More dark clouds loom on L.A.'s horizon for 1994; jobs and people to continue their exodus from county.

Things are going to get worse before they get better. At least that's the consensus of leading economists on the economic outlook for Los Angeles County.

While the state of California will begin to recover economically in 1994, and the nation as a whole will continue its slow "jobless recovery" from recession, the economy of Southern California -- especially the Los Angeles area -- has yet to hit bottom, economists agree.

In 1994 in Los Angeles County, jobs and people will continue their exodus from the area, per capita income adjusted for inflation will keep declining, housing prices will continue to fall, and governments will struggle again with falling revenues and increasing demand for services, say the economists.

"If you look at where we're heading, it gets worse," said Brad Williams, executive director of the Commission on State Finance. "A lot of counties are pretty close to the brink of bankruptcies."

Jack Kyser, chief economist and director of program research and development at the Los Angeles County Economic Development Corp., noted "the eye of the economic hurricane has been Los Angeles County."

"It will not hit bottom until early 1995," he predicted.

Economist/consultant Tom Lieser, formerly vice president at Security Pacific National Bank, predicted that "in the near term ... the region will suffer the slow agony of economic restructuring and continual abuse from better endowed or temporarily more fortunate areas of the state."

Larry J. Kimball, director of the University of California at Los Angeles Business Forecasting Project, said it is the permanent loss of tens of thousands of aerospace jobs, combined with declining home prices, out-migration, civil unrest and fear of crime, that are retarding Southern California's recovery.

Unemployment and fear of crime "feed each other," because fear drives people and companies from an area, which increases unemployment, which leads to more crime, explained Kimball.

"Los Angeles City Planning Department estimates that population in the Wilshire area, which includes Koreatown, the scene of violent racial confrontations, dropped by almost 13 percent. This was the largest drop in population of any of the city's areas," Kimball noted in the UCLA forecast report of December 1993. "The change in perception of that area as an investment location will undoubtedly be long lasting."

In a related section of that report, UCLA Economic Researcher Nelson Pedrozo added that home prices, a key indicator of economic health, "have not yet hit bottom in Los Angeles, since prices are falling at accelerated rates in many areas."

"One possible scenario is that Los Angeles residents are fleeing to (Ventura and Orange) counties, depressing home prices here and boosting prices there," wrote Pedrozo. "An alternative view is that residents, having lost a job or confidence in the area, move out to other areas, maybe in California, maybe someplace else. We think that some of each is happening in Los Angeles.

"If the job market continues to shrink as it has in the past few years, there are too many houses for the number of jobs in this county, and prices will continue to slip. ... The general direction for prices in all (California) counties is down, with very high depreciation in Los Angeles."

Commercial real estate brokers and developers believe the price of office buildings in the Southland is at or near bottom.

But, they add that downtown Los Angeles will likely be the last submarket to recover. In 1994, downtown landlords will remain plagued by an oversupply of space and deflated rental rates, they said.

Kyser predicted 1994 will bring many more bankruptcies and foreclosures in the real estate market -- which he noted is one of the last areas to recover from a recession.

Meanwhile, the EDC estimated that in 1994, the total number of non-agricultural jobs in Los Angeles will decline by another 21,000 and average per capita personal income, adjusted for inflation, will decline to 1982 recessionary levels. The unemployment rate is expected to improve slightly -- from 9.8 percent to 9.6 percent -- but Kyser said that will be due to people dropping out of the job market, not more people obtaining jobs.

The job-hemorrhaging aerospace industry is forecast by the EDC to lose another 30,000 jobs here in 1994 and another 26,000 jobs in 1995. UCLA forecasts 80,000 more aerospace job losses by the year 2000, and calls that prediction conservative.

Defense industry layoffs and falling real estate values also have added to the woes of the county's banking industry, said local bankers and analysts.

Jim Marks, financial institutions analyst with securities firm Sutro & Co. in San Francisco, said until the real estate market begins to recover, banks and thrifts in the area -- especially those that have yet to rid themselves of bad real estate loans -- are going to be on "shaky ground" in terms of their financial results in 1994.

Insurance companies are expected to be among the most active sellers of Los Angeles area commercial properties, including so-called "trophy" properties, in 1994, said a prominent real estate consultant. Some of these properties will likely sell for amazingly low prices.

Property-casualty insurance companies are expected to raise rates, especially commercial ones, in 1994, said industry experts.

Lower interest rates have resulted in lower profit margins for insurers nationwide, and insurance companies are looking to raise rates to recoup income. Commercial rates are predicted to rise 6 to 7 percent in 1994.

Some experts also predict a freeze on insurers writing property coverage in California in 1994.

The one bright spot in the EDC's forecast is the service industries (i.e., entertainment, hotels, accounting, law, engineering, temporary agencies, etc.) which are expected to grow 25,000 jobs in 1994.

International trade also is expected to continue to be a growth area, due in part to the negotiation of new trade agreements.

The Port of Long Beach is projecting a 5 percent growth in activity in 1994, and the Port of Los Angeles expects 4 to 5 percent growth.

Economists also predict that retail sales in L.A. County will increase between 1 and 4 percent in 1994.

When the Los Angeles County economy does begin to improve, it may mirror the nation and enjoy what is being termed "a jobless recovery," economists warned. This term is used to describe a situation in which productivity grows, while the employment picture does not noticeably improve, with employees simply performing more work in less time.

UCLA Professor Daniel Mitchell said that because this dynamic is at work in the nation's economic recovery, anyone who loses a job today "can expect to be unemployed longer than would be normal."

While the number of layoffs may decline, employers will remain less likely to fill vacant jobs, relying instead on existing employees and temporary or part-time workers to pick up the slack, said Mitchell.

"Overtime is at an all-time high. Employers seem reluctant to hire," said Mitchell. "If you do get a job, it will probably pay less than the job you had before."