Closing Seen as Blow to Already Weakened O.C.

Closing the Long Beach Naval Shipyard would deal a major blow to Southern California and to a struggling Orange County economy weakened by the uncertainty and hundreds of layoffs arising from its bankruptcy, economists said Friday.

About 550 of the 3,000 shipyard workers live in Orange County, with combined salaries totaling $17.5 million. Most of those who would be displaced are highly skilled blue-collar workers who earn high wages in specialized jobs like shipfitters and machinists.

In addition, dozens of businesses count on the repair facility as a major customer.

The closure “will obviously hurt our business,” said Doug Cook, owner of Cook Bros. Manufacturing & Supply Co. in San Clemente, which has sold pipe fittings to the shipyard for 40 years.

The decision by the Base Closure Realignment Commission, which voted 6 to 2 Friday to close the Long Beach facility, comes just as Southern California’s health care, technology, entertainment and construction industries are emerging from the recession.

But factors such as the closure of the shipyard and layoffs resulting from the Orange County bankruptcy are dampening the revival.

“It you start losing here and there, it adds up,” said Esmael Adibi, an economist at Chapman University in Orange.

Robert Kleinhenz, an economist for the Institute of Economic and Environmental Studies at Cal State Fullerton, said Orange County reaps 15% of the state’s military procurement, so it cannot escape being affected by the shipyard closure.

But Los Angeles County, he said, will be hit far more drastically. That county received 45% of California’s defense procurement funds last year--about $10 billion, and more than any other county.

“It’s a serious loss for Los Angeles County and the Long Beach area,” he said.

Some economists feel that the Southern California economy is diverse enough to absorb the loss without a devastating impact.

“Four thousand jobs is nothing in the scheme of the Southern California economy, but it can have a ripple effect,” said Rob Valletta, an assistant professor of economics at UC Irvine.

“You’re looking at some additional harm to the local economy because of these losses. It’s additional bad news on top of some hardships we’ve already encountered,” he said.

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The bad news in Orange County has been December’s bankruptcy filing in the wake of losses in the county investment pool totaling $1.7 billion. County supervisors laid off 700 workers and eliminated 2,000 jobs to try to cope with the loss.

Los Angeles County has its own budget trouble. Supervisors of the much larger county proposed earlier this week to slash 18,000 jobs, or one of five county positions, to repair its deficit-ridden budget.

Some state officials had hoped that the cumulative economic pain caused by these events might prompt the federal base-closing panel to keep the Long Beach shipyard open, “but obviously it didn’t,” said Ted Gibson, chief economist for the state Department of Finance.

But analysts also noted that the latest base closures come on the tail end of huge cuts in California’s aerospace and defense industries, in which more than 300,000 defense-related jobs were lost in the state because of reduced post-Cold War spending by the Pentagon.

“That process is winding down” and the base closures’ impact, while significant, “is not as damaging or severe as what the state has already been through,” Gibson said.

Analysts said the state’s ability to weather the defense cuts up until now, and to start growing again even modestly, bode well for withstanding the next closures.

“At least this closure is coming in the Long Beach area at a time when Southern California job growth is picking up again,” said Cynthia Kroll, regional economist at UC Berkeley’s Center for Real Estate and Urban Economics.

The new round of base closures “is not good news,” Kroll said, “but the advantage California has it that it has a diverse economy, so it’s not as though any of these places are losing their sole economic base.”

Analysts also noted that some bases already scheduled to close are finding new uses, even if their acreage won’t sustain jobs that pay as well as the bases did. One example: The computer company Packard Bell Electronics Inc. plans to move from Westlake Village to the Sacramento Army Depot that is also due to close.

Robert Paulson, head of the aerospace practice in Los Angeles for the consulting firm McKinsey & Co., argued that closing the bases actually helps California’s defense companies because it means the Pentagon will have more cash to buy weapons and other equipment built by those firms.

“The military budget is finite. If we do not let the military cut back on its infrastructure, it won’t have any money to spend on hardware,” he said.

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To be sure, none of the analysts downplayed the human suffering if President Clinton endorses the closures as recommended by the Defense Base Closing and Realignment Commission. “If you’re a shipyard worker in Long Beach, this is a disaster,” Paulson said.

Those jobs might not have paid the same wages, for example, as the satellite engineering jobs that have been lost in California, he said, but “these are good, blue-collar jobs with unique skills.”

And those kinds of shipbuilding jobs still pay more than many basic service jobs available these days that pay little more than minimum wage, economists said.

* WORKERS’ REACTION

Shipyard employees, merchants stunned by news. A38