1994-95: REVIEW AND OUTLOOK : ‘94/’95: THE ECONOMY : Major Forces at Work for a State Upturn in 1995 : Forecasts: Job growth and real estate are expected to help California join the national recovery.
It’s always something. As 1994 dawned, it was the earthquake. And the floods, in the aftermath of the fires.
What fresh hell for 1995? The consequences of the Orange County bankruptcy, perhaps.
California is never at a loss, it seems, for some nerve-jangling catastrophe that residents will see as the thing that will break the economy’s back.
But as the past has demonstrated, it is unlikely that the Orange County financial mess ultimately will do much to sway the state’s vast economy.
Although hundreds of government jobs in Orange County are expected to be lost, larger economic factors are at work there and in the rest of the state: pent-up demand for everything from homes to hammocks, a blistering nationwide recovery, recent trade pacts with Mexico and the world.
“Clearly, it’s a blip on the screen, but it’s important to remember that Orange County’s underlying economy is strong,” said Gary Hunt, executive vice president of Irvine Co. “We’re projecting job growth for the county.”
Which is not to minimize the severity of Orange County’s plight, or the possibility that the county could raise taxes as it cuts services--both changes that could harm Southern California’s business climate.
But economists argue that the main things that could derail the statewide recovery are the same ones that threatened it in 1994 to little effect: rising interest rates and a slowdown in the U.S. economy blunting nationwide demand for California products.
For now, most observers believe the state will continue its slow dance back toward economic health in 1995 after the turnaround year of 1994--driven by rising retail sales, a healthy rebound in residential real estate, increased foreign trade, and booms in entertainment, financial services and other industries.
And hard-hit Southern California should finally begin to take part in the upturn.
“California’s recovery is firmly established,” said the report in December from the Business Forecasting Project of UCLA’s John E. Anderson Graduate School of Management.
UCLA predicts the employment rate will rise a healthy 3.5% in 1995, with California gaining 440,000 jobs before slowing again in 1996 and ’97. As with past predictions, this one sees most of the new jobs in the service sector, which is expected to surge 7%. Other forecasters also see job growth in 1995, albeit at a less robust rate of 1% or 2%.
The state’s unemployment rate, still well above the nationwide figure, should drop to 6.4% in 1995 from 7.7% in late 1994, UCLA predicts. A California Business Roundtable poll of 1,208 executives found that 43% of them plan to expand their work forces in 1995. That’s an increase of 14 percentage points from 1993.
Leonard Rabinowitz, co-chairman of women’s apparel maker Carole Little Co. in Los Angeles, is one executive who had a good 1994 and expects to see further growth in the coming year. “Our wholesale sales were significantly higher”--up about 40%, in part because of an extension of clothing lines, he said. “We’ve increased from about 700 to 1,000 employees in Los Angeles.”
Rabinowitz sees sales growing about 10% in 1995. But, he added, “retail (sales) were not as comforting. . . . The stores are rushing to (discount) merchandise . . . at an even faster pace.”
Overall, though, UCLA says retail sales should reach double-digit growth rates in 1995.
Similarly, the residential real estate market should continue growing as it did in 1994. Even Southern California had year-over-year sales increases for every month in 1994, with a total of 188,137 houses sold through November, 14.1% more than in the first 11 months of 1993, according to Dataquick Information Systems in La Jolla.
“We think that sales are going to be about 15% ahead of what they were a year ago,” said John Karevoll, a real estate analyst at Dataquick.
Housing prices in the region have continued to decline, however. The November overall median price of $164,000 was down 1.2% from $166,000 in October and down 3.5% from $170,000 in November, 1993, Dataquick reported.
Karevoll said he thinks prices will continue to decline “about 3% to 3.5%.” Statewide, UCLA and others predict that home prices will begin to climb modestly in 1995.
In any event, Karevoll said, the percentage of homeowners selling for less than they paid seemed to peak a year ago at just under 50%. Karevoll foresees that proportion dropping below 38% in 1995.
Richard Lewis, president of Upland-based Lewis Homes, a major real estate developer and home builder, said that through November, his company sold 750 homes in Southern California in 1994, up slightly from the year before. He plans on selling 900 in 1995.
Statewide, “not only do we see the number of houses we sell (going) higher in ‘95, but our gross sales volume should be higher because we have more high-end developments,” Lewis said. Aerospace will continue to shrink, at a cost of 60,000 jobs between 1994 and 1998, UCLA says. But from 1998 through 2004, the industry could gain 25,000 jobs as the armed forces modernize.
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An Economic Yearbook
Here is a year-end look at the performance of the California, national and world economies: CALIFORNIA
Unemployment (percentage of state labor force unemployed): Nov.94 7.7
Retail Sales (in billions of dollars): 1994* 248.9 *Estimate
Personal Income (in billions of dollars) 1994* 712.8 *Average annualized projection, based on six months of data
Housing Permits (single-family and multi-family residences, in thousands of units) 1994* 96.5 *Average annualized projection, based on ten months of data
THE NATION
Unemployment (percentage of U.S. labor force unemployed): Nov. 5.6
Consumer Price Index (Annual inflation rate; not seasonally adjusted): 1994* 2.60 *Estimate
Gross Domestic Product (Percent change from year to year calculated in trillions of 1987 dollars) 1994* 4.5 *Calculated with data through Sept. 30
Personal Income (seasonally adjusted annual rate, in trillions of dollars): 1994* 5841.6 *Based on data through Nov. 30 Sources: Datastream, Economic Development Corp. Researched by ADAM S. BAUMAN / Los Angeles Times
