Aerospace Slump Casts Its Shadow : Economy: Effects of thousands of layoffs trickle down in the forms of vacant office space, sluggish housing market, loss of consumer confidence, long lines at the unemployment office.
Forget all the so-called leading economic indicators and the statistical balance sheets. People looking to measure the severity of the recession need only stop by Grant and Bill Cotter’s Manhattan Beach shop.
During an economic slide, the poorest of soles show up at their door in greater numbers. When times are bad, business is good at the Manhattan Shoe Hospital. And for them, 1991 was a very good year.
“It’s really no fun to be super busy when everybody else is doing so poorly,” Bill Cotter said. “But this is a business for hard times. We’ve just seen more and more people coming in with a multitude of shoes. People always like to buy new things, but when things are bad, you can’t always afford to.”
The lines showing up at the 57-year-old shop are just one of the signs pointing to a deepening recession.
The others that now dot the South Bay landscape are even more obvious. The lines at the unemployment office are longer. The amount of vacant commercial office space has mushroomed. The length of time single-family homes stay on the market has jumped. And thousands of jobs at aerospace firms and manufacturing plants from El Segundo to San Pedro have simply disappeared.
All things considered, 1991 was a bad year. Just ask Hugh Malay. The Manhattan Beach resident was one of 125 people laid off by Financial News Network in June, when the fledgling cable station was purchased by another media company. As with so many South Bay workers, it wasn’t a case of Malay being singled out. FNN’s whole West Coast office was shut down.
Today, the 32-year-old former broadcaster finds himself in the unemployment line along with a lot of other former success stories. But his tale is even more poignant than most--his fiancee also was laid off from her television job, forcing them to postpone their November nuptials indefinitely.
“This is the first time that I’ve been out of work,” said Malay, who faces about 400 competitors every time he applies for a job. “The first two months were OK, but now I’m getting anxious. And it doesn’t look too good. The TV and entertainment industry is in very bad shape.”
But things could be worse. And for thousands of aerospace employees in the South Bay, they are. Huge cuts in the national defense budget have torpedoed growth at some of the largest and best-known companies in the area.
Mass layoffs combined with hiring freezes at firms such as Hughes Aircraft, McDonnell Douglas, Northrop and TRW Space and Defense have cut at least 15,000 South Bay jobs since the beginning of 1990.
The impact has sent shock waves through the South Bay economy, unleashing a flood of vacant office space, slowing home sales and adding to the already lengthy lines at local unemployment offices.
“All we can say is that we will continue to adjust the size of the company in relation to the business that we get,” said spokesman John Booth at TRW, where the number of South Bay jobs dropped from 17,350 at the beginning of 1989 to 13,800 by the end of last September.
“Nobody likes doing this,” he said. “It hurts.”
The industry’s decline has cast a dark shadow over the South Bay economy and shaken the confidence of residents who may have considered an aerospace job a lifetime position.
Carson resident Hazel B. Horton worked at Rockwell International for 30 years in an electronics plant before she was handed her pink slip in August. Horton was one of 40 people laid off when her department was eliminated--something that has been happening with increasing frequency at the big defense firms.
“The economy has gotten so bad. . . . The situation really scares me,” Horton said. “I’ve tried all the major companies in the area, but it’s hopeless.”
She said she has considered moving to another state, but things aren’t much better elsewhere, especially “when you’re 65 and make $17.65 an hour.”
Eli Charne, 22, was forced to give up his Rancho Palos Verdes apartment and move back to his parents’ house in San Diego when Northrop laid him off on Dec. 6.
“I got a decent warning that they were going to close (our office) . . . but I thought I was going to be transferred to another division,” Charne said. About a month before his layoff, however, Charne discovered that was not the case.
Charne decided he would be better off trying to find temporary consulting work near his parents’ house while he prepares to return to college for his doctorate next fall.
“I would say that I could last comfortably for about two months before I really need to have some kind of work,” he said. “At the moment, I’m not too worried. Then again, I haven’t even got my first unemployment check yet. Ask me again in a couple months.”
Others have fared better. Richard Flores, a machinist at McDonnell Douglas, was laid off last year and spent several months looking for a new job. Flores used the time off to brush up his resume and interviewing skills under a training program offered by the Private Industry Council of Carson, Lomita and Torrance.
Flores finally landed a job with XRS Corp. in Torrance, an X-ray computer scanning firm, where he now works in the company’s inventory control and procurement department.
“When I got laid off, it was a complete shock. I was devastated,” he said. “But I feel fortunate to be where I am now because every day, on the radio, I hear about more layoffs.”
The economic uncertainty has resulted in sluggish real estate sales for most of the South Bay. According to Mickey Turner, president of the South Bay Board of Realtors, the average time a home is listed on the market has jumped to about 100 days, compared to 30 during the real estate rush of the late 1980s.
In Los Angeles overall, the unsold inventory of existing homes is now at 14 months, compared to four months during the last housing boom. Chris Taylor, an analyst with the California Assn. of Realtors, said that 1991 marked the third straight year of declining home sales, after six consecutive years of increases.
And, although total sales posted by Multiple Listing Services in the area are actually up in 1991--jumping to $1.86 billion from $1.71 billion in 1990--buyer confidence is shaky at best.
“You’ve got to work much harder to sell properties now,” said Turner, a Re/Max agent in Redondo Beach. “The high-end stuff has been particularly tough to sell. But sales in the $200,000 to $300,000 range have been brisk, and that’s what has kept us going.
“But it hasn’t been a good year for most. Most people aren’t sure if we’ve hit bottom yet, and that’s kept a lot of buyers away.”
