Consumers Downbeat About State's Future : Times poll: Survey finds Californians increasingly pessimistic about recovery. Sentiment could chill Christmas spending.

TIMES STAFF WRITERS

California consumers are more pessimistic about the future of the state's economy than they've been since 1993, results that bode ill for the pace of the state's recovery, a Los Angeles Times Poll has found.

The results come against a backdrop of falling real estate sales, impending Los Angeles County layoffs, the Orange County bankruptcy and continuing military base closures.

The findings, from a survey of 1,343 California adults taken between Sept. 7 and 10, quantify what some economists have said is increasing pessimism among state residents about the state's economic recovery--despite continued job growth and other signs of improvement.

Such pessimism could chill the upcoming Christmas spending season, as well as further depress an already moribund real estate market, economists said.

"It's basically perceptions," said Susan Pinkus, assistant director of the Times poll. "If people think things are going to be bad, will they spend money for a new car or a new house?"

Meanwhile, a separate poll suggests the Orange County financial crisis has taken a clear and widespread toll on that county's consumer confidence.

The Orange County Annual Survey, a consumer confidence poll conducted by UC Irvine, found that one in four residents has been personally affected by the county's bankruptcy filing nine months ago.

In The Times' statewide poll, 21% of respondents said they believe the state's economy will worsen in the next three months, a four-point increase from March and a 10-point increase over late 1994. That was the highest result since a 33% negative response in October, 1993.

Only 18% believe the economy will improve, down three percentage points from March and the lowest finding since late 1993.

State consumers also remain significantly more downbeat than the rest of the nation about the current state of the economy: 73% currently believe the state is in some form of recession, compared to 53% nationally, as last measured in June. (Economists believe the state actually emerged from recession in 1994.)

"It's a reflection that the state's recovery is not very vigorous and the state has not solved by a long shot all of its problems," said regional economist David Hensley at Salomon Bros. in New York.

Women were more unhappy about the economy than men, and middle-aged consumers were more pessimistic than either the young or the old, the poll found. And results differed by region: 79% of Southern Californians find the economy shaky, compared to 68% in Northern California.

The Times poll has a margin of error of plus or minus three percentage points.

Pasqual Mercado, 69, a retired federal worker in Ridgecrest, was one of The Times poll respondents who felt the economy would worsen in three months.

Mercado based his reply on personal experience. His son-in-law lost his job at a local bank and has had trouble finding work, he said. Mercado has seen property values in his neighborhood continue to fall. And at the naval base at nearby China Lake, he says, people are bracing for staff reductions.

"The wife and I go for a walk every morning, and you see a lot of empty apartments and homes," he said. "I wish I could say things are getting better, but I don't see it."

Economists differed on the importance of the poll findings. Some downplayed them, arguing that the state's economy will continue to improve.

"People have every right to their opinions, but the poll shows findings that are in direct contradiction to how the state's economy is doing in 1995," said Stephen Levy, director and senior economist at the Center for Continuing Study of the California Economy in Palo Alto.

But others said falling confidence could materially affect the pace of the state's recovery.

"Consumer spending makes up about two-thirds of the economy, and if confidence falls, then people are going to pull back more than they would otherwise," said Peter Griffin, a professor of economics at Cal State Long Beach.

Despite increasing pessimism, the evidence shows the state continuing its slow climb out of recession.

In August, the state added more than 28,000 jobs, and the unemployment rate dipped to 7.8%, from 7.9% in July, the Labor Department reported. All told, the state has added 110,000 jobs in 1995.

Some results of the Times poll supported the argument that state residents are doing well, despite their expressed doubts about the future.

Roughly two-thirds responded that they felt secure in their own financial situations, a figure that has remained virtually unchanged since the beginning of 1994 and is roughly the same as the rest of the nation. The figure is significantly higher than the 55% who responded that way in September, 1993.

Nevertheless, the state's unemployment rate remained much higher than the nation's, which fell to 5.6% in August from 5.7% in July. In Los Angeles County, the unemployment rate rose to 8.6% from 8.4%.

One telling sign of the troubles still plaguing the state's economy is the 20% plunge in new home sales in July from a year earlier, despite falling mortgage interest rates and increases in national home sales.

Partly as a consequence of the floundering real estate market, the widely watched UCLA Business Forecasting Project in June halved its predictions for the state's 1995 job growth from its forecast of six months before.

In Orange County, meanwhile, the UC Irvine annual survey found that more than two-thirds of respondents were fearful that the government's $1.7-billion investment fund loss will hurt them, either through their household finances or cuts in services or schools.

A large group of bankruptcy-affected and worried residents pulled down the county's overall confidence index, which nonetheless inched up to 90 this year from 89 last year.

If not for the bankruptcy, Orange County's consumer confidence would probably have shot up and surpassed the national average of 94 this year, said Mark Baldassare, a UC Irvine professor who conducted the survey.

The survey polled 1,001 adult residents by phone between Aug. 18 and 27 and has an error margin of plus or minus three percentage points.

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How the Poll Was Conducted

The Los Angeles Times Poll contacted 1,343 California adults by telephone Sept. 7-10. Telephone numbers were chosen from a list of all exchanges in the state. Random-digit dialing techniques were used so that listed and unlisted numbers could be contacted. Interviews were conducted in both English and Spanish. The sample was weighted slightly to conform with census figures for sex, race, age, education and regional voter registration. The margin of sampling error is plus or minus three percentage points; for certain sub-groups the error margin may be somewhat higher. Poll results can also be affected by other factors, such as question wording and the order in which questions are presented.

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Rising Pessimism

Californians increasingly think the state's economy will get worse in the next three months, the Los Angeles Times Poll found.

Question: Three months from now, do you expect California's economy will be better than now, worse than now or about the same as now?

Better

10/94: 26%

3/95: 21%

9/95: 18%

Worse

10/94: 11%

3/95: 17%

9/95: 21%

Same

10/94: 57%

3/95: 59%

9/95: 59%

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