UCLA: California’s Golden Days Are Gone : Economy: Forecasters say defense cutbacks and other layoffs have permanently weakened the state.
In an especially grim assessment of California’s long-term economic future, the UCLA Business Forecasting Project said Wednesday that cutbacks in defense spending and layoffs in other key industries will prevent the state from ever returning to its postwar glory days.
While reaffirming their belief that California’s current recession will end in the second half of next year, university researchers said long-term growth of low-paying jobs in the retail sector and other service industries will not be enough to offset the loss of high-paying jobs in aerospace and other types of manufacturing businesses.
“It’s simply unrealistic to think we’ll ever return to the ‘glory days,’ because the economy has undergone some profound changes that can never be reversed,” said Larry Kimbell, an economist and director of the forecasting project.
Few of those changes bode well for the state’s economy or its 30 million residents, the university said in its quarterly economic forecast.
More than 130,000 jobs in the defense and aerospace industry have disappeared over the past four years, and cutbacks in the military budget mean they are gone forever. Efforts by big corporations to squeeze more work out of fewer employees are also here to stay, Kimbell said.
Although some key segments of the economy--such as housing and international trade--should get better over the next few years, their growth is not likely to be enough to put the state back on a fast track, he said.
At the heart of the forecast’s bleak outlook are the continuing layoffs in the aerospace industry and other parts of California’s vast manufacturing sector, which traditionally has accounted for the lion’s share of the state’s high-paying jobs.
The state’s aerospace industry now employs about 199,000 people, down from 337,000 in 1990. UCLA expects employment to drop to 153,000 by 1998 and to just 147,000 by 2002--barely 40% of the work force that the industry employed in the boom days of the late 1980s.
A slow recovery that should begin next year is expected to eventually create 2.75 million more jobs over the next 10 years. But most of those gains will be in retailing, health and business services, and in other fields that typically don’t pay nearly as well.
“You just can’t replace an engineering job that pays $60,000 a year with two jobs that pay $20,000 and then hope that the economy won’t feel it,” Kimbell said. “It will.”
UCLA’s forecasts are closely watched by California’s business community and have been criticized in the past for being too negative when they were issued. Indeed, private-sector economists said Wednesday that the latest UCLA prediction may be too dreary.
“We’ve obviously got some problems here, but I think we also have to look at some of the variables that will affect the economy’s future,” said Lynn Reaser, senior economist at Los Angeles-based First Interstate Bancorp.
For example, Reaser said, California has been at the forefront of developing new technologies for everything from motion pictures to computers.
“Ten years from now, it’s conceivable that there will be industries that are flourishing that we haven’t even heard of yet,” she said.
But as events played out over the past few years, UCLA’s forecasts have turned out to be more accurate than those that were more upbeat.
If the latest projections for the long-term prove correct, however, it may actually help low-income families, Kimbell said. He noted that low inflation would keep living expenses down and the proliferation of lower-paying jobs would make it easier for those people to find work.
