Recovery From Slump to Be Tough for Area, Business Leaders Warn : Recession: Loss of thousands more aerospace jobs, and declining economies in Japan and Germany, mean a slower rebound in the South Bay.

Despite signs that the nation is finally creeping its way out of recession, government and business leaders are warning that Southern California--and particularly the South Bay--face a long and difficult road over the next year.

“I think it’s going to be tough,” Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County, said during a Harbor area business conference that drew more than 200 business leaders and included an address by former Gov. George Deukmejian.

Kyser’s comments, echoed by others during the daylong conference in San Pedro, focused on the impact of Defense Department cuts on local aerospace companies and other business and government factors that continue to slow this region’s economic rebound.

Already hard hit by the loss of 62,000 aerospace jobs since 1987, Kyser said, Southern California faces the prospect that 180,000 more aerospace workers will be laid off by 2000 because of Pentagon cutbacks and the flight of companies to other states.

“That is the reality. You can’t just lose that capability and those incomes . . . and expect to come out of it whole,” Kyser said.

Moreover, Kyser warned, Japan’s looming recession coupled with Germany’s sluggish economy threaten another mainstay of the Southern California economy--foreign trade.

Last year, California’s exports totaled $63.1 billion in merchandise, an 8% jump over 1990, and constituted “the one bright spot in our otherwise gloomy economy,” according to Gregory Mignano, executive director of the state’s World Trade Commission.

“They have sustained us in these hard economic times,” Mignano said of the state’s exports, which last year represented 15% of all U.S. foreign trade.

But Kyser warned that the export trade that helped Southern California survive the recession is also endangered by foreign economies. “The situation is that you do have international trade (here), and that has, to some extent, lessened some of the pain . . . but the reality is that international trade is a little at risk,” Kyser said.

Although many at the conference repeated the gloomy accounts of this area’s recession and cautious predictions for the future, there were signs that local business representatives see some hope that the economy can be turned around. And that prospect, they said, hinges on the same sort of proposals--fewer government regulations and more economic incentives for businesses--that were unveiled Thursday by the Council on California Competitiveness, a 17-member panel chaired by former Olympics executive Peter V. Ueberroth.

“The words you have to remember are major structural change,” said Kyser, who added that the regional economy, like California’s, needs a business climate that is “fast, fair and friendly.”

Similarly, Deukmejian told the conference that the future of the state and local economies hinges on an improved business climate to counter the aggressive efforts of other states to lure companies away with, among other things, the promise of fewer regulations.

“Many of our problems are of our own making. And they can be corrected if we focus our attention on them and if the policy-makers and decision makers are willing to make some changes,” Deukmejian said, urging a reform of worker compensation rules, regulatory agencies and liability laws.

“At the local level, the public and private sectors have to begin to reach out to businesses, all sizes of businesses . . . and to let them know that they are welcome,” Deukmejian said.

“We can point to things like the recession. We can talk about the drought . . . we can talk about defense expenditure cutbacks. And that isn’t going to do us any good.”

Otherwise, Deukmejian said, the state could one day lament the decline of its once-trademark industries just as the nation looks back on the fall of its once-mighty automobile and shipbuilding industries.

“(Businesses) are going to need to have a lot of assistance, a lot of support, a lot of cooperation,” Deukmejian said in an interview before his speech. “But California should never get itself in a position where 10 years from now, (people) turn around and say: ‘We’ve lost our lead in aerospace. We’ve lost our lead in high-technology.’ That would be disastrous.”