Job Diversity a Safeguard for Region

Thanks to its variety of small to medium companies, Southern California could hold its own or even thrive if the U.S. economy fell into a “double-dip” recession, many economic experts and businesspeople say.

And they’re not just whistling in the dark. The economies of the region’s six counties are poised to do better than the rest of the nation in a downturn. Already, they are adding jobs in manufacturing, entertainment, aerospace-defense and even the apparel industry, which is crying out for sewing machine operators to handle a surge in garment production in Southern California.

Today’s outlook for the region is in marked contrast to the early 1990s, when a decline of Defense Department budgets pushed the Southland to the worst recession since the 1930s, with massive job losses and declines in real estate values.

That kind of catastrophe couldn’t hit the region today, says economist Tom Lieser of the UCLA Anderson Forecast, because of the breadth of industries and occupations.

“This region is not concentrated on technology, as is Northern California, where the economy continues to suffer,” Lieser says.

Also, population growth in the Southland, an area of 20 million residents stretching from Ventura County to the border of Mexico and from the ocean to Riverside and San Bernardino counties, “increases demand for home building and retail and other services,” Lieser says.

To be sure, the likelihood of success is based on very slim margins. In the first half of 2002, Southern California added only 28,000 jobs to a labor force of 8.3 million--an increase of 0.3%, according to the Los Angeles County Economic Development Corp.

“We are so close to zero, I’m afraid a national recession in consumer spending would sink us too,” says economist Esmail Adibi of Chapman University in Orange. Yet Adibi, who doesn’t think there will be another round of recession, also notes that Southern California would fare better than Northern California and the rest of the U.S. if there were a downturn.

The new optimism about Southern California is based on the region’s triumph over adversity during the last decade, plus an expanding population of young families that has created a growth market.

“The economic devastation of the aerospace downturn forced us to develop new industries,” says Michael Jenkins, a San Diego economic development official. Qualcomm Inc. grew out of military technology and sparked the rise of telecommunications firms in San Diego County. Despite troubles in that industry worldwide, those companies survive and continue to develop technology in San Diego.

Also, sophisticated cross-border manufacturing ventures have brought progress to San Diego as well as Tijuana and Baja California, Jenkins says. Knowledge of materials and engineering transferred from aerospace defense work helped to make San Diego and Orange counties centers for the development of biomedical devices.

Now, with the rise in defense budgets after Sept. 11, aerospace work is in a long-term upturn again. Northrop Grumman Corp. is going to assemble components for the Joint Strike Fighter project in Palmdale and expand its operations in El Segundo.

Component suppliers, such as Ace Clearwater Enterprises Inc. of Torrance, have invested in new equipment to prepare for such new work.

A small company with $24 million in annual sales and 174 employees, Ace Clearwater spent $3 million to take over an advanced metal-forming operation from giant Honeywell International Inc. and move the machinery to a plant it owned in Compton.

“With this hydroforming equipment, we can compete for jobs on the Joint Strike Fighter,” says Gary Johnson, executive vice president of Ace Clearwater.

He credits the California Manufacturing Technology Center, a state agency, for helping his family-owned firm adapt the factory to more demanding work.

Apparel, a longtime Southern California industry that has been shrinking for decades as work moved to low-wage countries, has experienced a resurgence since Sept. 11.

Clothing manufacturers thought it prudent to increase production in the Southland after the terror attacks and have continued to do so because of concern over unrest in India and Pakistan and over new anti-terror U.S. Customs regulations that could slow down the movement of goods from overseas.

But the new production has caught the industry short of employees--specifically sewing machine operators, the basic occupation of the garment trade. The apparel industry, which now employs 125,000 people in the region, lost many sewing machine operators over the years.

“Once they learn how to operate a machine, they can also find jobs in food processing, furniture manufacturing and other pursuits,” says Ilse Metchek of the California Fashion Assn.

The result is that wages are rising and the traditionally female trade is changing.

“An operator with six months’ experience can earn $9 to $10 an hour,” Metchek says. At American Apparel, a Los Angeles company that makes fashion T-shirts, owner Dov Charney recently hired 400 sewers, almost half of them male.

Population growth is pushing the region’s development eastward. With land expensive and home prices high in Los Angeles and Orange counties, the Inland Empire of San Bernardino and Riverside counties continues to attract residents and industry.

“Engineers and skilled workers are coming here now because they can afford the houses and their companies are following, setting up satellite offices and even new headquarters,” says San Bernardino-based economist John Husing.

New ideas are cropping up to use the available land in the Inland Empire--an area as large as five New England states-- as a distribution point for all of Southern California. Domestic automobiles from plants across the U.S. and imported cars coming in through the ports of Los Angeles and Long Beach would be shipped by train to the former George Air Force Base in Victorville.

There they would be redirected to dealerships throughout Southern California, thus simplifying and reducing costs, according to the plans of Stirling Airports International, a real estate company that is developing the former air base, which it has renamed Southern California Logistics Airport, in collaboration with Victorville. Will the plan succeed? Possibly, but an important point is that the venture has the kind of scope and vision often associated with Southern California in the old days, when optimism had yet to be seasoned by adversity.

James Flanigan can be reached at [email protected].