These Trying Times : Economy: The Westside’s white-collar workers aren’t immune to the recession. They have been hit harder than in past downturns, some experts say.

By any measure, the Westside is feeling the recession, although its diversified, service-based economy has cushioned the impact. Thousands of businesses and professional offices have been forced to make trims in staff or spending, and these cuts have rippled through the economy. The recession doesn’t appear deep, but as the statistics show it is a broad one, affecting almost every sector of the economy. Unemployment is up. Sales tax revenues, a gauge of consumer spending, are flat. Houses are selling slowly, even if prices are holding fairly firm. Public assistance rolls are swelling. Has it bottomed out? There are some hopeful signs. Today we begin an occasional series on the recession’s impact on the Westside.

The motivational speaker finished his presentation at the Hollywood unemployment office, and the roomful of out-of-work professionals practically bounded out the door, brimming with enthusiasm and ready to start knocking down doors in search of a job.

Have confidence in yourself, persevere, and land that dream job, speaker and job counselor Ron Kaufman had told the group of 14 men and women attending the state-sponsored job-training class for white-collar workers.

If only it were that easy. The fact is, there is a recession in progress, and the Westside, for all its affluence, is not immune. In fact, some experts say this recession is hitting the white-collar ranks harder than previous downturns, and that a diversified, service-based economy such as the Westside’s is likely to be pinched in nearly every sector.

This is hardly news to people such as accountant Edward Scott, one of those attending the unemployment office’s job-training class. He and many of his classmates have endured months of frustration and financial hardship. Some of them are standing in unemployment lines and pounding the pavement for the first time in their adult lives.

“Absolutely, in my wildest dreams, never did I expect this,” said Scott, a Mid-Wilshire resident with a Ph.D. and more than 10 years of experience in accounting. He told the class, one of 23 around the state, of the stony reception he has been getting from prospective employers over the past several months.

“I don’t get any response at all,” said Scott.

Many of Scott’s classmates grumbled about similar problems. “Recession?” scoffed out-of-work aircraft designer Donald W. Hormell. “No, it’s a depression.”

How bad is the Westside’s recession? It’s hard to gauge precisely. For the three-quarters of the Westside that lies within the city of Los Angeles, few separate economic statistics are available.

But the direction of things can be discerned from economic data for the smaller Westside cities--Santa Monica, Culver City, West Hollywood and Beverly Hills (though not yet for the newest city, Malibu). This information depicts a broad downturn, though so far not a horribly deep one.

Unemployment is up. In February, 1989, the unemployment rates in the four cities averaged 3.5%. In February of this year--the most recent month for which figures are available--the average was almost 6.0%.

Retail sales are flat. The residential housing market shows signs of climbing out of the pits, but home prices are well below their summer-of-1989 peak. And the ranks of the poor receiving public assistance are swelling.

Bankruptcy filings are up. Office suites in prestigious buildings in Century City, Beverly Hills and Santa Monica sit empty, testifying to some of the highest commercial vacancy rates in a decade.

Less measurable but unmistakable are the thousands of little cutbacks that businesses throughout the region have made--cutbacks that reverberate through the economy. Service-oriented businesses, such as law and accounting firms and real estate brokerages, have been forced to trim down to fighting weight. Some have laid off workers.

Many businesses, stopping short of layoffs, have eliminated overtime, frozen hiring or slashed travel and advertising budgets.

But the cumulative effect is that many, if not most, people and families--rich, middle class and poor--simply have less money to spend.

Thus, they remodel their homes instead of trading up. Instead of buying a new car, they’re fixing the old one, or leasing. Rather than spending a night visiting the newest hot restaurant and spending $7 on a new movie, some are renting videos and cooking at home. And they’re not buying anything they don’t absolutely have to.

For Allan Taylor, a free-lance publisher and copy editor, the recession has meant “cutting back wherever you can, just to maintain. No splurging.” A movie buff who lives in the Miracle Mile area, Taylor used to go to the theater twice a week. Now he goes once or twice a month. He cooks at home, and he has put off plugging the leaky roof on the fixer-upper he bought four years ago.

