Watching and Waiting : More Than Recovery, a Year of Preparing for Greatness

By JAMES FLANIGAN

Jan. 3, 1996 12 AM PT

A watched kettle never boils. And Southern California, the vast and populous region that is almost certainly destined for greatness in the new age of commerce across the Pacific and the border with Mexico, will endure another year of transition--or preparation--in 1996.

But having come through five years of wrenching downturn and the first unfamiliar steps of recovery, the region now is poised, in the words of Winston Churchill, “at the end of the beginning.”

Recovery from recession will continue this year but with no engine of dramatic job creation. Aerospace-defense, the region’s old mainstay, will see further consolidations and cutbacks among small companies, although business is improving in commercial aviation and communications satellites.

The entertainment industry, the region’s new mainstay, will pause for reassessment of spiraling costs and flattening income. Job growth in Hollywood will be slower than its recent rapid pace.

But those basic industries, which directly account for about 4% of the region’s employment, will continue to provide a solid economic base.

The welcome surprises will come from growth in the region’s three less populous counties--Riverside, San Bernardino and Ventura--and from new and serious efforts to help Southern California realize its full potential in years to come.

Among events to watch will be a one-day conference in Los Angeles on Jan. 23 on California as financial center for the Pacific Rim.

State Treasurer Matt Fong is calling together the managers of 250 public and private pension funds--$300 billion of investment power--to discuss direct investment in ventures of California companies in Asia and Latin America, and increasing California’s role as financial center for the Asia Pacific region.

As Fong sees it, Southern California today, receiving massive flows of goods and capital from Asia and Latin America, is in a position similar to that of Chicago in the 1850s as it became a center for trading in grain and cattle.

Chicago created commodity futures markets back then, and it remains the world center for futures trading. Similarly, California should develop itself as a “center for Pacific Rim finance and trade,” Fong says. Setting up investment structures, as the conference will discuss, is a step in that process.

Another event with a larger significance will be the American Smithsonian exhibition at the Los Angeles Convention Center in February. The exhibit will draw more than 1 million visitors in two weeks and highlight the potential for tourism of cultural attractions and of central or downtown Los Angeles--an area that remains in need of renewal.

In 1996, new business and residential groups, such as the South Park Stakeholders Committee, will try to go beyond talk about revitalizing downtown and adjacent areas. Similarly, in Hollywood, work will go forward on the Museum of Entertainment and other efforts to restore glamour.

It would be good business for the whole five-county region if traditional Los Angeles and Hollywood could become magnets for conventions and entertainment. Think only of what Midtown Manhattan and Chicago’s Loop do for their areas.

Meanwhile, Southern California’s outlying counties are gaining jobs from the region’s leadership in foreign trade and wholesale goods distribution.

Riverside and San Bernardino counties, their economies counted together as one metropolitan area, are projected to increase employment by 21,000 jobs, or 2.8%--a faster pace than Los Angeles’ 2.1% projected gain or Orange County’s 1.6%. Employment in Ventura County is projected to grow 2.6% to 241,600.

Riverside/San Bernardino’s strength is in space available for warehousing and in location--interstate highways lead to the east and south and major rail lines crisscross the counties; Ontario Airport in San Bernardino County is a major freight terminal and a regional hub for United Parcel Service.

Business is good; warehouse rents rose 23% in the last year, according to the E&Y; Kenneth Leventhal real estate group.

Ventura County’s Port Hueneme is the nation’s largest export point for citrus fruit--Sunkist oranges going global--and a major import point for bananas. Trade through the port is growing 10% a year, with automobile imports--overflow from the mammoth Ports of Los Angeles and Long Beach--up more than 13%, reports Mark Schniepp, director of economic forecasting at UC Santa Barbara.

As are the nearby San Fernando Valley areas of Los Angeles County--as well as Orange, Riverside, San Bernardino and San Diego counties--Ventura increasingly is home to entrepreneurial business. Biotechnology-related companies are opening up near Amgen Inc. in Thousand Oaks.

Change is constant throughout the region. Defense appropriations are still declining, so small companies in traditional aerospace must merge and reduce work forces to stay alive, says Jon Kutler of Quarterdeck Investment Partners, a local investment banking firm.

But quickening orders in commercial satellites--a new growth business--as well as commercial aviation are providing work for this region’s companies, says John Harbison, aerospace specialist for the Booz-Allen & Hamilton consulting firm.

In Hollywood, the more things change. . . . Box-office receipts last year were up only a fraction and blockbuster films often didn’t repay their costs. But “Waiting to Exhale,” a modest film about four women, was a surprise winner. So watch for repeated attempts to succeed with witty women’s films.

Truth is, Southern California’s economy is progressing quietly, a little below the surface, the way heat builds slowly in water. A watched kettle may seem to take a long time, but it boils nonetheless.

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Where the Growth Will Be

In 1996, economists expect economic growth in Ventura, San Bernardino and Riverside counties to outpace that of the five-county region’s larger Los Angeles and Orange counties.

As people flock to the counties ...

Population (in millions)

Riverside / San Bernardino

1996**: 3.11

Ventura:

1996**: 0.73

** Forecast

... retail sales climb ...

Taxable sales (in millions)

Riverside / San Bernardino

1996**: $16.9

Ventura: