Economist Predicts Tough ’92 for Some Valley Industries : Recession: Aerospace, construction, real estate and financial services companies are expected to struggle. But health care, other fields should do well.

An economist Friday predicted tough times in 1992 for San Fernando Valley-based companies in the aerospace, construction, real estate and financial services industries.

But Jack Kyser, chief economist for the Economic Development Corp., told a gathering of local business leaders that engineering, apparel, health care and transportation-related businesses are expected to do well.

Kyser addressed the annual business forecast conference of the Valley Industry and Commerce Assn.

Gary N. Conley, the EDC’s president, said that in addition to the recession, the region’s companies are being hurt by a restructuring of the economy that is causing local jobs in aerospace, banking and other industries to disappear.

The restructuring is like what occurred in the Midwest during a major recession in the early 1980s, when many heavy industries “were permanently downsized,” Conley said. “The same thing is happening here.”

In another talk, state Treasurer Kathleen Brown said the state’s AAA bond rating is in “serious jeopardy” unless there is quick action to shrink a growing pool of red ink.

She called the recession in California the most severe the state has experienced in the post-World War II era.

Brown said the recession is causing the state’s revenues to drop and expenses to increase. The state’s budget deficit will be $2 billion to $3 billion during the fiscal year that ends in June, and the prospect exists of another $3 billion in red ink next year, she said.

As a result, Brown said, bond rating agencies have put the state on a negative watch, meaning that failure to find a way to pay the state’s bills could cause them to downgrade the quality of California’s debts from a AAA to a AA rating. A drop in the credit rating would add millions to the long-term cost of borrowing funds.

Brown said the Wall Street bond-rating agencies are worried about the strength of the state’s economy. She said the dimensions of the recession can be seen in a housing-start rate that is half of normal, an $800-million increase over what was budgeted by the state for benefits to the unemployed and others, and the 380,000 jobs the state lost between mid-1990 and mid-1991.

To turn the situation around, she said, “every regulatory agency throughout the state” from the governor’s office on down has to become pro-business. “Our first priority has got to be to retain the jobs we have and the second priority has got to be to attract new jobs,” she said.

Ironically, one of the recipients of the annual awards given by the VICA organization was General Motors Corp., whose expected departure next August after 44 years of building cars in Van Nuys will mean the loss of 2,600 jobs at the plant. The ripple effect could result in thousands more jobs being lost.

VICA is a 280-member nonprofit business organization representing more than 90,000 employees in the San Fernando Valley area. The organization’s purpose is to encourage economic growth by providing elected leaders and the public with a business perspective on public issues.

A key problem locally is that workers’ productivity is not keeping pace with that of workers in other industrialized countries, thus putting U.S. goods and services at a competitive disadvantage to those offered by foreign rivals, said Conley of the EDC, a private, nonprofit business group.

Conley urged business, government and educators to find ways to jointly raise workers’ output, and he urged Valley companies to step up efforts to export their products overseas.

One of those attending the conference was Walter W. Mosher, whose San Fernando-based manufacturing company employs 330 people. He said the state’s 11% income tax and high cost of workers’ compensation insurance puts him at a disadvantage compared with competitors in other states and countries.

He said he will decide in the next six months whether to relocate his business to Nevada, where it is far cheaper to do business. A native of Los Angeles, Mosher said he’s stayed until now “out of loyalty.”