EARTHQUAKE / THE LONG ROAD BACK : NEWS ANALYSIS : Perception of L.A. Will Be a Key Element in Business Recovery : Future: Earthquake struck just as economic development officials were detecting signs of renewed interest in region after a series of other calamities.

Economists will track jobs lost, engineers can tote up road repairs and politicians may wrangle over the amount of earthquake relief needed to make Southern California whole once more.

But a separate matter could mean vastly more for the future of the economically beleaguered region: the price of its growing image as a hostile place to live, with the Northridge quake only the latest example.

“People do not set up new companies, and they don’t invest in things, unless they believe there’s a real future,” said W. Brian Arthur, a Stanford University economist. “That belief has been badly shaken in California.”

Just when Southern California seemed ready to escape a three-year recession, the devastating quake has joined riots, brush fires, gang violence, traffic, smog and costly housing as an unwanted symbol of life in metropolitan Los Angeles.

The image problem, while hazy and hard to measure, threatens to manifest itself in concrete ways.

It could shove the recovery back to 1995, some economists caution, especially if traffic remains slowed and business disrupted. Already, quake-related news has made it harder to recruit people to move to Southern California.

“The bad part of the earthquake publicity isn’t the earthquake itself,” Arthur said. “It’s network anchormen flying into California and saying, ‘This is a state in deep trouble.’ ”

It was only a few years ago that Southern California enjoyed a privileged status in the nation’s imagination, as if it were a palmy oasis of wealth, opportunity and leisure. These days, many non-Californians wonder why anyone in their right mind would live in a region that seems so jinxed.

Take the Florida executive who was recently mulling over a job offer from a medical products company in Southern California. Then the earthquake struck.

“His wife said, ‘If you go, you go without me,’ ” said Richard B. Krell, managing director of the Russell Reynolds executive search firm in Los Angeles.

The latest jolt to California’s image has come at a pivotal moment, just as an array of efforts to enhance the state’s reputation with business executives may have been starting to pay off.

Recent changes in workers’ compensation law, streamlined environmental permit procedures and new tax incentives had all won applause from business executives who had griped about California for years.

In an interview shortly before the earthquake, an economic development official was marveling at more than 20 telephone calls he had gotten lately from companies interested in Southern California.

At one point, as the phone kept ringing, “we were just sitting around and saying, ‘Holy mackerel. What’s going on here?’ ” said Jack Kyser, chief economist with the Economic Development Corp. of Los Angeles County.

But the earthquake has cast a sudden pall.

“How do we deal with it?” Kyser asked. He also wonders if the recovery, which had begun to appear in parts of California, will now be delayed until 1995. “We’ve got a major issue here.”

The issue has grown with each recent calamity, and Southern California, an enormously fragmented region, has not answered the wave of bad publicity with a coherent voice, say some experts in the field of image making.

“People expect a city to defend itself,” said Harry Webber, a Los Angeles advertising executive who worked on the successful “I New York” ad campaign in the early 1980s. “What’s damaging is that the city has not taken the responsibility of defending the positive side of life here.”

He cited Southern California’s history as a magnet for creative, ambitious people in search of a better life--and the economy’s ability to deliver it--as pluses that should not be forgotten.

In any case, California’s astounding streak of bad luck is not expected to torpedo the economy forever.

Public impressions rise and fall, but the state’s inherent assets, including the climate, the Pacific and the skilled labor force, remain competitive edges, economists say. On top of that, many immigrants are bringing an ethic of hard work and entrepreneurship that will pay off in coming years.

In other words, today’s apocalyptic view may be just as distorted as the glamorized picture of the 1980s, when Southern California’s boosters dreamily proclaimed it was recession-proof.

“That old image of California, and particularly L.A., had to be demolished,” said David Hensley, an economist at the Salomon Bros. investment firm in New York. “Probably now the pendulum has swung too far in the other direction.”

Employers and investors are moved most by the bottom line, and California continues to be profitable turf for key, growing industries. Software and other high-tech firms benefit from the skilled work force and highly developed infrastructure. Trade-oriented enterprises can take advantage of the location as well as newly liberalized trade laws.

The list goes on.

“Would the movie industry leap because of this kind of problem?” asked Lee E. Koppelman, director of the Center for Regional Policy Studies at State University of New York at Stony Brook. “My judgment is no. When people have a sizable capital investment, the decision to move is based on factors that are purely economic.”

What threatens Los Angeles more than earthquakes and fires, he contends, is fear of crime and racial unrest.

New York City, for example, lost 750,000 jobs between 1955 and 1970 as employers followed middle-class residents out of the city and into safer suburbs, a migration that pushed New York to the verge of bankruptcy.

“You keep on having these kinds of race problems and crime problems and it’s going to be no different than the city of New York,” Koppelman said.

Cleveland’s image was battered by a series of news reports, starting in the 1960s when debris in the polluted Cuyahoga River caught fire. An episode of political turmoil in the late 1970s led to bankruptcy.

In the 1980s, Cleveland’s business leaders responded with a costly ad campaign, improved cooperation with local government and major downtown renovations.

But image wasn’t all: The city’s traditional industrial employers carried out painful restructuring plans, slashing thousands of jobs, to become more competitive. Today, Cleveland’s unemployment rate is lower than the nation’s.

“If building new buildings and stadia and a rock ‘n’ roll hall of fame is good, then some good has come out of it,” said Norman Krumholz, a professor of urban planning at Cleveland State University. But, he added, many areas remain mired in poverty.

New York, besides responding to its 1970s problems with an ad campaign, also benefited from a migration into the city by young, affluent professionals and a 1980s boom on Wall Street. Even today, however, its job base--and reputation--remain shaky.

Some believe that California’s own creative community may be more qualified than any other to put together a balanced message about society here. Said Webber, the advertising executive: “The fact that they’re not being used to help it through this image crisis is really a shame.”