Economic Cross-Currents Spawn Winners and Losers : Jobs: Mixed news on the recovery has dealt blows to many, but it’s helped others find new avenues of success.
In a world of sky-high stocks and rock-bottom interest rates, vanishing jobs and abundant anxieties about the future, Andrew Gee views his own layoff as a mixed blessing.
“I’d been toying with the idea of going into acting,” said the researcher-turned-acting student, who had grown weary of laboring on “Star Wars” laser technology in a windowless room all day. “When the layoff happened, there was nothing to stop me.”
Such twists of fortune are common these days, as an extraordinary array of cross-currents sweeps the economic landscape, enriching many, punishing many others and reshaping people’s lives in ways they never planned.
The financial economy of stocks and bonds has boomed, even as corporate America continues to lay people off. Low interest rates have proved a bonanza for homeowners and other borrowers--but a stiff penalty for retirees whose income has shrunk.
Just in recent days, a mixed assortment of economic gauges has left analysts to argue whether the lazy national recovery was picking up steam or sputtering. And in California, the latest news remains grim: The recession will hang on through mid-1994, UCLA analysts say.
Yet even California’s malaise has taken an irregular toll, leaving some largely unscathed. The Central Valley farmer who sells walnuts to Western Europe or the Silicon Valley entrepreneur who ships sensors to Indonesia are cushioned from the slump in a way that local merchants never can be.
“One person’s loss can be another person’s gain,” said Frederick L. Cannon, an economist at the Bank of America in San Francisco. “There’s a tremendous amount of cross-currents in the economy. For California, especially, they seem unprecedented.”
Certainly, those whose livelihoods are tied to conditions inside the Golden State’s borders find themselves on more perilous turf than their neighbors whose fortunes are not.
When Peggy Schoeny retired from the U.S. Customs Service and opened up a bakery 10 years ago, she hoped to create a legacy--and livelihood--for her twin daughters. The El Monte business expanded steadily, pulling in more than a quarter of a million dollars in sales.
Then, around 1990, it started to sink, and it has been sinking ever since.
“People no longer feel they can afford to have large birthday parties,” declares Schoeny, 66, an energetic woman who considered becoming an aerobics instructor after she retired from the federal government. “One hundred people or more to a first birthday party was common--but no more.
“You can live without cakes,” she added. “That’s what’s hurting us.”
Dozens of new bakeries, many launched by immigrant entrepreneurs, have sprouted in her area, meanwhile, making survival even tougher. With revenues now 40% below the 1980s’ peak and no rescue in sight, Schoeny has decided to unload the enterprise.
“I thought it would be a lifelong thing for them,” said the Silver Lake resident, referring to her adult daughters. “But it just hasn’t turned out that way.”
While Los Angeles is the epicenter of California’s slump, troubles ripple through many parts of the state that also have been shaken by defense cuts, overbuilt real estate, crime and congestion.
In the Bay Area community of San Mateo, Jim McCarthy feels lucky to have steady work as a licensed contractor. Indeed, he got his current home-remodeling job when another contractor went bust.
But McCarthy, 36, says it’s a struggle and that his income has stagnated for several years. Financially insecure homeowners now offer less lucrative work--renovating a kitchen, say, instead of building a whole new addition. Costs for insurance and lumber have skyrocketed.
“When I was 18, I thought that by the time I’m 36 I’d own a home, I’d be more financially secure,” said McCarthy, a father of two, who sometimes fantasizes about relocating to the Pacific Northwest. “I thought I wouldn’t be winging it as much. But almost everyone I know is in the same situation.”
Actually, Californians whose incomes are linked to conditions in other parts of the country--or the world--have an insurance policy.
Just ask the 80 employees of Impact Systems, a Silicon Valley maker of high-tech components used by paper producers. California customers account for a mere 1% to 2% of business at the 11-year-old San Jose firm. But overseas business represents almost half.
Recent sales to an Indonesian producer of office products, along with shipments to China, Taiwan, South Korea, have helped the bottom line, even as Western Europe’s economy has slowed, said Kenneth P. Ostrow, chief executive and founder of the firm.
“To say we’re not feeling the recession, would be stating it too strongly,” said Ostrow, who expects revenues to remain in the $16-million range this year, while more efficient production will double his profits.
“But because of business in Asia, we’re doing better than we would have been.”
Still, global markets are no panacea. In a 300-acre orchard in Visalia, southeast of Fresno, Gary E. Hester knows that his living depends significantly on consumers thousands of miles from California’s Central Valley.
Much of his produce is shipped to other regions of the United States. Some of his plums and navel oranges end up on grocery shelves in the Pacific Basin. Western Europeans buy many of the walnuts.
