Quake Seen Speeding Recovery of Economy : Rebuilding: $15 billion in insurance payouts and aid provides stimulus for area. Long-term effect is unclear.

Call it shock therapy: Earthquake rebuilding efforts are about to breathe new life into Southern California’s battered economy, as disaster relief money showers down on an army of builders, repair companies, retailers and suppliers.

Remarkably, some economists now expect the quake to speed up the region’s recovery rather than push it back into 1995, as many had feared in the chaotic days after Jan. 17. The fuel: $15 billion in insurance checks and disaster aid--in effect an economic stimulus program aimed at the heart of Los Angeles.

“It filters through the economy in an amazing way,” said Morton O. Schapiro, chairman of USC’s economics department.

The Sherman Oaks resident said the earthquake has provided his family a do-it-yourself lesson in the economics of disasters. “We replaced a TV. We replaced two VCRs. We spent a thousand dollars to get our car fixed. We built a new fence. And I don’t think we’re the only ones.”

From earthquakes to blizzards, floods to tornadoes, natural disasters obviously take a toll on wealth as well as nerves. Work time is lost forever. Rattled residents move away. Businesses are wiped out. Tourists go elsewhere.

Job gains in Southern California may be slightly lower in the future, when the rebuilding wave winds down around 1996.

Yet seven weeks after the Northridge earthquake sparked fears of regional paralysis, the surprise is that Southern California’s economy is not faring worse.

Sky-high estimates of up to $30 billion in damage have been slashed to $13.5 billion in a new UCLA study. Freeway repairs in Los Angeles are proceeding much more rapidly than in the Bay Area after the 1989 Loma Prieta quake. Federal money is coursing through the pipeline from Washington.

“The irony of it is that this bad event that created a lot of hardship is going to start an economic expansion about a year before it would have happened otherwise,” said private economist Mark Zandi, who expects a recovery this summer, based on his analysis of Hurricane Andrew and other disasters on their regions.

Already, new signs of economic life are emerging, as the shell-shocked aftermath of disaster evolves into a phase of methodical rebuilding. Property owners, still awaiting insurance payments, now are calling contractors and beginning to plan major renovations and repairs.

“The increase in calls and estimates is tremendous,” said Mike Quiroga, owner of Mike’s Roofing Service in Van Nuys, who expects business to leap as much as 75% this year.

“We’re going to be busy in the next 30 to 45 days,” he said. “Everybody will start receiving their insurance checks.”

Not far from the epicenter, Roy Armstrong also is standing at the threshold of an upturn. His Northridge business, Far West Plywood Co., has recently suffered some of the worst weeks ever.

But word on the street is encouraging. “They’re quoting the work,” Armstrong said of the building contractors to whom he sells lumber and other materials. “They’re just waiting for the money. There’s a lot of bidding going on right now.”

No magic formula can reveal precisely how a region will fare in the aftermath of disaster. But Miami’s experience with Hurricane Andrew may be instructive.

The August, 1992, storm devastated sections of Dade County and was blamed for $23 billion in losses.

Yet $19 billion in relief, mostly private insurance money, seemed to propel Miami out of recession shortly after the storm, despite the closure of nearby Homestead Air Force Base. The county gained 28,400 payroll jobs in 1993, an above-average advance, and the unemployment rate fell to 7.8% from about 10%.

“There’s no doubt that it (disaster relief) speeds up economic growth in the short run, no doubt at all,” said Pat Fishe, a professor of economics at the University of Miami. “A lot of employment and a lot of income was created that people didn’t plan to create.”

It will be a long time before Californians know the final price tag of the quake.

UCLA researchers last week estimated earthquake losses at $13.5 billion, although the governor’s office maintains that the damage is between $13 billion and $20 billion. Overall, government agencies are providing $11.6 billion in aid and insurers are providing $3.5 billion.