Real estate agent Lisa O’Gorman made a lot of money in recent years buying Westside houses for herself, renovating them and putting them back on the market. But with the recession, she, too, is cutting way back. No more shopping sprees where she would spend $250 on a jacket “without even thinking about it,” O’Gorman said. And she and her husband also canceled plans to visit her parents in England, because they can’t afford it.

Even the well-to-do are scaling back. Some are pulling their yachts out of the water to save money. Not long ago, there were waiting lists for slips at Marina del Rey. For the past two months, the vacancy rate has been at the highest level--5.7%--since the county started keeping track in 1987.

Many who have escaped layoffs are job-sharing, taking cuts in pay or being forced to work part time and lose their medical benefits.

And on any given day, as many as 30 unemployed and underemployed managers and executives show up at the state unemployment center in Hollywood to relearn resume-writing, job-hunting and interviewing techniques and use the phones and typewriters to let employers know of their availability.

Each week, another wave of them rolls in, said job-club coordinator Viola Fudge.

“I’m up to my eyeballs,” said Fudge. “Architects, doctors, physicists, engineers, accountants, managers. Just name it, we got it.”

In Palms, mechanical engineer Hocine Remram, 35, said the fierce competition for jobs in his field is prompting him to look for another line of work. After 2 1/2 years as a well-paid mechanical engineer at a West Los Angeles firm, he was laid off in March.

Now Remram is thinking of starting his own firm. “Some kind of food business,” he said. “Something recession-proof. Everyone has to eat.”

Nicole Taylor, 41, a Miracle Mile accountant and finance officer with almost two decades of experience, has been looking for work since January.

“It’s extremely difficult to find jobs,” she said while waiting for help at the West Los Angeles unemployment office. “All I’ve gotten back is those form letters--’you have excellent qualifications, and if anything comes up, we’ll call.’ ”

Who is not looking for work? Unemployment officials. They’re swamped. Clarence Hunter, assistant manager of the West Los Angeles unemployment office, said that “conservatively speaking,” his office has witnessed a 20% increase in new claims since the beginning of the year.

Job fairs have been packed, but the pickings are slim. The volume of help-wanted ads and postings is so meager that state unemployment coordinators have begun counseling Westside job seekers by phone to save them a trip to the unemployment office in search of jobs that aren’t there.

Amid the gloom, however, economists point out that the recession so far remains a generally mild one, and that the Westside, with its wealth and its diverse economy, has gotten off relatively lightly.

There have been no mass layoffs of factory workers, such as took place in the South Bay or Long Beach, where some major defense contractors have been cutting back sharply.

“We’re much more bulletproof to a recession,” said Peter Best, West Los Angeles senior marketing consultant for the Grubb & Ellis commercial real estate brokerage firm. “If one (industry) goes in the tank, others are there to keep it up.”

A generally booming entertainment industry also has added to the Westside’s economic buoyancy. Recession or no, for example, the big Westside movie studios are all at work on plans for major expansions in the coming years--Columbia in Culver City, Fox in Century City, Warner Bros. in West Hollywood and Paramount in Hollywood.

Still, many firms haven’t been able to handle the hard times. The Century City law firm of Wolf & Leo went belly-up last month after a two-year struggle in which it trimmed its staff of lawyers from 85 to 26. When it closed, it was unable to even meet its last payroll.

And as the real estate market slumped, real estate agents by the hundreds were forced out of work. A year ago this month, high-flying real estate broker Mike Glickman closed offices in Brentwood and Beverly Hills, and a month later was forced to shut down his entire operation, laying off 1,200 agents.

The Jon Douglas Co. of Beverly Hills, the largest real estate operation on the Westside, picked up many of those agents, but by fall, the war clouds in the Persian Gulf dealt the market another blow--and Douglas was laying off about 400 agents, almost a fifth of its sales force.

