Angelenos forge ahead despite fears.

CALIFORNIA is supposed to be going to hell in a hand-basket, but last week at the Glendale Galleria, Buena Gee was browsing through the racks at Macy's.

With one pair of pants over her arm, Gee, who work in the accounting department of a non-profit organization, did express concern about the economy and noted that several employees at her company, which operates refinement homes, were recently laid off.

But is she worried about her own financial neck? "Not so much," Gee said. "I just love to shop."

Welcome to the land of the disconnected economy.

As the campaign to recall Gov. Gray Davis picks up steam and state lawmakers put off a massive debt load for at least another year, Los Angeles and many other parts of California go on pretty much unencumbered.

Housing prices continue to boom, commercial real estate is showing signs of life, and unemployment has remained relatively steady, despite projections of sagging job growth. An unexpectedly high 2.4 percent annual growth rate in the U.S. gross domestic for the second quarter, along with a resulting pickup in stock prices last week, only buttresses the view that the national economy is finally on the mend--and that state and local growth cannot be far behind.

Anecdotally, there is little sign of trouble: folks are eating out, buying cars and shopping in malls. All of which begs the question: If the news is so bad, why aren't Californians noticing it more?

Job security

Howard Roth, chief economist with the state Department of Finance, says that attitudes about the economy often come down to real-life experiences.

"They may not know people who are unemployed because the loss of jobs is concentrated in a few industries," Roth said. "They read the paper and see employers aren't hiring and some are cutting back. But they say, 'My job looks pretty secure. And things seem to be going right for me.'"

Such views are borne out in recent polling by the Public Policy Institute of California. The percentage of Californians expecting bad economic times in the next year was 59 percent in June, down from 71 percent in February. Expectations are lower in the San Francisco Bay Area than in Southern California.

Significantly, the state budget deficit remains a second-tier concern: only 12 percent of those surveyed in Southern California call it the state's most important concern; the economy garners the largest tally, at 26 percent (43 percent in Southern California).

To be sure, there is pain and suffering out there--with the potential for more once the effects of the new California budget trickle down. Anyone who works for the state is potentially vulnerable, as are local school districts, court employees and construction workers.

People like Mack Scott, a 46-year-old Long Beach homeowner who lost his $44,000 job as a teacher in the L.A. Unified School District on June 30. Scott, who was about to take the standardized test for his teaching credential in September, said he was one of four non-credential teachers laid off at City Terrace Elementary School.

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While he pays $300 a month for COBRA insurance, one of his fellow teachers with an ongoing illness couldn't afford it; she had to apply for Medi-Cal.

Limited job losses

William Fulton, president of the Solimar Research Group in Ventura, said that as a state contractor and business owner, several decisions are "up in the air."

"I don't know whether I'll get paid, whether I should go after new jobs or new contracts," Fulton said. "If I get a contract, I don't know when the money comes through."

Even so, the government sector represents only 13.5 percent of L.A. County's workforce. Besides, the government sector job losses, which began about four months ago, don't approach the 171,600 jobs lost in Northern California last year, the majority of which came from technology.

And while it's not easy finding work these days, Jack Kyser, chief economist of the Los Angeles County Economic Development Corp., points out that Southern California is a haven for the self-employed, where starting a restaurant or becoming a consultant is commonplace. Others cushion a job loss by relying on the income of their spouse or significant other.

Scott, the former LAUSD teacher, said he expects to live off the income of his domestic partner until he gets his credential or begins substitute leaching in the fall.

"My partner makes a good living and I don't have a lot of debt," he said. "So I know I could live off substituting or debt. It hasn't stopped my spending habits."

Angelenos aren't just buying on the cheap, either.

Mike Green, general manager of the Pacific Dining Car in downtown L.A., said his sales and customers are up about 5 percent from last summer, higher than his usual year-over-year increases.

Recent additions of the Cathedral of Our Lady of the Angels and Disney Hall have drawn more crowds to the downtown area. Also, customers have doubled this month on nights when big concerts at the Staples Center brought in the crowds, he said.

Even high-end retail shops, which suffered nationwide from low sales in the past few years, are making good money. "My boutique is booming," said Hanna Hartnell, who designs and manufactures high-end women's ware at her own studio in Santa Monica. "I think the economy is much more hopeful."

Hartnell said she sells on average 15 of her dresses, which range from $400 to $800 a week. "The way things are going," she said, "I could tack on another $200 and I don't think my customers would notice."

Million-dollar deals

Much of what has propped up the economy--as well as consumer sentiment--is real estate. Or, more to the point, the financial leverage emanating from real estate.

In 2002, assessed valuations increased an average of 7.4 percent countywide from the year earlier, according to figures released last week by L.A. County Assessor Rick Auerbach. That is the steepest increase in more than a decade and represents a cumulative $50 billion jump in property values.

Sales of million-dollar homes in California rose 15.5 percent during the April-June quarter compared with the like period a year earlier. In Southern California, the jump was close to 30 percent.

Indeed, more than one out of every three homes valued at $1 million or more can be found in California. As the values go up, homeowners are left with many more wealth avenues, whether it's refinancing or an outright sale.

Malcolm MacEwen, branch sales manager at Coldwell Banker Beverly Hills East, said "people are lining the walls" in his office, thanks to low-interest loans and a 20 percent appreciation in house and condominium prices on L.A.'s West side.

First-time homebuyers realize that the difference between their monthly rents and a mortgage payment is negligible. During the second quarter, the average rent in L.A. jumped to $1,326 a month from $1,248 a month during the same quarter last year, while vacancies jumped to 5.5 percent from 4.1 percent over the same period, according to RealFacts.

"I can't think of a case this year where an agent came to me and said, 'My client is selling his house because he lost his job,'" MacEwen said. "That was absolutely every day in the early '90s."

Homeowners are refinancing, as well.

"You still have a significant amount of disposable income when people are able to, at very little cost, decrease their mortgage payments," said Aubie Goldenberg, a partner in the retail group of Ernst & Young in L.A. "They're selective on where they're spending, but they're willing to spend it."

Credit is key

Zero-percent financing and rebates from automobile manufacturers have lured car buyers as well, said Jeremy Anwyl, president of Edmunds.com Inc., an industry information site based in Santa Monica.

He said traffic on his site has increased 25 percent from last year. "In a lot of cases, they're not buying cars because they have to," Anwyl said. "The one they have is fine."

Which says a lot about the underlying confidence Angelenos appear to be enjoying--even if much of it is based on their ability to pay on credit. Bob Kelly, president of the California region of Mellon Financial Corp.'s private wealth management group, said that while low interest financing deals on mortgages and car loans are tempting, they are also bets against the future for consumers whose increase in income, if any, is negligible.

According to a recent survey by Mercer Human Resources Consulting, pay increases have averaged 3.3 percent to 3.5 percent this year, compared to a 4 percent-plus average before the economy tanked.

How long will it last? Jackie, the wife of a local restaurant owner, said she still buys because she manages her budget well. Last year, she bought a new car, attracted to the low-interest financing deals.

"I had to put a down payment on it, though," she said. "If not for my credit, I would've qualified."