Study Predicts Anemic Local Rebound : Southland Joblessness Is Also Forecast to Stay at High Level This Year

While the nation’s economy appears on its way to recovery, Southern California is expected to continue struggling this year and into 1992 as a result of more aerospace layoffs, a stagnating real estate market and business flight from the region.

That forecast, issued Monday by the Economic Development Corp. of Los Angeles County, also projects sharp jumps in unemployment in Los Angeles, Orange, Ventura, San Bernardino and Riverside counties in the next six months.

For instance, unemployment is projected to be at 7.9% in Los Angeles County by the end of 1991, compared to 5.9% at the end of 1990. Also, the report projects that 49,000 manufacturing jobs will be lost in Los Angeles County this year.

“There is a lot of gloom out there,” said Jack Kyser, chief economist of the EDC, a private, nonprofit group that promotes development in the Southland and whose membership includes some of the largest firms in the area. “This is the worst it’s been since 1978, but it’s not beyond hope. It will take us a year or two to solve the problem.”

Several other leading economists say, however, that while the Southern California economy is bad, it will basically improve along with the national economy in 1992.

“I don’t think we’ll do better than the rest of the country, but I don’t see why we’ll do any worse,” said David Brownstone, assistant professor of economics at UC Irvine.

David G. Hensley, director of the UCLA Business Forecasting Project, said: “I’d argue that 1992 will be a growth year for the local economy.”

The EDC’s generally gloomy outlook for Southern California comes as the nation’s economy is recovering. California entered the recession later than the rest of the country and is expected to lag in emerging from the downturn.

Consumers continue to be cautious about the local economy, which has been buffeted by layoffs, consolidations and plant closings. Seventy-two percent of those interviewed in a Los Angeles Times Poll in early August described the Southern California economy as shaky.

The recession is only part of the problem. Economists also point to the number of businesses leaving Southern California because of high costs, high taxes and heavy regulation.

In addition, they note that ongoing changes in world politics, particularly in the Soviet Union, may continue to cut into the defense industry here.

In the five-county area, the report projects, aerospace employment will fall 7.7% this year compared to the year before. That translates into about 28,500 fewer aerospace jobs than in 1990. And Kyser says 20,000 aerospace jobs will likely be lost here in 1992.

Just as bleak is the outlook for new residential construction. The number of housing permits in the area is expected to fall 43.8% in 1991 compared to 1990.

“The construction pipeline is running dry,” Kyser said.

One economist notes that the area housing industry’s difficulties are not unique. “Sure we have real estate problems, but so does the rest of the nation,” said Philip Vincent, vice president and economist at First Interstate Bank. “California is no worse off in the construction area than the rest of the country. And in the residential construction area, I think we’ll be recovering very soon.”

The EDC’s retail sales projections are also dismal, however. The report forecasts a retail sales rate increase of just 1.8% for the five-county area in 1991 compared to the year before. That is far below the 7% to 8% growth required for a “decent” year, Kyser said.

But the report was not entirely pessimistic. It pointed out that Los Angeles County has seen--and will continue to see--growth in motion picture and television production and in engineering and management services in 1991.

It also projects that international trade will continue to expand in Southern California. And despite the drought, agriculture will “still manage a decent performance” this year, the report says.

The Outlook in Southern California The Economic Development Corp. of Los Angeles County, in its 1991 semi-annual economic forecast, predicts an increase in unemployment in the Southland and a slow, economic recovery in 1992. All charts are for five-county Southern California region. Unemployment is growing. . . Six-month unemployment rate forecast Los Angeles County: 7.9% Orange County: 4.8% Riverside-San Bernardino: 9.3% Ventura County: 6.7% Source: Construction Industry Research Board