The demise of Drexel Burnham Lambert and the collapse of Columbia Savings & Loan eliminated thousands of jobs in Beverly Hills and sent office vacancy rates soaring there.

L.A. Gear, the athletic shoe maker based in Marina del Rey, has reduced its work force by more than 100 employees in recent months and abandoned its plans to move into the big new Channel Gateway complex.

Even Rodeo Drive, big spenders’ heaven, has suffered. Retail sales at apparel stores in Beverly Hills in the last quarter of 1990 totaled $53.1 million, down from almost $62 million during the comparable quarter of 1989, according to Jeff Reynolds, an analyst with the state Board of Equalization in Sacramento.

At the malls, the story has been the same. The manager of one high-end shoe store lamented one day recently that more people were coming in looking for jobs than looking for shoes.

“Five people walked in the other day--all day, and more of them brought resumes than were customers, or they took an (employment) application,” said the manager. Like many other merchants, she asked that her name not be used; in the fashion business, customers can be scared off by word that a shop is in decline.

Some economists say the recession is closely linked to the retrenchment of the once-sizzling local real estate market.

After years of unbridled expansion and price increases, the real estate market began to soften in the summer of 1989, and the inventory of unsold properties built up.

Then, when Iraq invaded Kuwait on Aug. 2, 1990, “the market just fell right through the bottom,” said real estate magnate Jon Douglas.

On residential streets, “For Sale” signs have darkened the lawn of many a home for as long as a year.

The once-robust commercial market also came to a screeching halt. Even healthy businesses put off their expansion plans amid the economic uncertainty.

“It was absolutely horrible,” said Peter Best, the Grubb & Ellis official. “Everybody was talking recession and acting accordingly.”

The overall vacancy rate for commercial real estate on the Westside for the first quarter of 1991 was 18.2%, up from 15.2% at the end of 1990 and 13.4% at the same time last year, according to Grubb & Ellis. And in Beverly Hills, the Marina del Rey/Culver City area and Westwood, the office vacancy rate now exceeds 20%. Altogether, about 7.7 million of the 42.4 million square feet of Westside office space now stands empty.

But after a miserable year, the real estate market is showing signs of a rebound.

Douglas, for one, said the last three months have been among the best ever for his big real estate brokerage. Escrow agents and commercial brokers report near-feverish activity as buyers swarm open houses.

Whether the increased activity is a short-term reaction to the end of the Gulf War or the start of a lasting recovery remains to be seen.

Some experts predict that the Westside’s strengths--its rich, service-based economy and its prized location and choice real estate--will help pull the area out of the recession quicker than most other parts of Southern California.

A boost may also come from the entertainment industry, the closest thing the area has to a major employer. The big studios “are expanding at an unprecedented pace,” said Best, the Grubb & Ellis analyst. “Their appetite for office space is second to none.”

Consumer Spending Figures show the total sales that occurred in each city, of which 6 percent was paid to the state in sales taxes. Inflation, as measured by the consumer price index, was 6.1% in 1990, so any year-to-year increase of less than that reflects a decline, in real terms, in consumer spending and in taxes paid. The State Board of Equalization returns 1% of total retail sales to each city.

1ST QUARTER City ’89 ’90 % change Los Angeles $5,886,810,000 $6,202,856,000 5.4 Santa Monica 322,772,000 340,903,000 5.5 Culver City 188,427,000 206,541,000 10.1 West Hollywood 141,102,000 144,771,000 2.6 Beverly Hills 257,254,000 272,399,000 5.8

2ND QUARTER City ’89 ’90 % change Los Angeles $6,380,999,000 $6,408,928,000 0.4 Santa Monica 339,352,000 360,077,000 6.1 Culver City 221,201,000 234,683,000 6.1 West Hollywood 151,323,000 148,658,000 -1.7 Beverly Hills 267,917,000 277,046,000 3.3

