Valley’s New Era Offers Rewards, Punishment : Business: A ruthless downturn has masked a restructuring trend. Rising industries evoke optimism.

Well before the Northridge earthquake, changing markets and hard times had upended the San Fernando Valley--overturning the lives of some while heaping unexpected fortune on others.

For those who lost jobs or equity or business, the past several years have been a lingering disaster, a conspiracy of bad luck and unexpected betrayals.

“It started with the riots, then it seemed to go downhill. . . . Every time there was a disaster--the fires, the earthquake--it died some more,” Shirley Silverstein said.

After 14 years, she is closing the family’s Van Nuys toy store--Miniature Towne U.S.A.--and moving to Texas. “It’s the recession,” she said. “With so many people laid off, it has had a great rippling effect on us.”

And yet, for others--those posting record sales, moving to larger quarters, climbing the corporate ladder--the 1990s have so far been a time of unequaled opportunity.

“For all practical purposes, we didn’t know there was a recession, except that every time we needed to hire somebody there would be dozens of applicants,” said Mark Sampson, director of research and development for a North Hollywood firm that he and a partner started in 1990. Sales for their company, Matchless Amplifiers, grew from zero to $1 million in two years. Sampson expects to double that this year.

Far from capricious, the economy’s path reflects the orderly work of capitalism’s invisible hand, clearing the way for a 21st-Century economy. And the Valley, like the rest of Southern California, is witness to a dramatic adjustment that has been partially obscured by three years of recession.

A new economy is emerging that, like its predecessors, will have its share of winners and losers, decided--as always--by the demands of willing buyers.

It is an economy that is leaner and more competitive, with fewer lifetime employees and more part-time and temporary workers. It is a workplace with plenty of jobs but fewer that pay well.

It is also a market in which a bit of sweat and cash can still propel a good idea from a neighborhood garage to a 100,000-square-foot factory.

Dan Sandel, an Israeli immigrant, had friends in nursing who complained about routine chores, such as counting needles. That idea sparked the creation of Devon Industries, which now employs nearly 400 at its Chatsworth plant. Last year, Devon sold about $60 million in medical supplies, including needle counters.

The old economy transformed Los Angeles County, especially Chatsworth and Canoga Park, into a high-technology center, employing some of the brightest minds and most productive hands in the world.

Cars, airplanes and motion pictures employed thousands of Valley workers. While the movies continue to cast a bright picture, other workers in traditional Valley industries have lost jobs and position and security.

Reductions in federal defense spending and a changing marketplace have eliminated more than 10,000 local jobs, knocking the wind out of the nation’s premier manufacturing powerhouses.

At Hughes Aircraft Co., General Motors, Lockheed Corp. and other bastions of Valley employment, hundreds of acres of once-productive factories are shuttered and for sale. Their absence has produced lean years for a host of smaller companies and retailers as well.

Rocketdyne, a division of Rockwell International Corp. and one of the Valley’s largest employers, predicts it will hire fewer than 20 college graduates this year, compared to 200 five years ago.

James Osment, the firm’s administrator of college relations, said newspaper classified ads used by his firm and others to recruit employees used to be so thick, “you could hardly pick up the section with two hands. Now you can pick it up with two fingers.”

But in that vacuum, an army of small- and medium-sized companies are thriving.

In key industries such as entertainment, computer hardware, biomedical and aerospace subcontracting, Valley firms account for nearly 30% of all employment and revenues in Los Angeles County, according to a research project directed by economist David Friedman.

The Valley scores high in four other industries: general industrial machinery, metalworking, computer software and environment-related businesses.

The numbers bolster a more optimistic view of the region, although there remain complaints from business owners over taxes, government regulation and social issues such as crime, Friedman said.

“Despite the fact that a lot of firms would like to leave, they can’t. I call it the ‘golden handcuffs,’ ” said James Renzas of Paragon Decision Resources of Irvine, a consulting firm. “Take the high-tech crowd. Where are they going to find a labor market with the kind of brainpower you find in L.A.? In Boise?”

But even with a healthy stock of firms, providing enough good-paying jobs will be one of the most serious dilemmas of the new economy, say experts.

Productivity has skyrocketed--more is produced with fewer workers, machines do more and more of the repetitive work once assigned to assembly lines. The payoff is competitively priced products as well as the continued survival of local firms. It also means there is less demand--and compensation--for all but the most irreplaceable flesh-and-blood employees.

