SOUTHERN CALIFORNIA JOB MARKET : A SPECIAL REPORT ON EMPLOYMENT TRENDS : OUTLOOK : SOUTHLAND’S DIVERSITY KEY TO ITS SUCCESS

It produces large portions of the nation’s rivets, cooking oil, upholstery filling and guided missiles. New residents clamor in at the rate of 1,000 a day--opening bank accounts, filling their shopping carts, jamming the freeways, walking into classrooms, struggling for a better life in mom-and-pop businesses.

If it were a country, its economy would rank 12th in the world (just behind Brazil but ahead of India).

Southern California--a hard-to-define territory that begins somewhere around Santa Barbara and sprawls eastward along the Tehachapi Mountains and south to the Mexican border--has emerged as an economic colossus, the nation’s leading source of new jobs, a place where opportunity booms even as the population soars and changes in unprecedented ways.

“The size of the region and the size of the issues and the size of the changes just boggle the mind,” said Stephen Levy, senior economist with the Center for Continuing Study of the California Economy, a nonprofit research organization in Palo Alto.

Los Angeles has been a major city for many years, of course, but something new is apparent. The labor force has gotten so big, its consumers such a tempting market, the industrial base so varied, that it has become an economic magnet as never before. “Once you reach a certain size--with so much going on--then everyone else has to locate here,” observed Phillip E. Vincent, a vice president and economist with First Interstate Bancorp.

This new phenomenon is having profound effects on the area’s economy and culture, both good and bad. It means old-line law firms from New York racing to put out their shingles in Los Angeles. It means banks from Tokyo building towers that alter the downtown skyline. It means more garbage and congestion. It translates into the emergence of a whole array of businesses--consultants, computer services, temporary personnel, accountants and others--cropping up to serve industries both on the high and low ends of technology.

Indeed, if there is one word to describe the Southern California economy, that word is diversified. Outsiders may identify the area with Hollywood and Disneyland. Natives are more keenly aware of the importance of aerospace and defense-related industries. In fact, a big manufacturing base in such traditional areas as apparel, paper products, furniture and chemicals remains an important part of the Southern California economy.

And the services are booming as never before, including port facilities that benefit from the growing trade with Japan, South Korea, Taiwan and many other nations. “We’re not tied to any one manufacturing industry,” said Duane Paul, a vice president and economist at Bank of America. “We’re not tied to any one service industry. The region’s future is not tied to one, two or a dozen firms.”

It’s way too big for that--and getting bigger all the time. The combined population of Los Angeles, Ventura, Orange, Riverside and San Bernardino counties now approaches 13 million. Add San Diego County and the total exceeds 15.5 million people--and growing fast.

The broad, murky, but highly coveted area known as high tech is as good a place as any to start a tour of the area’s economic landscape. Motion pictures and television make for a glamorous image, of course, but the reality is that fewer than 100,000 people earn their livings locally in those fields. By contrast, 290,000 people work in the production of computers, office equipment, semiconductors, aircraft, spacecraft, guided missiles and pharmaceuticals in Los Angeles County alone; Orange County has another 106,000, and San Diego, 58,000.

“The term that (President Dwight D.) Eisenhower coined--the military-industrial complex--is really meant for Southern California,” said Alan Clayton-Matthews, an economist at Data Resources Inc. of Lexington, Mass.

Such industries are sought after because they’re low in pollution and pay more than average, which means that they bring in a work force of affluent consumers to patronize retail shops and purchase services. Southern California, for example, has the greatest concentration of mathematicians, scientists, engineers and skilled technicians in the United States, according to a recent report by Security Pacific Corp.

Moreover, the area is holding its own in traditional manufacturing, even as other parts of the country endure the pain of losing such employers. Estimates vary, but Los Angeles County, with some 886,000 manufacturing jobs, accounts for roughly half of all such employment in the state. Orange, San Diego, Riverside and San Bernardino counties add another half-million workers.

In comparison to parts of the country that have fought a losing battle to retain their traditional industrial base, Southern California remains attractive to such employers both for its local markets and its access to the Pacific Basin. And in such diversity there is strength. When things are tough in any one industry--say, oil--Southern California doesn’t reel like a Texas or Louisiana, because there are so many other industries contributing to the economy. “Who would want to close in California?” asks Levy, with maybe just a touch of exaggeration.

Nonetheless, manufacturing employment, even in healthy industries, isn’t expected to grow much, because staying competitive requires getting more output from fewer workers. From the standpoint of jobs, the future is clearly focused on a different sector of the economy: services.