3RD QUARTER City ’89 ’90 % change Los Angeles $6,459,053,000 $6,356,550,000 -1.6 Santa Monica 359,187,000 360,478,000 0.4 Culver City 229,339,000 233,439,000 1.7 West Hollywood 141,141,000 148,828,000 5.7 Beverly Hills 260,361,000 248,863,000 -4.2

4TH QUARTER City ’89 ‘90* % change Los Angeles $6,787,940,000 $6,864,886,000 1.1 Santa Monica 375,403,000 387,690,000 3.5 Culver City 242,965,000 257,727,000 6.2 West Hollywood 150,066,000 159,285,000 6.0 Beverly Hills 321,609,000 336,688,000 4.7

FULL YEAR City ’89 ’90 ** % change Los Angeles $25,514,793,000 $25,833,220,000 1.2 Santa Monica 1,396,714,000 1,449,148,000 3.7 Culver City 881,932,000 932,390,000 5.8 West Hollywood 583,632,000 601,542,000 3.1 Beverly Hills 1,107,141,000 1,134,996,000 2.5

* Preliminary figures, provided by Hinderliter, de Llamas & Associates of Glendora ** Includes use of 4th quarter preliminary figures in annual total Source: State Board of Equalization, Research Department

Employment Unemployment is up significantly from two years ago in each of the four Westside cities for which figures are kept. (Unemployment data for Westside portions of Los Angeles were not available). The figures are for the month of February in 1989 and 1991.

City Employed Unemployed Rate 89/91 89/91 89/91 Santa Monica 55,414/57,727 1,804/3,226 3.2/5.3 West Hollywood 24,053/25,057 1,520/2,719 5.9/9.8 Beverly Hills 18,129/18,336 545/974 2.9/4.9 Culver City 24,989/26,032 663/1,187 2.6/4.4 WESTSIDE CITIES 122,585/127,152 4,532/8,106 3.5/5.9 COUNTY TOTAL 3,982,770/4,149,000 183,949/329,000 4.4/7.4

Source: California Employment Development Department, Employment Data and Research Division

Spending Consumer spending was off in the four Westside cities. While gross retail sales were up in 1990 compared to 1989, they were up by only 3.7%. Because that is not enought to match the inflation rate of 6.1%, it is, in real items, a decrease. 1989: $3,969,419,000 1990: $4,118,076,000 % change: 3.7 Source: Hinderliter, de Llamas & Associates.

Employment The unemployment rate in the four Westside cities of Santa Monica, West Hollywood, Beverly Hills and Culver City increased by more than 2 percentage points between February 1989 and February 1991. However, the rate is still below the countywide rate of 7.4%. Unemployment rate ‘89: 3.5 ‘91: 5.9 Employed ‘89: 122,585 ‘91: 127,152 Unemployed ‘89: 4,532 ‘91: 8,106 Source: California Employment Development Department, Employment Data and Research Division.

Public Assistance As unemployment increased, so did the number of people seeking government help to make ends meet. The four Westside cities saw increases in the number of people receiving Aid to Families With Dependent Children, General Relief and Food Stamps. The figures compare September 1989 and December 1990. AFDC ‘89: 2,418 ‘90: 3,898 General Relief ‘89: 524 ‘90: 811 Food Stamps ‘89: 561 ‘90: 710 Source: L.A. County Department of Public Social Services.

Home Sales Nervousness about the economy stalled home sales. The median sales price for a home was virtually the same during the first quarter of 1991 compared to the same period of 1990, while the actual number of homes that sold dropped. 1st Quarter Median Price ‘90: $495,500 ‘91: $496,000 1st Quarter Sold ‘90: 1,346 ‘91: 810 Source: Dataquick Information Systems,

Next Week

Not long ago, belief in the accumulation of wealth via the ownership of residential property may well have been the most widespread form of religion on the Westside. The recession changed that, but real estate brokers say that after a miserable year, the residential market has snapped back smartly in the last two months. Is it the start of a lasting recovery or a flash in the pan? Next week, in the second installment of articles on the recession, buyers, sellers and experts in the field will offer their views.