Rewards, once spread broadly among production workers, are now increasingly concentrated on those who develop and design new technologies and products, along with those who sell them.

“The reality is we are up to our neck in technology,” said Jack Kyser, chief economist with the nonprofit Los Angeles County Economic Development Assn. “What we need is an infrastructure to get it out of the lab and onto the factory floor and start creating jobs in a fairly quick manner.”

The area has borne the brunt of the California recession. Altogether, Los Angeles County lost more than 500,000 jobs between December, 1990, and January of this year, accounting for between 60% and 70% of the total number of California jobs lost in that time, experts say.

Trade unions that once guaranteed top wages and benefits to workers have dwindled. The International Assn. of Machinists District 725 once represented more than 40,000 workers in the years following World War II. Their numbers had fallen to half that by 1974. Now, there are 2,400 members, said union Research Director Don Nakamoto.

“It has been the result of reduced aircraft contracts,” he said. “The slowdown has been over the past 20 years, but the recent cuts have been the most dramatic.”

David Bantle, a 71-year-old former aerospace engineer and one of the new breed of entrepreneurs, said the bad news for machinists has benefited his firm, DAMACO Inc. The machine shops that once worked for aerospace now aggressively compete for his business.

“Many of those shops are very hungry,” said Bantle, who 13 years ago started making lightweight electric wheelchairs in his Chatsworth garage and now owns a 24,000-square-foot factory. “That is unfortunate for them, but great for us because they are highly competitive.”

There has been no contraction for supermarket workers.

“Historically, we have been in a good situation because people obviously have to eat, so that gives us a leg up on most industries,” said Rick Icaza, president of the United Food and Commercial Workers Union, Local 770. “But the jobs have basically been frozen in the grocery industry. There haven’t been many hirings.”

Union checkers earn close to $14.50 an hour, plus $4 an hour in benefits. Even box boys earn health and pension benefits on top of their $5 hourly wage, he said.

But union officials worry about the growth of independent and warehouse-style food markets, some of which rely heavily on lower-paid temporary and part-time workers.

“They have a 25% price advantage on payroll because 80% of their employees are part time and excluded from benefits,” Icaza said.

Taking part-time or temporary jobs--which typically pay lower wages and offer few benefits--has been the only option for many Valley workers. And state employment officials predict that the trend will grow.

Unemployment claims in the Valley went from 66,853 in 1989 to a peak of 108,243 in 1992. Last year, the total dipped to 88,289, according to the state Employment Development Department.

The layoffs and firings have continued to slow down, according to a Times poll of San Fernando Valley residents. Earlier this month, 16% reported that they or a family member had been fired in the last year, compared to 25% a year ago.

It is probably no coincidence that one-third of Valley residents polled this month say they have taken some job training or schooling in the past two years to boost or change their careers.

“Being frozen, that is the highest risk, saying: ‘This is what I do, this is what I am,’ ” said James Boulgarides, professor of interdisciplinary studies at Cal State Los Angeles. “You have to re-create yourself, like a phoenix out of the ashes and re-create a new life.”

As the Valley’s largest manufacturers have cut jobs or left altogether, many workers lucky enough to find new employment have discovered it pays less and offers fewer benefits.

Among people who have changed jobs in the last five years, nearly one-fifth of those between the ages of 30 and 64 say they are working part time because they cannot find full-time jobs, according to this month’s Los Angeles Times Poll.

Job prospects through the end of this decade will become increasingly divided between large numbers of low-paying jobs and relatively scarce high-paying positions, according to state forecasts.

The largest number of new jobs predicted for California in the next six years are, in order: retail sales clerk, corporate executive, waiter, office clerk and cashier.

Of those, state officials predict there will be 124,000 new jobs for top managers and executives, and 400,000 for the rest.

Among the relatively well-paying jobs in the top 25--besides executive--are nursing, accounting, engineering and teaching.

More than half of the top 25 will pay minimum wage, according to the EDD. Of the 50 occupations expected to have the largest numbers of jobs created through the year 2000, 29 start at minimum wage.

In Los Angeles County, state economists predict that over the next three years, the jobs with the greatest demand will be, in order: sewing machine operators; office clerks; executives; film/TV producers, directors and actors, and waiters.

