'02 A YEAR OF LOWERED EXPECTATIONS IN AREA.

Byline: Barbara Correa Staff Writer

managing to sidestep the worst of the national economic downturn in 2001, cities and communities throughout Southern California spent 2002 lowering their expectations for job growth and overall economic performance.

National stagnation weighed on international trade, manufacturing, distribution and retail spending through the year, keeping payroll employment unusually flat. The port shutdown in October further pressured these sectors, though its impact can't be accurately gauged for another few months when new employment data comes in.

sectors where Southern California job growth did occur, education and government, will be targeted for spending cuts next year as the state looks to get its budget crisis under control.

Some areas of the region are faring better than others.

San Bernardino County is continuing to see an influx of middle-class people with disposable income moving to the area from Orange and Los Angeles counties to get more affordable housing, said Keith Lee, an economic development manager for the county.

That bodes well for local job creation. ``As people move to the Inland Empire, eventually they get sick and tired of that commute. So that fuels an economic engine for us.''

He said housing prices reflect the eastward migration. ``Six months ago 50 to 60 percent of locals could afford to buy a house here. Now prices are beginning to rise like in the coastal communities.''

Demand for housing continued to fuel construction employment in the Inland Empire during the year, said John Husing, an economist based in Highland.

``We added 30,000 jobs on average for the year, almost all of that related to construction or building materials.''

Distribution and manufacturing employment, traditionally strong in the Inland Empire, were flat and slightly up, respectively, in 2002. But last month manufacturing employment fell for the first time in two years, Husing said.

``I think the first half of next year is going to look a lot like last year,'' he said. ``The spark we need in manufacturing and distribution will not come about until those sectors turn around nationally.

``Production sectors have been hit by five psychological attacks since 2001: the tech sector implosion, the stock market, 9-11, corporate scandals and now Iraq. Business likes a secure environment to buy new business equipment.''

As for the 10-day lockout at the Los Angeles region's three ports, the full impact won't be known until revised employment data comes out in March, said Husing. In the short term, however, the shutdown actually boosted UPS cargo operations at its West Coast headquarters at Ontario International Airport, he said.

The agreement reached between the Pacific Maritime Association and West Coast Longshoremen in November left enough space for the implementation of new technologies that will improve productivity, meaning the San Pedro bay ports won't be adding jobs, said Joe Magaddino, coauthor of a regional forecast by the office of economic research at Cal State Long Beach.

But the shutdown has brought attention to the emerging intelligent transportation systems industry. As a transport gateway for the state, Long Beach must come up with ways to make the distribution supply chain more seamless, said Lou Anne Bynum, dean of economic and resource development at Long Beach City College.

The opening in April of the Alameda Corridor, a railway that connects the ports of Los Angeles and Long Beach to the transcontinental rail network east of downtown was the start of that process, which will continue to create jobs in technology and transportation for the foreseeable future.

Another regional strength this year was the entertainment industry's comeback following an extended strike threat and its subsequent hangover.

``We've come back strong in terms of entertainment, film and TV,'' said Fred Gaines, chairman of the Valley Industry and Commerce Association, a business group in Sherman Oaks. ``That's a large sector of our economy.''

The San Fernando Valley is seeing and will continue to see more defense spending in the region. Other strong sectors are real estate, mortgage refinancing and retail, which has remained strong with the reopening of the Sherman Oaks Galleria and the revamp of the Fallbrook Mall.

On the downside, local businesses are concerned the budget deficit will translate into higher taxes, Gaines said. They also are worried that a more liberal state legislature could increase regulation and push new programs like the paid family leave act.

Overall, however, he is optimistic about the economic environment improving next year. ``Compared with the rest of the nation,'' said Gaines, ``we did pretty well.''