But while the fourth-generation farmer finds foreign markets “intriguing,” he says they also cause headaches. Recently, Mexican border authorities withheld a permit for a shipment of plums, forcing him to abruptly reroute the packages to Texas.
“Overseas markets are a double-edged sword,” said Hester. “It’s nice to have the marketplace--but you can lose it as quick as you get it.”
The “best thing that could happen” to his orchard business, Hester said, would be a brisker U.S. economy so that people felt better about themselves and their jobs.
Just 15 miles outside downtown Los Angeles, ice cream maker Leo Politis also knows that far-off events can lift or batter his bottom line. Business in Greece meant as much as 25% of his Cool-A-Coo ice cream sales a few years ago.
More recently, the Whittier manufacturer has suffered as the U.S. dollar gained some 30% against the Greek drachma, forcing Cool-A-Coo prices upward overseas. Today, Politis’ native Greece provides just 10% of the sales of Cool-A-Coo.
“If the dollar would weaken, I could go up another $200,000,” declares Politis, whose business also has been hit by problems close to home, notably the California slump and regulatory headaches, such as costly workers’ compensation insurance.
Of all the cross-currents buffeting people’s livelihoods, one of the most powerful is the widespread wave of cost-cutting in corporate America. Yet surprisingly, there may be opportunity even in some of these cutbacks.
Enter Michael A. Trigillo. The vice president of Valley Relocation & Storage of Southern California said moving jobs for corporate consolidation--just one part of his business--are up at least 20% this year.
“We just hired a new receptionist. We need to bring on an accounting manager,” said Trigillo, a Long Beach-based agent for North American Van Lines. “Yes, it has put us in a position where we need to be hiring people.”
Of course, such consolidations also have caused deep pain.
Although David L. Annala had worked on a restructuring plan for his employer, a health maintenance organization, it came as a shock last April to find out that he’d been “restructured” out of a job.
“Basically, I got my notice and I was on the street,” recalls the former project manager in marketing, who learned two days later that his wife was pregnant.
The next turn of the wheel came in a few months, when the company rehired him--but for a less-prestigious analyst’s job, a 10% pay cut and an extra 30 minutes of driving from his home in Huntington Beach to an office in Cerritos, instead of Costa Mesa.
“I think it turned out to have a happy ending, although there are things I would have preferred,” Annala, 33, says of the turbulent chapter. These days, he adds, “you can’t get the best of all worlds.”
Andy Gee, the laser specialist, lost his laboratory job at the end of 1990. Nowadays, he’s pursuing acting through courses at the Stella Adler school in Hollywood and working part time for L.A. Unified School District, where he helps teachers work with computers.
But shifting from “Star Wars” to stardom isn’t easy. “Right now I’m sort of meandering,” concedes Gee, 30, who last year moved back in with his parents in Torrance to cut costs. “I have to pay off my debts, so I have to get a full-time job. But if I get a full-time job, I can’t pursue my acting.”
In a much broader sense, Gee’s uncertain fortune is shared by millions of Americans who have become players on Wall Street, as interest rates have plummeted in recent years, making traditional bank accounts less attractive.
Many stockbrokers have thrived in this environment, despite the cutbacks hitting some of their white-collar counterparts, as new clients seek to bolster retirement and other savings accounts.
“Particularly over the last year, a lot of people have come out of the woodwork,” observed Martin R. Shandling, a financial consultant with Merrill Lynch in Century City.
Joe Malamed, a jewelry craftsman in Beverly Hills, is among the many who grew disenchanted with the low interest rates now paid for certificates of deposit. “You thought you could handle 5%. Then it was 4%. Then it was 3%. It was getting really crazy.”
So last year Shandling shifted him mostly to long-term municipal bonds that offered tax-free yields of 6.5%, equivalent to taxable CD yields of about 10%.
But if Malamed is pleased, such a strategy isn’t for everybody. Bonds, for instance, sink in value if interest rates go up.
“At my age, I have to look for security,” explains Martin S. Deutsch, a retired retail executive from Los Angeles, who now lives in the Oakland hills. “One doesn’t know what’s going to happen.”
So Deutsch, 79, sticks largely to short-term CDs, which barely keep up with inflation. “My income is tremendously reduced,” he said. “When you retire and you live on Social Security and your investments, every penny counts.”
Nevertheless, Deutsch recognizes that low interest rates benefit households and companies that wish to borrow money cheaply. “It’s being done in Germany. It’s being done everywhere,” he said of national policies to keep rates low. “It’s a good thing to do. It just hurts people like me.”
