SOCAL LEADS U.S. IN UPTURN.

Byline: Evan Pondel Staff Writer

California's economy is poised to outperform the nation's in 2005, when a weakened U.S. dollar could help reinvigorate export growth throughout the state, according to a Wells Fargo survey released Tuesday.

Despite an unprecedented state budget deficit, a robust economy in Asia is likely to help drive California's, said analysts at the San Francisco- based bank.

Export growth for computer and electronic equipment manufactured in California is expected to provide the greatest boost for the state's economy, with the Wells Fargo survey finding U.S. exports already up 15 percent this year.

``The global economic recovery, especially in Asia, is helping these manufacturers in the state,'' Sung Won Sohn, Wells Fargo's chief economic officer, said Tuesday. ``Meanwhile, in Silicon Valley, people are job-hunting once again.''

Despite anticipated job growth in the technology sector, Gov. Arnold Schwarzenegger's plan to take away $1.3 billion from local governments this year may thwart a full-fledged recovery.

The Wells Fargo survey said California already lost 40,000 government jobs in 2003, and thousands more jobs could be trimmed this year at the local level. Government could surpass manufacturing as the weakest sector in California's economy in 2004.

And if the governor's deficit-reduction bond issue does not pass, it could give Schwarzenegger some political justification to at least discuss raising taxes, Sohn said.

``The other concern right now is whether China's economy will form a bubble. There is a little bubble developing for China's real estate market, but I don't think the country can politically afford that,'' Sohn said. ``Besides, in China the government controls everything, and it is unlikely they will let a bubble happen.''

Exports to Asia, and China specifically, are integral to Southern California's economic growth. The Southland economy has been expanding since the middle of 2003 and is expected to continue as the entire state's growth engine this year, according to the Wells Fargo report.

Specifically, foreign trade through the Los Angeles-Long Beach port is generating strong demand for warehouse and industrial space. Ten-month two-way total trade is up 10 percent from last year, while port officials of the two cities expect a 5 percent to 7 percent increase in cargo activity for 2004.

``In terms of exports, China is interested in many of our products because of their quality, especially scrap metal and steel,'' said Denise Allyn, a manager at International Technologies Network Inc. in Thousand Oaks. ``But what is truly amazing is how much the U.S. manufacturing base is moving to China.''

International Technologies manufactures plastic injection molds and circuitry in China. Manufacturing in Asia has become increasingly appealing because of the relatively inexpensive cost of labor. Allyn said right now Canada is beating the United States in the dash to do business in China.

Influencing more exports, Southern California is starting to reap the benefits of higher defense spending. For example, Boeing Co.'s new contract for 210 Super Hornet fighter aircraft could help stabilize the region's aerospace industry.

Approximately 40 percent of the new contract will involve Boeing's El Segundo plant. That means job growth is imminent in the next several years, Sohn said. Boeing's plans to move forward with the production of the new 7E7 could also bring business to Boeing suppliers in Southern California.

But job growth in aerospace is contingent on how well the state deals with ``the hurdles of employment cost packages,'' Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said.

``Businesses are very cautious about hiring more people with the possible mandates in health care for 2006 and the cost of workers' compensation,'' he said. ``Everything depends on whether Arnold gets things under control in California. The sad fact is the state has a lot of potential, but what has come out of Sacramento has thrown a lot of sand in the gears.''

Evan Pondel, [phone]

evan.pondel(at)dailynews.com