California Economy

They're back. Palo Alto economists Stephen Levy and Robert Arnold today will deliver their latest long-term state forecast, and the gloomy crowd who insist that California's goose is cooked won't like it. In their report, Levy and Arnold insist that California remains well-positioned--with the right industries, the right technologies, the right geography--to emerge from the recession as strong as ever. "World market trends still favor California," says Levy.

As 550 politicians, business executives and lobbyists descended on the Biltmore Hotel in downtown Los Angeles for Assembly Speaker Willie Brown's economic summit Tuesday, President Bill Clinton and Gov. Pete Wilson called on California to solve its own problems. Speaking by telephone to the summit, Clinton held out the possibility that he would help California cope with the high cost of immigration, and said many of 500,000 jobs he intends to create will be in California.

Despite signs that the California economy continues to recover, some locals remain uncertain that the state is rebounding from the economic miseries of the early 1990s. So, if it's of any comfort, two out-of-town executives who keep tabs on the Golden State from the other coast say that the recovery seems to be continuing. "I'm an outsider, but I like California," said Jim Adamson, chief executive officer of Flagstar Cos. Inc., the Spartanburg, S.C.

At a recent conference on prospects for California, Lewis Coleman, chief financial officer of Bank of America, confirmed that the state's economy was moving forward after recovering from the terrible recession of the early '90s. But, curiously, he spoke about the recovery as a scientist would describe quarks or anti-matter--as seen through evidence of its existence, not as seen physically.

California's strong recovery from its economic plummet in the early 1990s survived the Asian flu financial crisis, the dot-com collapse and even this year's rolling blackouts. But now the state's eight-year business expansion finally appears to have met its match. Amid the economic havoc created by the terrorist attacks, business forecasters increasingly are saying that California is joining the rest of the nation in sinking into a recession or near-recession.

In realtors' offices across California, a new phenomenon has been visible in recent weeks--customers. At least a few home builders have reported a rise in their long-depressed business. And amid all the mixed economic signals of recent days, there even have been hints of an upswing in retail sales. Is the California economy, bruised and battered from an unusually severe downturn, creeping back to its feet?

The outlook for the California economy is getting much bleaker, hurt by the weakening national economy, the continuing slump in real estate and persistent losses in defense-related employment, top economists say. If current trends continue, they say, the state's recession could last until late 1992 and perhaps into 1993, making the economic downturn the most severe in California since the Depression in the 1930s.

Despite mounting problems in the world economy and a jittery U.S. stock market, Californians are extremely upbeat about both the state economy and their own personal finances, a new Los Angeles Times poll has found. A full 67% of those polled say the California economy is "robust," and 73% believe their finances are secure. Overall, 61% of residents think the state is going in the right direction, up from 48% just four months ago.

President Clinton's proposed budget for next year delivers some bad news for the California economy in the form of a nearly $8-billion cut in defense spending, but the plan also contains several nuggets of good news for the state, including a possible second shot at a job-creating "empowerment zone" for Los Angeles.