As the Valley slowly winds its way out of the recession, “people will find jobs,” said UCLA economist Daniel Mitchell, “but they will find them at the K mart clerk level. There is no great natural law that says income” will be spread evenly among workers.

More troubling to consider is that as educational demands climb for the best jobs, the dropout rate at city schools remains over 33%. Although a lot of new jobs being created in the Valley and elsewhere are a big step up for many immigrants, that may not be true for their U.S.-born children.

The payoff of a college education, as compared to the rewards of a high school background, has soared in recent years, said Morton Schapiro, dean of USC’s College of Letters, Arts and Sciences and former chairman of the school’s economics department.

That is not because college graduates are doing so well, but because high school graduates’ incomes have plummeted.

Evidence of the widening income gap is apparent in the Valley, where the income of the wealthy grew much faster than that of the poor during the 1980s, according to the 1990 U.S. Census.

Only 12% of working adults in the Arleta-Pacoima area reported their occupation as managers or professionals, for example, compared to nearly half the adults living in Sherman Oaks, Studio City, Toluca Lake, Encino and Tarzana, according to the U.S. Census.

Prospects remain dim for restoring widespread blue-collar prosperity through large employers making new products such as electric cars.

“The concept of defense conversion is politically correct, it sounds good and rolls off the tongue. . . . It seems like something you can throw money at and create jobs,” said David Goodreau, chairman of the California Industrial Council and president of a Burbank aerospace manufacturing firm. “But the technology just isn’t there to support it. Maybe there is a lot for R & D-type jobs, but from the standpoint of hiring a lot of the production workers being laid off, those people are out of luck.”

Others are less pessimistic.

“The entire country is going through this kind of stratification, but the difference is that California still has a manufacturing base, tens of thousands are opening up new businesses,” said economist Friedman, who has written extensively about the state’s economy. “The argument that we have reached some kind of low-wage, low-skill equilibrium is totally false.”

He points to several Valley firms that are doing well in the new marketplace and are not limited to sophisticated, high-technology products and services. There are also some traditional factories that have found a niche in the global market.

Jeff Ornstein, chief financial officer of Superior Industries International Inc., a Van Nuys-based manufacturer of aluminum wheels, said business has grown dramatically over the past 10 years.

“We are the world leader, with about a 40% market share,” Ornstein said of the firm that was started in the Valley 35 years ago.

More than 1,000 people work at the Van Nuys plant and another 2,500 work at factories in Arkansas, Kansas and Tennessee. While echoing many complaints about the region, Ornstein said his firm has no plans to leave.

Jobless Claims

First-time claims made each January and May since 1991:

San Fernando

January May 1991 5,590 3,826 1992 4,689 4,619 1993 5,813 4,402 1994 6,633 3,545 Canoga Park 1991 3,686 3,259 1992 5,383 4,736 1993 5,467 4,844 1994 5,848 3,566 North Hollywood 1991 4,852 4,098 1992 5,827 5,433 1993 5,535 5,230 1994 6,354 4,791

Source: California Health and Welfare Agency

The Valley’s Economic Indicators

The measures of economic pain felt through several years of recession include falling home prices, skyrocketing numbers of foreclosures, unemployment filings and the number of those seeking bankruptcy protection. Figures are for the San Fernando Valley unless otherwise noted.

HOUSING

Condominium and single-family home sales 1993: 10,525 1994-sales through end of May=4,496 Average sales price 1993: $235,483 ***

Single-family house foreclosures

The number of single-family home foreclosures reached a record high last year. The pace continued through the first quarter of 1994. 1989: 198 1990: 226 1991: 963 1992: 2,168 1993: 4,301 1994: 1,192 ***

JOBS

The number of unemployment claims at the three state offices serving the San Fernando Valley reached a high in 1992 and have since declined. 1989: 66,853 1990: 81,485 1991: 100,701 1992: 108,243 1993: 88,289 ***

BUSINESS

City Dept. of Water and Power records show a 17% decline in the number of electric meters hooked to commercial/industrial users in the San Fernando Valley, dec. 92 to dec. 93. Since then, the number of hookups has climbed slightly.

Number of commercial/industrial users, functioning meters only. December measures.

Valley Citywide 1990 69,144 209,340 1991 69,964 211,311 1992 71,836 215,534 1993 59,880 173,434 April 30, 94: 60,052 N/A

***

BANKRUPTCIES

Bankruptcy filings for Los Angeles County.