Re/Max agent Adam Baziw was even more direct.
“A couple of years ago, if you had a cardboard box with a roof on it, you could sell it,” he said. “But people are no longer running around saying, ‘What have you got to show me?’ It’s been a tough, tough year.”
Perhaps the best indicator of the tough times has been the glut of commercial office space. Analysts say that the overall vacancy rate in the South Bay remains close to 20%--roughly on par with other major metropolitan areas--with a whopping 6 million square feet of office space available. Downtown Los Angeles, meanwhile, has about 18% office vacancy, and the number jumps above 20% overall, if offices available to sublease are counted.
And the news gets worse. With every announced aerospace office closure, more space is dumped onto the market. The absorption rate has slowed to a “screeching halt,” said Jim Biondi, senior vice president with Grubb & Ellis’ Torrance office.
“The aerospace and defense firms were really the engine that drove the South Bay market,” Biondi said. “I don’t see any positive signs that will lead to higher absorption rates, except that we’re at such a low level now, there’s no way to go but up. The long-term prognosis is just not very good.”
Still, some commercial real estate experts predict that the current situation may actually be good for the South Bay in years to come. Rich Davis, managing director of Cushman & Wakefield’s South Bay branch, said the area’s reliance on the aerospace industry should force it to become more diversified in the future.
“I think there’s a light at the end of the tunnel. It’s just a matter of how far away it is,” Davis said. “You have a case here where, at one point, Hughes was taking down a million square feet at a time. But with all the downsizing going on, we’re not going to see those kinds of tenants anymore. It’ll force us to be much more diversified, and that’s good. It’s just going to take awhile.”
The Port of Los Angeles last year reported revenues equal to 1990’s haul of $150 million. Port officials say an increase in international trade helped offset slow times during the Gulf War. However, the port still cut personnel by 7%, reducing its work force to about 750 people in anticipation of a continued downturn.
“Six months ago, I would have been very surprised if we had done as well as (1990), but the (shipping) market turned around,” said Al Fierstine, the port’s director of marketing. “But if we had to depend just on the domestic market, we’d be way down.”
No one has to tell former sportscaster Malay just how bad 1991 was. Since he started collecting unemployment four months ago, he said the lines at the Torrance office have more than tripled in size.
On most days, the South Bay office resembles a departure lounge at Los Angeles International Airport, with hundreds of people crammed into a small space, asking each other questions about how to fill out the piles of forms. Even the employees seem confused by the numbers, with several serving more as traffic police than social workers.
“Every time I come here, it takes more effort to sit around for hours and watch all this misery,” Malay said. “My pride almost kept me from collecting unemployment benefits, and I put it off for as long as I could.”
No one needs to tell Bill Cotter about the current state of the economy. When you start seeing pairs of Salvatore Ferragamo shoes coming in for multiple resolings, you know the times are bad.
“People are now bringing in four or five pairs at a time,” he said. “We’re seeing a lot of people come in that drive Mercedeses and BMWs. But the reason they’re coming in is because if they spend $37.50 to resole their shoes, rather than spending $200 for a new pair, then they can continue to drive their BMW.”
Correspondent Helene D. Laube also contributed to this story.
Public Assistance in the South Bay
The welfare rolls are growing, according to statistics gauging the demand for public assistance programs administered by Los Angeles County. The three principal programs are Aid to Families with Dependent Children, general relief and food stamps. AFDC is paid to parents of minor children. General relief is a $341 monthly payment that goes to single adults who do not qualify for other forms of government aid. Food stamps are usually issued in conjunction with other welfare programs. The figures below show the number of people in selected cities receiving the three types of relief in September, 1989; August, 1990, and July, 1991, the most recent month for which figures are available.
General Relief/Aid to Families Food Sta City ’89 ’90 ’91 ’89 ’90 El Segundo 60 95 108 12 15 Gardena 947 2,757 3,066 184 251 Hawthorne 3,822 5,660 6,386 382 501 Hermosa Beach 72 67 72 14 7 Inglewood 10,792 12,056 13,395 1,310 1,218 Lawndale 1,486 2,079 2,354 188 182 Lomita 632 866 971 130 125 Manhattan Beach 92 101 109 20 2 Rancho Palos Verdes 60 64 72 2 7 Redondo Beach 715 794 880 100 63 Torrance 1,460 1,687 1,897 121 168
mps City ’91 El Segundo 19 Gardena 312 Hawthorne 617 Hermosa Beach 8 Inglewood 1,507 Lawndale 225 Lomita 154 Manhattan Beach 3 Rancho Palos Verdes 8 Redondo Beach 78 Torrance 207
Source: Los Angeles County Department of Social Services
South Bay Unemployment Rates
Unemployment is up almost everywhere in the greater Los Angeles area, according to a comparison of the unemployment rates in October, 1989; October, 1990, and October, 1991. All figures are percentages.
Cities 1989 1990 1991 Carson 4.0 5.9 7.5 El Segundo 1.5 2.3 2.9 Gardena 2.9 4.3 5.5 Hawthorne 3.5 5.2 6.5 Hermosa Beach 3.0 4.4 5.5 Inglewood 4.7 6.9 8.7 Lawndale 4.2 6.2 7.8 Lennox 6.1 8.8 11.0 Lomita 2.7 4.0 5.1 Manhattan Beach 2.1 3.1 3.9 Rancho Palos Verdes 1.7 2.6 3.2 Redondo Beach 2.8 4.1 5.2 Torrance 2.4 3.3 4.5 Los Angeles County 4.2% 6.2% 7.8%
Source: State of California, Employment Development Department Employment Data and Research Division
