Impact of Aerospace Cuts May Begin to Diminish : Commerce: Layoffs like those at Hughes Aircraft are expected to start taking less of a toll on the state’s economy, experts say.
Hughes Aircraft’s plan to slash 9,000 aerospace jobs over the next 18 months comes as the latest wallop to the economy of Southern California, already injured by recession, riots, earthquakes, a state budget crisis and other lingering woes.
But despite the unhappy outlook that thousands more formerly secure aerospace workers will lose their jobs in coming years, cutbacks in the industry will slowly diminish as a threat to California’s economic future, analysts predicted Tuesday.
“I know we cannot continue to hemorrhage (aerospace jobs) the way we did in 1990 and 1991,” said David G. Hensley, director of the UCLA Business Forecasting Project. “The sector would disappear.”
The California economy, experts point out, bounced back from another big defense consolidation at the end of the Vietnam War, a time when the state was far more dependent on the military than it is today. Current cutbacks, while painful, “will not be a significant long-term threat to the regional economy,” maintained Stephen Levy, director of the Center for Continuing Study of the California Economy.
The major reason: The U.S. economy, more than any single industry, is the state’s engine of growth or its economic ball and chain. A national recovery is expected to help conditions in California later this year or in 1993, despite weakness in aerospace, retail and other industries.
Clearly, however, the disruptive and rapid retrenchment of aerospace has had an important--and negative--effect on California’s economy in recent years. Since reaching a peak level of 376,000 jobs in 1988, aerospace employment in California has plunged to 282,000, according to a UCLA analysis.
Overall, aerospace cuts may account, either directly or indirectly, for more than 100,000 job losses, or one-fifth of the jobs that have vanished in California during the recession, according to Brad Williams, an economist with the Commission on State Finance in Sacramento.
Such changes take a toll: Aerospace workers, who are paid higher than average, help fuel the economy as consumers; and aerospace firms typically support a vast web of services and subcontractors through their huge military contracts.
There is a highly personal, human trauma related to such layoffs. This was evident in the faces of anxious Hughes workers Tuesday. “Like everybody else in the aerospace industry . . . everyone’s talking about getting laid off and what’s going to happen next,” said Jim Burschinger, a driver at Hughes. “We’re nervous.” Announcements such as the one by Hughes on Tuesday hit the economy--and the morale of those who labor within it--in several ways, said Lynn Reaser, chief economist at First Interstate Bancorp. “It’s affecting retail sales, it’s affecting real estate, it’s affecting tourism,” she said. “Even for people who are secure in their jobs, the impact of the news is significant.”
Nonetheless, the performance of the national economy is far more critical to California than is the health of the aerospace industry, researchers said. In the late 1960s, for example, as defense spending wound down but the U.S. economy stayed buoyant, California lost 40,000 jobs in defense-related manufacturing--but gained 107,000 jobs in non-defense manufacturing.
A struggling defense sector wreaks the most damage when the U.S. economy already is sinking. In 1969, when the national economy plunged into a slump amid continued defense cutbacks, California suffered a more serious recession than the nation overall.
That long-ago plight mirrors today’s, the only other episode since World War II in which California has lagged a national recovery. “The evidence is very clear,” according to a May report by economists Levy and Robert K. Arnold of the Center for Continuing Study of the California Economy in Palo Alto. “Defense spending cuts in times of economic growth have been easily absorbed in California. Defense spending cuts in times of recession have added to the state’s downturn.”
Nowadays, defense accounts for 7% of the state economy--just half of its share in the late Vietnam era, a change that ought to limit the fallout of cutbacks. While nobody is sure how much cutting is left, economists said half or more of the layoffs already have occurred, with future announcements to come intermittently during the 1990s.
Levy, for instance, said the process of defense downsizing, which he dates to about 1986, is 50% to 60% complete, leaving perhaps another 100,000 jobs for the chopping block. While maintaining that the negative effects could be offset by a U.S. economic recovery, he added, “nobody’s going to believe that right now.”
MAIN STORY: A1
Aerospace Job Losses
Employment in California’s aerospace manufacturing sector has steadily declined since 1987 as defense cutbacks have hit Southland defense firms hard. Forecasters predict job losses to continue into 1993.
Thousands of jobs
1st quarter, 1987: 377,410
4th quarter, 1992: 273,810*
* estimates
Source: UCLA Forecasting Project
