More tough times, long job lines predicted for Southland in 1992.

The year 1992 looks to be another tough one for the Southland economy, with continued weaknesses in finance, manufacturing, real estate and retailing. Jobs will continue to evaporate in Los Angeles.

Some probable brighter spots in 1992 include home sales and construction, international trade and apparel manufacturing.

But the bright spots will not be enough to spur job growth in Los Angeles County as a whole, and thus local retail sales and other sectors should continue to sag, said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp.

"There will be no job growth in 1992 -- in fact, I am predicting a one-half of 1 percent decline in the number of jobs in the county," said Kyser. "That follows on top of an eight-tenths of 1 percent decline in 1991."

There are about 4.27 million employed in Los Angeles County, according to state figures, so a one-half percent decline in employment means about 21,000 local jobs will disappear in 1992.

Job seekers will find slim pickings: A help-wanted advertising index of Los Angeles area newspapers went into 1992 at its lowest point in 20 years, a strong indicator that hiring will remain soggy.

Continued outmigration of Southland businesses to other regions is also taking its toll on Los Angeles, said Kyser.

The UCLA Business Forecasting Project has echoed Kyser's sentiments, predicting that the state economy will lose 0.8 percent of its jobs in 1992, with Southern California absorbing the brunt of the losses. The job loss in 1992 would follow on a 3.4 percent shrinkage in California jobs in 1991.

Said David Hensley, who heads the UCLA program, "The recession will linger in the state well into 1992, with a recovery beginning either late next year or early in 1993."

The continued job losses for Southlanders will result from government cutbacks, defense and aerospace industry reductions, the shutdown of the GM plant in Van Nuys, weak hiring in retailing, business outmigration, the merger of banking giants Bank of America and Security Pacific, and slow construction of commercial and retail buildings, said Kyser.

On the positive side, interest rates are low, and look likely to drop even lower.

With the Federal Reserve Board -- governor of the nation's money supply -- forsaking its fight against inflation to instead become stimulative, interest rates could drop to the lowest levels in nearly 20 years.

"I am looking for long-term bond rates to come down another 2 or 3 percent in the next several years," said Michael Bazdarich, president of MB Economics in La Canada. With long-term, good-quality corporate bond rates running around 8.3 percent, that means bond yields could drop into the 5 percent range, if Bazdarich is right.

Federal Reserve Board Chairman Alan Greenspan has acknowledged the economy is weak, and publicly stated as much. That generally means the Fed will loosen up the spigots on the money supply.

Some local lenders are entering 1992 with their lowest mortgage rates in a generation. For example, First Interstate Bank is offering a 7.47 percent, adjustable-rate home loan.

The low rates could stimulate home sales in 1992, and thus construction and furnishings sales, providing a much-needed underpinning to the struggling Southern California economy, said economists.

"We are not going to see the boom-boom years of the 1980s, but the lower rates should provide some life in the housing markets," said Bazdarich. "That will help the overall economy. We are not going to drop into a black hole."

There are clues already that a modest rebound in the near-moribund residential sector is under way.

Home sales in October in Los Angeles County reached 4,400, up 5.5 percent from September, although off a bit from October a year earlier.

And home prices, while no longer appreciating, are stable. In Los Angeles County, the median-priced home in October sold for $192,000, virtually unchanged from a year earlier.

While the home sales and price information is not the picture of a boomtown, it is still a long way from the picture painted by some East Coast gloomsters, who have predicted wholesale house price cuts in California. To date, that hasn't happened, and local economists are not predicting it will happen in 1992.

Despite the possibility of an uptick in housing markets, commercial real estate looks to have another poor year.

Office vacancy rates, near a region-wide average of 20 percent, are rising, and many retail locations are boarded up and seeking tenants. Construction lending is running at about one-third 1989 levels, and looks to stay that way through 1992, said economists.

"New office space is coming into the market far faster than the economy's ability to absorb it," said Hensley of UCLA. "California financial institutions are for the most part uninterested in making new construction loans."

But, in better news, international trade is expected to continue its upward growth path in 1992, good news for the roughly 285,000 Southlanders who, directly or indirectly, make a living moving goods through local ports.

Continued weakness in the dollar will help. "I think the dollar will remain on the mushy side," said Kyser.

That cheapening of U.S. products' prices will boost exports, even while the American appetite for imported goods appears relentless. Both imports and exports through the Los Angeles Customs district grew last year and will again this year, said Kyser.

Apparel manufacturing, while not expanding, is evidently holding its own here. About 100,000 are employed in the garment district, one of the few local manufacturing industries to maintain employment levels in 1991. There was no decrease in apparel manufacturing employment in 1991, and 1992 looks to hold solid also.

Cheap labor -- seamstresses are paid the minimum wage and often less -- stylish designs and closeness to market help local manufacturers.

Said David Morse, co-owner of the California Mart, the 3-million-square-foot apparel showroom in downtown Los Angeles, "I think things are picking up. We are getting good response, and we are leasing up."

