After a Lukewarm Year, Economy May Heat Up

Recessions don’t just end, they peter out. 1996 in the San Fernando Valley was a case in point: Optimism abounded, but genuine economic growth remained elusive and many business people had to be content with hopes of a recovery on its way--though not, apparently, in any hurry.

“Everyone is expecting a recovery . . . but it’s not showing up,” said Shirley Svorny, economics professor and director of the new Center for the Study of the San Fernando Valley Economy at Cal State Northridge. “Either it’s not really captured by the data, or we haven’t really turned the corner.”

The same story is told by local business people, many of whom say things have improved, but still don’t compare to the glory days before the aerospace downsizing.

“Things are a little bit better than in 1995. But they are nowhere near 1992” and before, said Ron Nardizzi, a Canoga Park restaurant owner, echoing an oft-repeated sentiment. “Those were our best years,” he added.

Despite strength in the entertainment sector, job growth in the Valley remained fairly flat in 1996 at just under 600,000 jobs, according to the study center at CSUN.

And other indicators are equally lukewarm. More people filed for bankruptcy in the Valley in 1996 compared to a year earlier. Valley housing foreclosures shot up by 15% from 1995. Home resale prices continued to hold flat, or drift gently downward.

And the number of people on welfare and other forms of relief, which ballooned in the early ‘90s, stabilized, but showed little sign of dropping back to levels of before the recession.

Statistics lag behind reality, said Svorny. But even to an optimist, such numbers, “point out . . . the severity of the recession we have been in,” she said.

Not all the news was bad, of course. The entertainment industry turned a corner a couple years ago and hasn’t looked back.

Strengthened by its export market, this industry has been adding jobs in the Valley, renting airplane hangars and warehouses across the Valley because of the shortage of studio space.

Filming permits in Los Angeles County have ballooned 32% over last year’s total, according to the Entertainment Industry Development Corp. There are even reports of production companies offering other firms money to move so their premises can be used for filming.

What’s good for entertainment has been good for Glendale and Burbank. These saw such growth in media-dominated commercial districts that vacant offices in many areas were all but nonexistent by year’s end.

Last summer, NBC announced it would triple its campus in Burbank, thus joining Warner Bros. and Disney, which also are expanding. “At the present time, there are no downsides to Burbank’s economy,” said Chris Foss, economic development manager for the city.

Outside of entertainment, other economic sectors continue to turn in lackluster performances.

Residential real estate, for example, remained in a slump, showing only faint signs of bottoming out.

Prices of Valley homes dropped less sharply than in years past, but kept falling nonetheless. One study based on a repeat sales index, shows that throughout Southern California real values of homes declined by about 3% in 1996, said Nima Nattagh, market analyst with Experian, a real estate information company.

Realtors have long blamed soft housing prices on recession-related foreclosures. They contend bank-auctioned homes that sell for rock-bottom prices are weighing down the market. But Nattagh said his firm has found that foreclosed homes on average sell for only a few percentage points less than market value.

Valley homes did sell more readily. The number of homes that changed hands each month in the Valley in 1996 increased an average of 17% compared to 1995. But again, this good news was tempered. Most of the increase reflected the fact that 1995 was an unusually bad year for real estate, and compared to two years ago, this year’s sales were unimpressive.

“The message is, it’s been good. But don’t get too excited,” said Nattagh.

Still, plenty of people think there are reasons to be cheerful. Said John Rooney, of the Valley Economic Development Center: “I don’t want to sound overly optimistic, but I think this is the best anyone has felt in five years.”

Thing are looking up at Santa Clarita-based Remo Inc., a maker of drums. Until recently, the company was set to move to San Antonio, Tex., but decided against it as the business climate locally improved.

“We see it picking up a lot,” said chief financial officer Doug Sink. Sales at Remo are up 22% this year, he said.

There never was much of a recession at MRV Communications, a computer networking company. MRV is one of a growing number of high-tech firms thriving in the West Valley. In the first nine months of 1996, sales were already 50% ahead of last year.

“We are very happy with the local environment,” said Edmund Glazer, chief financial officer.

And 1996 brought a series of promising events that justified the sunny mood.

In February, a group led by longtime Valley real estate developer Robert Voit and Bob Selleck Jr. bought the former General Motors plant in Panorama City and announced they would build a $100-million retail and commercial complex on the site. Mann Theatres had jumped on board by the year’s end.

Developer Jerry Katell later announced he was buying the controversial Warner Ridge site next to Pierce College in Woodland Hills, and would proceed with a massive office development there that had been delayed for years in legal proceedings.

And in July, in a crowning moment for the Antelope Valley, Lockheed Martin landed a coveted government contract to build a prototype new-generation space shuttle, a project that is expected to create as many as 2,000 jobs, many of them at the company’s Skunk Works plant in Palmdale.

The company also announced plans to move 1,000 workers from its Ontario plants to Palmdale, raising hopes among civic leaders that Palmdale’s devastating boom-bust cycle was back on an upswing.

Finally, in what Jack Kyser, chief economist with the Economic Development Corp. of Los Angeles County calls “the signature event” of 1996 for the Valley, an upscale Bloomingdales opened in Sherman Oaks Fashion Square in November.

Just as the year was about to end on this happy note, however, one of the most bitter labor disputes the Valley has seen in years broke out in Pacoima.

Price Pfister, a faucet maker, proceeded with plans to move operations to Mexico, lay off 500 workers and close its Valley foundry.

Scorning the company’s ostensible motive--that state restrictions on lead content in faucets had forced restructuring--union members protested. Five people went on a hunger strike. And as 1996 closed, its lasting image became the stark tableau of Price Pfister workers collapsing with stomach pains.

It was a painful reminder that the effects of recession still bite.

Economic strains persist, but 1997 looks to be brighter for Valley businesses, Kyser said.

His message for 1997?

“We should stand by,” he said. “More will happen.”