Southland Jobs Growth Seen as Staying Strong

By PATRICK LEE and THOMAS S. MULLIGAN

April 7, 1996 12 AM PT

TIMES STAFF WRITERS

Southern California is now creating jobs faster than at any time in this decade, a Times computer analysis shows, and economic experts believe that the expansion will roll on through the end of next year.

Even Los Angeles County, which suffered more during the last recession than any part of the state, could catch up with the rest of California in its rate of job creation in the next two years.

“We have the best economic base than at any time in our history,” said Jack Kyser, chief economist with the Economic Development Corp. of Los Angeles County.

The statistics provide the strongest evidence to date that Southern California has largely shaken off the economic blues of the early 1990s, when housing prices plunged and manufacturing jobs disappeared by the hundreds of thousands.

The regional recovery is all the more remarkable because it is occurring without any help from the major industries that traditionally have been among the most visible in Southern California: defense, financial services and real estate.

Stepping into the vacuum left by the retreat of the aerospace manufacturers and the demise of First Interstate Bank are new-wave job creators such as Joshua Greer, 26, a computer prodigy whose Digital Planet design firm in Culver City spins out Internet advertising vehicles for movie studios, corporate clients and others.

It is a business that did not even exist when the recession began five years ago.

Skeptics may doubt the durability of a rebound seemingly built on “froth” such as World Wide Web pages, but the Times computer analysis of state employment data finds that Los Angeles County and the four counties around it saw job increases across a broad range of industries in 1995, the second full year of such increases in the entire region and the first in Los Angeles County.

Nearly 113,000 jobs were created last year in the five counties, an increase of nearly 2% over 1994 and the largest numerical increase since 1989, according to average annual figures from the state Employment Development Department. Total nonfarm employment in the five counties was nearly 5.93 million.

Although the worst of the recession was largely over by 1993, the economic recovery since then has been modest and uneven. Los Angeles County was the last of the five counties--including Ventura, San Bernardino, Riverside and Orange--to see jobs increase since the recession began six years ago, and its unemployment rate remains well above the national average.

Economists expect the growth in Los Angeles County to continue, despite the continuing job shrinkage in aerospace and defense, a lagging real estate market and threatened layoffs from a series of corporate mergers, such as those from the recent union between First Interstate and Wells Fargo Bank.

According to Kyser, Southern California will add more than 142,000 jobs in 1996 and more than 146,000 in 1997--a growth rate of 2.4% each year. The reason: Job growth is occurring in the emerging industries, more than offsetting losses in industries whose halcyon years have come and gone.

“There are more motion picture jobs than aircraft jobs, and motion picture jobs pay more,” said Stephen Levy, senior economist and director of the Center for Continuing Study of the California Economy in Palo Alto. “That’s a symbol of the evolution of the Southern California economy.”

To be sure, the upbeat outlook could dim for any number of reasons: if the real estate market continues to flag, if another natural disaster hits the Los Angeles area, if the wave of corporate mergers results in higher than expected layoffs, if promised new defense contracts fail to materialize.

And there remain the usual impediments to growth: relatively high labor and real estate costs, as well as a shortage--except in the Inland Empire--of prime factory or warehouse space.

Outside California, there remains a lingering perception that the state is hostile to business. Executives often cite the state’s environmental and workplace-safety regulations, which exceed federal ones, as making business more difficult and expensive here.

The perception persists despite recent workers’ compensation and other regulatory reforms designed to ease business frustrations.

“More often than not, companies eliminate California as a whole from their site search, primarily because of what they see as an anti-business climate,” said Dennis J. Donovan, senior managing director of the Wadley-Donovan Group, a location consulting firm based in Morristown, N.J.

Yet, the strength of recent local job increases was enough for UCLA recently to revise its forecast of the state’s economic future. The widely watched Anderson Business Forecast is predicting 3% job growth statewide in both 1996 and 1997, the best rates since the late 1980s.

Across the region, jobs are growing fastest in those industries that build on the most ephemeral of things--ideas and imagination--and turn them into exportable products that create very real cash and very real jobs.

And they’re not just talking movies anymore: The growth is occurring in design, architecture, fashion, apparel and business consulting that draw upon Southern California--or the idea of Southern California--as raw material.

“What’s happening in the L.A. economy goes much beyond entertainment,” said Allen J. Scott, associate dean of UCLA’s School of Public Policy and Social Research. “L.A. is becoming a center of design-intensive consumer goods--cultural products--as a sort of engine of growth that spills over between all of these industries.”

Typical of these firms is Digital Planet, which Greer co-created less than two years ago.

The firm embodies many of the attributes that analysts say will characterize the Southern California economy of the next few years. It is entrepreneurial, marries computers and entertainment, is carving a market niche where none existed before, makes use of the pool of creative talent found mainly in Los Angeles, and pays well.