But Southern Californians stand to benefit more from relief money than their counterparts in other places because a lot of the cash will stick around. Local factories can produce many of the items needed for replacement and rebuilding, from home appliances to building materials to electronic equipment.

“After about March you’ll start to see a plus from the rebuilding effort,” said Ted Gibson, principal economist at the California Department of Finance. “You’ll get an economic push for a year to 18 months that otherwise would not have occurred.”

Ultimately, residents and retailers may feel the pinch of lost wages and out-of-pocket rebuilding expenses. Damage to the region’s image, as employers and tourists choose to stay in places they perceive to be safer, will be hard to measure.

Some analysts view the negatives as enough to cancel out the positives. In the first half of this year, Los Angeles housing values may be 1 percentage point lower than without the quake, according to First Interstate Bancorp, with steeper declines expected in the San Fernando Valley.

“In the long run, it’s a negative,” said the University of Miami’s Fishe. “Otherwise you’d like these disasters to keep coming along.”

It is, however, a modest negative, almost too small to discern as the years progress, economists say.

UCLA researchers were startled Friday when statewide jobs data for February revealed virtually no earthquake losses.

“If February didn’t show the hit, we could be talking positive gains from here on out,” said UCLA economist Larry J. Kimbell, discarding his initial estimate of a short-term loss of 29,000 jobs. “We could be talking the end of recession.”

The local economy should create 36,000 new jobs by September, the UCLA study found, knocking 2 percentage points off the unemployment rate and triggering an economic recovery three months earlier than expected.

After 1996, as the rebuilding stimulus peters out, the county will lose another 12,600 jobs, according to the forecast. But that loss may be partly offset by other job gains because a recovery is expected to be in progress.

“We agonized over the question--is this earthquake a good thing for California?” Kimbell said. The long-term answer, he and colleague Nancy Bolton concluded, was no--but almost to a minuscule degree in an economic sense.

In the short term, the quake’s aftermath has been a time of economic turmoil, reminiscent of wartime for many scrambling enterprises.

Bed Bath & Beyond, a national retailer, air-freighted new inventory, such as breakable picture frames and glassware, to meet public demand after the quake. Moreover, it flew dozens of managers in from around the country to get its four Los Angeles-area stores back into shape.

“These guys flew in from Florida, from New York, from around the country. We probably had 100 guys,” said regional manager Art Stark. “They dropped what they were doing and were here for 15- (to) 18-hour days, seven days a week. It was an amazing thing.”

Construction firms, their suppliers and a wide range of specialists from asbestos removers to glass replacers are among the many beneficiaries of rebuilding.

Yet the massive task of getting things back to normal is creating less obvious opportunities as well.

Masters of Printing, a small business in Northridge, suffered $10,000 in damage, along with the loss of important customers at the Northridge Fashion Center.

For the moment, however, the post-quake helter-skelter of people moving around, scrambling for aid--and keeping in touch with each other--has provided a jolt of printing work.

“We’ve been doing a lot of business cards. We’ve been doing a lot of flyers,” said Natalie Berger, who owns the shop with her husband. “A lot of copies have to be made for FEMA (Federal Emergency Management Agency) stuff. Fortunately, we have been busy.”

It will remain a mystery how the economy would have performed without the one-two punch of disaster and rebuilding.

Some believe the earthquake struck at a pivotal moment when the region was starting to edge out of recession.

Home sales had been rallying. Economists had detected an emerging trend of lower job losses, despite the continued weakness in aerospace and defense.

Business failures in California had declined slightly after shooting up in 1991 and 1992. New businesses were being created, and opinion surveys pointed to rising public confidence.

Now, the prospect of billions of dollars in relief money has become the most persuasive piece of evidence that Southern California’s long economic winter is going to end this year.

“We don’t want to get lulled into saying, ‘Hey, everything’s great. It’s just like the good old days,’ ” said USC’s Schapiro. “But we are on the path to recovery--undoubtedly.”

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