Business Failures in State Rose 33% in ’92 : Economy: California rate was nearly quadruple the pace for the United States. Los Angeles fared even worse.
In another indication that California’s economy seriously lags the nation’s, state business failures grew 33% in 1992, nearly quadruple the national pace, according to preliminary data released Tuesday by Dun & Bradstreet Corp., the business information company.
The story was even worse in Los Angeles, where business failures increased a whopping 73% over 1991. In San Francisco, business failures were up 23%.
All told, California failures accounted for more than a fifth of the nation’s total, said Joseph W. Duncan, Dun & Bradstreet’s chief economist, speaking in Los Angeles at a meeting of the National Assn. of Business Economists.
The figures are further evidence that California--still reeling from defense industry cuts, a depressed real estate market and continuing corporate layoffs--is sitting out the recovery that appears to be taking hold in the rest of the nation.
A recent forecast by UCLA’s business school said the state’s recession should linger through most of 1993.
Business failures statewide increased to 19,590 in 1992 from 14,693 in 1991. That compares to a national increase of 9%, to 96,100 from 88,222.
“The numbers are very, very negative for California,” Duncan said in an interview. “The business services sector has been particularly hard hit, and along with them, retail. . . . In Los Angeles, that’s partly because of the riots.”
But Duncan added that the growth in state business failures, while dramatic, peaked early last year and should moderate in 1993.
He noted one bright spot in the state’s economy: New business starts were up slightly, by 1.5%, in the first eight months of 1992, the most recent data available. It was the first such increase since 1986.
By August, 26,043 new businesses had started in California, up from 25,660 in a similar period in 1991. Nationally, new business starts were up 5.3% in the same period.
As Fortune 500 companies continue to bleed employees, it is clear that new jobs will come from new business, Duncan said.
“The resurgence has to be in small and intermediate businesses,” he said. “Everyone tracks the big companies, but what you want to track is the new incorporations. They are a leading indicator, the first indicator of job pickup.
“Fundamentally, if you look at California and its cyclical decline, which is very similar to what happened in the Northeast, you still probably have a little ways to go, a couple or three more quarters, then you’ll have a gradual rebound,” Duncan said. “But there’s nothing dynamic that’s going to turn the economy around.”
Other findings:
* State business failures increased by double-digit rates in all major industrial sectors, with increases highest in the financial, insurance and real estate industries (up 45% to 1,320), services (up 44% to 7,510), agriculture (up 44% to 330), retail (up 35% to 3,150) and construction (up 33% to 1,980).
* In Los Angeles, 1,383 businesses failed in 1992, compared to 799 in 1991. Here, failures were worst in the service sector, where they increased 186% to 740, and in retail, where they shot up 75% to 210. Failures in construction and financial services industries were also high.
* In San Francisco, 542 companies went out of business, up from 442 in 1991.
* NEW JOBS FROM TOYOTA
Toyota Motor Sales U.S.A. said it will create a North American replacement parts division and 400 jobs. D2
Business Failures
Business failures increased in California at nearly four times the pace of the rest of the country. Even harder hit was Los Angeles.
Failures in:
1991 1992* California 14,693 19,590 Los Angeles 799 1,383 United States 88,222 96,100
*Estimate
