Economic Rebound Undeterred by Quake : Business: Dun & Bradstreet says L.A.’s recovery continued despite temblor. Insurance, U.S. provided boost.

The Northridge earthquake could bust up freeways and shake apart shopping malls but apparently could not derail the recovering Los Angeles economy, which according to a Dun & Bradstreet study released Monday is stronger now than at the time of the quake.

“No one was more surprised than us,” said David Kresge, the firm’s senior vice president of analytical services. “But when you have this much data, you’re not looking at an illusion.”

Using proprietary credit and other financial information from more than 20,000 firms located within 40 miles of the quake’s epicenter, Dun & Bradstreet economists determined that the rate of local business failures--which shot up during the recession from 1990 through 1992 and began to fall sharply near the start of 1993--has continued to drop through 1994.

Even more surprising, Kresge said, was that the failure rate for businesses located within 20 miles of the epicenter is shrinking slightly faster than the rate statewide. The 20-mile area has about 177,000 businesses, employing 1.6 million workers, the study said.

Some $19 billion or more in insurance payments and federal aid is helping keep much of the local economy pumping, the report said. Dun & Bradstreet gathers business information, including credit worthiness of individual firms, for sale to business clients.

Other economic researchers, at UCLA and the Center for the Continuing Study of the California Economy, said the report is consistent with their research, and local business and political leaders found the upbeat data cheering.

“This is certainly the sort of thing we had hoped for, recognizing that the Los Angeles area has suffered a series of significant problems, economic and natural, as well as civil,” said Ray Remy, president of the Los Angeles Area Chamber of Commerce.

“I think we are poised for some good things to happen . . . not . . . the boom ‘80s, but definitely a better environment than we have seen in the last three or four years.”

Mary Leslie, Mayor Richard Riordan’s deputy for economic development, called the report “good news,” but added that while the overall economy is improving, “there is a select group of businesses that are disproportionately impacted, and they are mostly in the Valley.”

Rather than finding growing numbers of firms falling behind on their bills, the Dun & Bradstreet study found that among businesses within 40 miles of the epicenter, 16% strengthened their financial status despite the quake and 16% got weaker. Similarly, 13% of firms were recast as higher credit risks, while 13% lowered their credit risk ratings.

“It was a wash from the point of view of the larger economy,” Kresge said. “But, of course, if you are part of the percentage that got weaker it’s not a wash at all. It is easy to get lost in the statistics and say, ‘It’s not so bad.’ ”

In effect, the local economy kept right on the same track it was following before the quake hit, with business losses counterbalanced by other gains, he said.

Certainly, for many businesses or individuals, the quake brought financial disaster.

Yet, despite the damage to tens of thousands of individual businesses and homes, Dun & Bradstreet analysts say the timely repair of roads and freeways, as well as the local economy’s growing strength in the months before the Jan. 17 quake, protected Southern California from much worse, long-term damage.

“I had a fit trying to put this stuff together at first,” said Kresge, a former Harvard economics professor. “I had expected to track how manufacturing got weaker and how many more businesses had failed, but then we saw the numbers and said, ‘Hey, wait a minute, this is a different story.’ ”

The study confirms earlier assessments by economists from UCLA’s Business Forecasting Project who have said the quake would have only a slight negative long-term impact on the Southern California economy.

The findings also are consistent with data collected by the Palo Alto-based Center for the Continuing Study of the California Economy, said the center’s director, Stephen Levy.

“The big losses from the earthquake were in asset losses and wealth losses to people losing their homes or buildings, but not the disruption of the region’s ongoing economic activity,” Levy said. “People got wiped out of particular assets, but it didn’t damage the region’s economy. . . . So it is possible to have a severe earthquake, with great damage, without great disruption to everyday economic affairs.”

Monday’s Dun & Bradstreet report contrasted sharply with grim predictions when the firm began its six-month study in the days following the quake. The firm’s analysts had determined that more than one-third of California’s manufacturing base was within 40 miles of the earthquake’s epicenter.

Manufacturing is considered a key element of a region’s economy because each dollar earned in salaries is exchanged several times throughout the community.

In telephone and door-to-door interviews in the days after the quake, Dun & Bradstreet workers in a preliminary tally found that one-fifth of the 3,000 area firms most likely to have been hurt by the quake had suffered some kind of damage.

Of special concern were high-tech manufacturing zones in the northeast San Fernando Valley, which have a high concentration of the region’s biomedical, computer hardware and aerospace subcontracting companies.

At the time, Kresge said, there were fears that the quake would push the Los Angeles area’s economy into a “death spiral, where firms shut down, cash flow problems mount, there is no money for repairs and workers aren’t getting paid.”

But despite the broken freeways, long detours and personal tragedies, “People kept coming into work and firms kept operating,” Kresge said. “. . . And because businesses were able to operate, whatever damage they did have, they were able to pay for repairs with some cash flow. The economy was by no means crippled.”

Of the quake damage reported by businesses, most turned out to be inventory losses and broken windows, the report said. Cited as examples are a Van Nuys marble wholesaler that lost $500,000 in shattered stone and a Sherman Oaks china store that sustained $100,000 in broken inventory.

The marble wholesaler is recovering with a federal Small Business Administration loan, and the china store owner was insured, the report said.

The Dun & Bradstreet study credits the infusion of insurance money--estimated to be from $7 billion to $10 billion--with keeping the doors of many damaged businesses open. Federal assistance--which through various programs will amount to $12 billion--also helped, but has been slower in coming, he said.

Times staff writer Hugo Martin contributed to this story.