industries, shows no sign of weakening. Although city dwellers are suffering from the drought, longstanding agreements have kept water flowing to farmers, albeit at slightly higher prices.
And tourist dollars continue to bolster the economy, as Ventura and Ojai draw increasing numbers of weekend refugees from the Los Angeles Basin.
San Diego County
Conventional wisdom suggests that San Diego’s three-legged economy will stand firm against all but the strongest financial winds.
But civic boosters acknowledge that tourism has stalled, military spending is flat and construction levels are lagging the blistering pace set during the late 1980s.
“This is a delicate period,” said Dan Pegg, president of San Diego’s Economic Development Corp.
In its favor, San Diego has weaned itself from a near-total dependence upon military dollars and successfully exploited its reputation as a tourist mecca and an attractive place to live.
But even San Diego’s diversified economy probably is not strong enough to withstand a severe national downturn, said Rayford Boddy, an economics professor at San Diego State University. “San Diego is looking more like California, and California is looking more like the rest of the United States,” he said.
San Diego’s economic future will be determined largely by its ability to continue attracting free-spending tourists and well-heeled newcomers who can afford to live in one of the nation’s least-affordable counties.
During the past year, most of the county’s major attractions have reported attendance that is flat or down. Robert Galt, president of Sea World of San Diego, blamed disappointing attendance at his park on a “national malaise” in travel and tourism.
The construction industry is balanced just as precariously.
Although new construction remains relatively strong compared to the rest of the country, cracks have appeared. Housing permits have failed to keep pace with the late 1980s, and in recent months, an estimated 9,000 construction employees have lost jobs.
“People in the industry are scared,” said Julie Dillon, a builder who serves as president of the local Building Industry Assn.
Contributing to this report were Times staff writers John O’Dell in Orange County, Greg Johnson in San Diego, Jenifer Warren in Riverside and Kenneth R. Weiss in Ventura.