Recent fashion shows at Cal Mart have engendered buyer interest, said Morse.

But there is bad news in Southern California's economic picture, and lots of it.

In the last year, 50,000 manufacturing jobs have disappeared from Los Angeles County, and a large portion of them were in the struggling aerospace industry, the last of the high-wage factory employers here. The steel plants are gone, the rubber plants are gone, and, with the closure of the GM plant in Van Nuys, the last of the auto plants will be gone in 1992.

Hensley of UCLA said more bad news is yet to come. "We are forecasting that California aerospace employment will decline by 24,000 in 1992, and an additional 20,000 in 1993," he said.

Most of the cuts will come in Los Angeles County, heart of the aerospace industry. By way of comparison, about 227,000 are employed in "high-tech" industries in Los Angeles County, mostly in aerospace, according to state Employment Development Department data.

Summarized Ken Ackbarali, senior economist at First Interstate Bank, "The southern half of the state is more affected by defense industry cutbacks than the northern half."

Economist Goetz Wolff said that the aerospace cutbacks will blunt an economic recovery for the whole region. In the early 1980s, Los Angeles was boosted out of a recession in part by heavy Reagan-era military outlays, much of which was spent here. In 1992, just as the economy sags, the military outlays will be withdrawn. "It doesn't look good at all," said Wolff. "It's something of a double whammy."

Forecast - Los Angeles County
Company                      1990a        1991e         1992e
Employment(1)              4,308.2      4,273.7       4,252.3
Retail Sales(2)             $68.40       $63.70        $65.40
Construction lending(2)      $4.21        $1.85         $2.00
House start permits         25,045       16,000        19,700
Home sales                  63,476       55,778        60,000
Home prices(1)              $200.9       $200.8        $195.0
Condo sales                 12,273       11,031        12,000
Condo prices(1)             $151.9       $152.1        $153.0
1 In thousands
2 in billions
Source: US Department of Commerce, Dataquick Information
Services, Construction Industry Research Board, California
Employment Development Department

Weakness in manufacturing will have a profound impact on the Southland economy for years to come. Generally speaking, economists regard manufacturing as a basic industry, which helps to draw money from outside into the local economy. When a computer is made here and sold elsewhere, it pulls money into the local economy.

Moreover, each factory job is thought to create another two to three jobs in collateral activities, such as warehousing, trucking, administration, accounting and law.

As manufacturing weakens, it will ripple across the Southern California economic landscape, weakening other sectors that may have thought themselves far removed from the grubby life of factories and smokestacks.

Like manufacturing, retailing will remain a hard place to make a buck in 1992. The bankruptcies in 1991 of Carter Hawley Hale (The Broadway), Ortho Mattress, Barker Bros. and others underscore the weakness of this segment of the economy.

As of late 1991, retail sales in Los Angeles County, adjusted for inflation, were running 7 percent below year-earlier levels, and no one is predicting a surge in sales in 1992.

Big-ticket items and fancy stores are getting hit the hardest, said Bazdarich. "People are shying away from higher-priced merchandise," he said. "The discount stores are doing fine, but the consumer is avoiding the upper end."

Of Los Angeles County's 4.27 million workers, about 644,000 are employed in retailing, so weakness in this sector will have a big impact on local employment.

Despite the pall cast over 1992 by economist predictions, it could be that Los Angeles is planting the seeds of its own recovery.

With demand faltering, rarely has it been so cheap to rent office or warehouse space in the region.

Top-quality office space is renting for $1.50 a square foot a month or less in Los Angeles, far less than the $3 a square foot such space commanded in 1979 -- 13 years ago, and before a wave of inflation.

After adjustment for inflation, office rents are off roughly 75 percent from 1979. While the current glut of office space is bad news for building owners and lenders -- indeed, it is part of the crisis banks are suffering -- it means low rents for those wanting to start a business.

Too, industrial rents are sagging. There are reports of good warehouse space in Torrance being snagged for 26 cents a square foot, less than half what similar space went for just a few years ago.

Those willing to take somewhat dumpier warehouse space near downtown Los Angeles -- in a multi-story building -- can get space for as low as 20 cents a square foot.

Again, the low rents bode well for those wanting to start a business or hold down operating costs.

Wages are soft in Los Angeles, with unskilled labor plentiful at $5 an hour, and world-class ports nearby. There is a huge local consumer market of more than 12 million people.

"There are tough times ahead," said Kyser of the county Economic Development Corp. "But in 1993 we should start pulling out of it."

UCLA Forecast - California
                          1991          1992          1993
Employment                -3.2%         -1.3%          1.7%
Taxable sales             -4.9           0.6           7.4
Inflation rate             4.1           2.8           3.1
Unemployment rate          7.6           8.6           8.5
New home prices(1)      $234.5        $235.4        $234.6
1 In thousands
Source: UCLA Business Forecast