From its beginning with $8,000 in start-up capital, the firm now has more than $1 million in sales from more than 100 clients, Greer said.

If Greer has his way, the 35-employee firm will morph itself further in the next month or two, becoming the first “programmer” for the Internet with a new, interactive narrative game called “Madeleine’s Mind,” which will incorporate real-time animation, music, dialogue and, he hopes, paid advertising.

Greer’s firm is among those seeing the fastest growth in Southern California--the business services sector. In Los Angeles County, business services added 18,800 jobs in Los Angeles County, a 7.5% increase, and 9,000 in Orange County, a 10.5% increase, according to The Times’ computer analysis.

Close behind were motion pictures, which added 16,900 jobs in Los Angeles County (a 15.1% increase). (And many economists believe official figures understate total employment in the motion picture industry because many of those jobs are freelance.)

Los Angeles County, with its pool of potential customers, wealth of creative talent and competitive drive, was the only place that Toronto native Greer seriously considered basing his business.

As much as he likes San Francisco, he said, “It seems like they’re always on a lunch break.”

As the local economy recovers, other firms are looking at Southern California’s ample supply of technical workers as a magnet.

“Southern California has a critical mass of high-tech labor and support services that is currently underutilized because of the aerospace downturn,” said Donovan, the location consultant.

More traditional industries also are seeing growth. Across Southern California, job growth was strong in wholesale and retail trade, in health services, in nondurable goods manufacturing, particularly apparel and toys, and in some construction categories.

And UCLA, among others, believes that the stagnant real estate sector, traditionally an engine of growth in times of recovery, will finally bottom out in 1996. One sign that may happen: In February, the rate of existing home sales was up nearly 25% compared to a year earlier, the California Assn. of Realtors reported.

The expansion of existing firms is driving some of the growth. Firms ranging from Inacom Corp., a computer wholesaler, to Elite Access Systems, a manufacturer of security gate motors and controllers, are planning to expand into new buildings and hire new people in Southern California this year.

Alex Parsadayan, co-owner and vice president of Elite Access Systems, says his firm has been growing on average 35% a year, selling security equipment nationwide for use in apartment complexes and industrial buildings.

In October, the firm will double its space when it moves into a 36,000-square-foot plant in Lake Forest from its current base in Orange. The firm will hire half a dozen new people to augment its staff of about 30.

“The industry’s growing too,” Parsadayan said. “People like to have more security.”

Similarly, Inacom, based in Omaha, is planning to double its Southern California warehousing and distribution operation this summer when it moves into a 180,000-square-foot facility in a new Ontario business park. At the same time, it plans to triple its staff to nearly 100 employees.

Inacom is part of the emergence of the Inland Empire as a regional center for distribution and warehousing, Kyser said. And Inacom is also part of the trend of businesses locating in Southern California to take advantage of its location at the nexus of Asian and Latin American trade.

“International business is the fastest growing segment of our business right now, and we will be . . . servicing it out of Ontario,” said Mike Steffan, Inacom’s president and general manager of operations in Omaha.

Businesses looking to trade overseas are drawn by Southern California’s accessibility to Asian cities and its large corps of export-import brokers, trade consultants and other facilitators.

Despite the recent good news, Wall Street remains skeptical about the Southern California recovery, said David Hensley, a regional economist with Salomon Bros. in New York. As ever, the problem is partly bad public relations.

Just saying “Silicon Valley” helps people understand the rebound in the northern part of the state, but in Southern California the story isn’t so simple.

“The entertainment industry doesn’t sound as solid as does aerospace,” Hensley said. “There may be some froth in the sector,” he added, “but there’s something very solid and durable about the business.”

Salomon Bros. is advising investors to buy California mortgages and mortgage-backed securities because it believes that lingering perceptions of weakness in the state have driven their prices to bargain levels, Hensley said.

Investors’ unease is likely to be fueled by the news last week that Southern California mortgage delinquencies hit their highest level in eight years.

But don’t try to argue that to boosters such as the Economic Development Corp.’s Kyser. A British trade official told him recently that Southern California had a great trademark: The letters “L.A.” still meant something to customers abroad.

“We’ve yet to take advantage of it,” Kyser said.

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Where the Jobs Were

Business services, retail trade and motion pictures accounted for the largest number of new jobs in the five counties of Southern California from 1994 to 1995, according to a Times computer analysis of state employment data.

Industry: Increase/decrease in jobs, 1994-’95

Business services: 30,700

Retail trade: 22,600

Motion pictures and amusements: 19,800

Wholesale trade: 18,100

Construction: 12,200

Other services: 10,300

Nondurable goods: 7,600

Transportation: 7,400

Health services: 6,600

State and local government: 4,400

Personal services 1,900