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Valley's New Era Offers Rewards, Punishment : Business: A ruthless downturn has masked a restructuring trend. Rising industries evoke optimism.

CHANGING FORTUNES. The Valley Economy in Transition. Second in a series


Well before the Northridge earthquake, changing markets and hard times had upended the San Fernando Valley--overturning the lives of some while heaping unexpected fortune on others.

For those who lost jobs or equity or business, the past several years have been a lingering disaster, a conspiracy of bad luck and unexpected betrayals.

"It started with the riots, then it seemed to go downhill. . . . Every time there was a disaster--the fires, the earthquake--it died some more," Shirley Silverstein said.

After 14 years, she is closing the family's Van Nuys toy store--Miniature Towne U.S.A.--and moving to Texas. "It's the recession," she said. "With so many people laid off, it has had a great rippling effect on us."

And yet, for others--those posting record sales, moving to larger quarters, climbing the corporate ladder--the 1990s have so far been a time of unequaled opportunity.

"For all practical purposes, we didn't know there was a recession, except that every time we needed to hire somebody there would be dozens of applicants," said Mark Sampson, director of research and development for a North Hollywood firm that he and a partner started in 1990. Sales for their company, Matchless Amplifiers, grew from zero to $1 million in two years. Sampson expects to double that this year.

Far from capricious, the economy's path reflects the orderly work of capitalism's invisible hand, clearing the way for a 21st-Century economy. And the Valley, like the rest of Southern California, is witness to a dramatic adjustment that has been partially obscured by three years of recession.

A new economy is emerging that, like its predecessors, will have its share of winners and losers, decided--as always--by the demands of willing buyers.

It is an economy that is leaner and more competitive, with fewer lifetime employees and more part-time and temporary workers. It is a workplace with plenty of jobs but fewer that pay well.

It is also a market in which a bit of sweat and cash can still propel a good idea from a neighborhood garage to a 100,000-square-foot factory.

Dan Sandel, an Israeli immigrant, had friends in nursing who complained about routine chores, such as counting needles. That idea sparked the creation of Devon Industries, which now employs nearly 400 at its Chatsworth plant. Last year, Devon sold about $60 million in medical supplies, including needle counters.

The old economy transformed Los Angeles County, especially Chatsworth and Canoga Park, into a high-technology center, employing some of the brightest minds and most productive hands in the world.

Cars, airplanes and motion pictures employed thousands of Valley workers. While the movies continue to cast a bright picture, other workers in traditional Valley industries have lost jobs and position and security.

Reductions in federal defense spending and a changing marketplace have eliminated more than 10,000 local jobs, knocking the wind out of the nation's premier manufacturing powerhouses.

At Hughes Aircraft Co., General Motors, Lockheed Corp. and other bastions of Valley employment, hundreds of acres of once-productive factories are shuttered and for sale. Their absence has produced lean years for a host of smaller companies and retailers as well.

Rocketdyne, a division of Rockwell International Corp. and one of the Valley's largest employers, predicts it will hire fewer than 20 college graduates this year, compared to 200 five years ago.

James Osment, the firm's administrator of college relations, said newspaper classified ads used by his firm and others to recruit employees used to be so thick, "you could hardly pick up the section with two hands. Now you can pick it up with two fingers."

But in that vacuum, an army of small- and medium-sized companies are thriving.

In key industries such as entertainment, computer hardware, biomedical and aerospace subcontracting, Valley firms account for nearly 30% of all employment and revenues in Los Angeles County, according to a research project directed by economist David Friedman.

The Valley scores high in four other industries: general industrial machinery, metalworking, computer software and environment-related businesses.

The numbers bolster a more optimistic view of the region, although there remain complaints from business owners over taxes, government regulation and social issues such as crime, Friedman said.

"Despite the fact that a lot of firms would like to leave, they can't. I call it the 'golden handcuffs,' " said James Renzas of Paragon Decision Resources of Irvine, a consulting firm. "Take the high-tech crowd. Where are they going to find a labor market with the kind of brainpower you find in L.A.? In Boise?"

But even with a healthy stock of firms, providing enough good-paying jobs will be one of the most serious dilemmas of the new economy, say experts.

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