Chap. 7 Chap. 11 Chap. 13* 88 26,157 884 5,709 89 27,797 867 5,247 90 32,078 1,005 5,659 91 42,723 1,583 7,063 92 47,744 1,766 8,653 93 43,875 1,693 9,281

Chap. 7 Chap. 11 Chap. 13* 94 12,827 475 3,129 93 15,047 538 3,026

Chap. 7--liquidation-assets are converted to cash to pay off debts...Law decides. Chap. 13--reorganization for an individual. Chap. 11--reorganization for a company or corporation Source: Dept. of Water and Power; San Fernando Valley Board of Realtors, Inc.; California Employment Development Dept.; Public information office, U.S. Bankruptcy Court, Central District of California.

Key Valley Industries

Selected industries in the Valley that account for a significant number of firms and employees in Los Angeles County.

Biomedical

% firms in Firms county Employees 196 22.90 12,320 Metalworking 213 16.21 2,806 General Industry Machinery 71 13.52 1,841 Aerospace Subcontractors 197 26.51 12,122 Computer Hardware 270 28.97 11,081 Software & Programming 416 20.29 5,439 Entertainment 1,338 25.00 37,706

Source: UCLA, The New Economy Project

Where the Jobs Will Be

Service sector jobs account for more than half of the top 20 occupations expected to show the largest increase in the coming years, according to recent projections by the state’s Employment Development Department.

Los Angeles County, ‘90-’97

1. Sewing machine operators (+13,530)

2. General office clerks (+8,440)

3. General managers and top executives (+8,290)

4. Producers, directors and actors (+8,270)

5. Waiters and waitresses (+7,650)

6. Registered nurses (+7,610)

7. Retail salespeople (+6,180)

8. Receptionists and information clerks (+5,810)

9. Secretaries (+5,800)

10. Combined food preparation and service workers (+5,500)

11. Instructional aides (+4,970)

12. Food preparation workers (+4,890)

13. Cashiers (+4,790)

14. Light-truck drivers (+4,670)

15. Security guards (+4,430)

16. Nurse aides, orderlies and attendants (+4,240)

17. Elementary schoolteachers (+3,740)

18. Non-scientific sales representatives (+3,740)

19. Restaurant cooks (+3,690)

20. Accountants and auditors (+3,610)

Statewide, ‘87-2000

1. Retail salespeople (+174,490)

2. General managers and top executives (+124,060)

3. Waiters and waitresses (+102,340)

4. General office clerks (+96,790)

5. Cashiers (+82,210)

6. Registered nurses (+76,430)

7. Combined food preparation and service workers (+60,210)

8. Accountants and auditors (+58,800)

9. Secretaries (+56,770)

10. Electrical and electronic engineers (+54,890)

11. Janitors and cleaners (+52,470)

12. Receptionists and information clerks (+50,140)

13. Bookkeeping and accounting clerks (+45,020)

14. Food preparation workers (+43,360)

15. Non-scientific sales representatives (+41,460)

16. Systems analysts and electronic data processors (+40,170)

17. Light-truck drivers (+39,990)

18. Security guards (+39,080)

19. Heavy-truck drivers (+38,980)

20. Electrical and electronic technicians (+38,340)

Source: California Employment Development Department, Labor Market Information Division

The Lineup

Today

A New Workplace: For people who lost their jobs or equity or business, the past four years have been a lingering disaster. And yet, for others, the ‘90s have been a time of unequaled opportunity. A1

Enterprise: Profiles of companies that epitomize the type of businesses expected to prosper in the new economic climate. A19

House of Horrors: After two years on the market, Darrel Swendener’s dream house has turned into a nightmare. B1

Lowering the Boom: The roaring ‘80s in the Antelope and Santa Clarita valleys sputtered to a close, but the area seems poised to recover quicker than other areas of Southern California. B2

Tuesday

Future Tense: A report from the front lines on the new workplace, where entrepreneurs, computer experts and others talk about how they feel about having 21st-Century jobs in the 20th Century.

Forever Young, Not: An already overburdened school system struggles to prepare youngsters for the changing workplace.

Help: A compendium of tips, lists and insights for coping with the lingering recession and preparing for the new economy. Plus, a Q&A; with Robert D. Bass, an Encino bankruptcy lawyer.

Temporary Solution: In almost every industry, from banking to biotechnology, temporary workers are playing an increasingly important role. Valley Business