In contrast to manufacturing, the service sector--ranging from hotels and restaurants to health care, the professions, trade and even government--will require more and more workers as it assumes greater prominence in the economy. Such services as health care, law, accounting and business--including temporary personnel--made up 35% of Southern California’s job growth last year, according to state statistics.

Retail and wholesale trade, stimulated by growing activity at the ports, accounted for another 28% of the growth, with finance, insurance and real estate adding another 13%. Even government, no longer growing in many regions, made for 12% of the job growth. “As the population expands, so does the demand for various types of government services,” Paul observed. “And as the services go up, the employment goes up.”

In most things, of course, what goes up must come down. And, despite all the reasons to be bullish on Southern California, the area is exempt from neither the laws of nature nor economics.

For instance, as employment in such industries as food processing, clothing and printing was rising by 9,000 jobs last year, it was dropping by 5,000 jobs in such areas of “durable” manufacturing as machinery, brackets, frames and other products. B of A’s Paul attributed the drop-off to continuing competition from abroad, despite the fact that the lower-valued dollar is expected to help such industries eventually.

The outcome of Congress’ trade debate also could affect the area. For instance, if tough trade sanctions were approved in response to economic pain felt largely elsewhere, a trade war could ensue--hurting imports and exports. And retail trade has other vulnerabilities. If consumers were to cut back on their spending--a development that many analysts expect but one that has yet to materialize to a large degree--shops and other businesses would feel the pain in a hurry.

The good news is that the strengths inherent in Southern California’s economy would likely cushion the blow of such national and global economic forces. Other potential problems, however, pose special concerns for the area.

For example, a serious cutback in defense spending would have ripple effects: It would injure not only the big employers that rely on federal contracts, but many of the firms that provide services to them. And the resulting layoffs would hurt local businesses. Analysts, however, aren’t expecting such a drastic scenario.

“There is a vulnerability, and you should see evidence of it in the next couple years as the procurement of aircraft, for example, slows down,” said Clayton-Matthews of Data Resources. “But you’ll also see the extent of that vulnerability, which isn’t very big.”

Other questions surround the new immigration law, which is now in the process of being implemented: How tough will the enforcement be? To what extent will it force upward the rock-bottom wages that typically have been paid to undocumented aliens in the past? And will that pressure companies to raise prices? Will labor shortages develop in such low-pay industries as apparel and restaurants that have prospered with the help of low labor costs?

First Interstate’s Vincent predicted that if the law’s provisions are effective, “wages should go up. That’s good from the employment side. But it will put pressure on prices, which may rise higher in California than the rest of the nation.”

Citing the continuing wave of immigrants, many of whom lack education, some analysts wonder if the area’s labor force might ultimately be seen as less attractive to firms that traditionally have been drawn by the area’s supply of highly skilled labor. The unprecedented population growth and change is “going on in a region that is performing as one of the top technology regions in the top technology society,” Levy said. “Will it keep that role?”

In the end, the biggest imponderable of Southern California’s economic tomorrow is whether the region will become a victim of its own success; whether it is luring so many newcomers that the future is one of scarce water, transportation headaches and chronic waste-disposal problems. “How big do we want to get?” Vincent asks. “How dense and how congested do we want to get? A lot of people out there are saying, ‘Enough.’ ”

Maddening tie-ups on the freeways are a current example of what happens when too many people try to use limited resources. Despite such hassles, however, the area still has room to grow, especially in outlying counties. A recent report by the Center for Continuing Study of the California Economy ranked Riverside and San Bernardino as the state’s fastest-growing counties, by a measure of growth in population, retail sales, income and jobs. The report found that Southern California is home to 13 of the state’s 15 fastest-growing cities.

Indeed, the area’s prognosis remains one that residents have learned to take for granted over the years: Growth. Growth. And more growth. Said Levy: “The L.A. Basin is as strong as it’s been in the last 10 years. In terms of jobs, you’re talking very large numbers.”

TOP 10 CALIFORNIA COUNTIES BY JOB GROWTH

County Total Jobs Jobs Created 1986 1982-86 1. Los Angeles 3,924,400 380,000 2. Orange 1,051,000 194,800 3. San Diego 833,400 157,000 4. Riverside 584,400 131,800 5. San Bernardino 584,400 131,800 6. Santa Clara 773,000 71,000 7. Sacramento 399,500 70,800 8. Alameda 551,100 69,200 9. Contra Costa 258,500 51,300 10. San Mateo 285,000 32,200

Source: Center for Continuing Study of the California Economy

Editor: Stephen West News Editor: Robert Burns Art Director & Illustrator: Patricia Mitchell