BICOASTAL ECONOMY. The Tide Ebbs
With growth slowing on both coasts, the vaunted ``bicoastal economy'' that characterized the 1980s is no more. Still, the West Coast is in relatively good shape, despite a slackening defense industry. On the eastern seaboard, only Florida continues to post above-average growth.
`CALIFORNIA is just like the rest of the country, only more so,'' goes the old adage. These days, the reverse is true for the Golden State's economy and for that of Oregon and Washington State as well. As the nation slides toward recession, the West Coast is in relatively better shape. ``Flat at a high level and likely to stay flat,'' is how Walter Hoadley, chairman of Bay Area Economic Advisers in San Francisco describes it.
``We're sort of growin' but slowin','' quips John Mitchell, chief economist for US Bancorp in Portland. In other words, like the rest of the country only less so.
Yes, there has been some slowdown in certain industries, such as timber in Oregon and aerospace in Washington. And there is some disruption as economic activity shifts within the region - from overcrowded Los Angeles and San Francisco to the Central Valley towns of Fresno and Bakersfield, for example.
But overall, according to economists in all three states, the West Coast is likely to weather the economic downturn indicated by recently declining growth in personal income and gross national product nationwide. This is particularly good news for the Pacific Northwest, which suffered severe recession in the early 1980s.
Some analysts are less sanguine. The cover story in Forbes magazine last week, titled ``California's Fading Boom,'' warned that ``more and more manufacturers are packing up and leaving California.'' Citing the high costs of labor, housing, and energy, as well as ``a bewildering array of environmental regulations and antigrowth propositions'' (like ``Big Green'' on next week's ballot), the pro-business magazine predicts that the loss of manufacturers to relatively friendlier states like Arizona, Colorado, and Texas ``will have a devastating impact on the state economy.''
That is not the view, however, of two Federal Reserve Bank of San Francisco economists, Carolyn Sherwood-Call and Ronald Schmidt. ``The outlook for California's economy hinges on whether the drop in activity from a year earlier reflects a return to a more moderate level, or whether that decline marks the beginning of a regional slide,'' they report in the bank's latest quarterly review. ``Our analysis suggests that the first interpretation may be more accurate.''
``There's no Texas or New England about to happen, which some pundits think,'' says Sanford Goodkin, executive director of the San Diego-based KPMG Peat Marwick/Goodkin Real Estate consulting group. ``The economy is relatively strong because of its diversity.... Any economy or real estate market that has been in such heat for so long needs a period of slumber. Job formation will be slower, but still beyond almost every other state if not all other states.''
Mr. Goodkin notes, for example, that while California is expected to lose 200,000 defense-related jobs between now and 1995, state employment still will be growing by 300,000 jobs a year. He also predicts that Los Angeles soon will pass New York in dollar volume of international trade.
To the north, economic prospects are looking even better.
``We continue to outpace the national averages in terms of performance,'' says Mr. Mitchell of US Bancorp in Portland. For example, Oregon's employment growth for the past 12 months has been 2.6 percent, a point higher than the US overall. Still, that's half the 5 percent job growth rate of recent years, reflecting a loss of 5,000 timber industry jobs and layoffs of several thousand workers by the electronics firm Tektronix, Oregon's largest private employer.
Like California, the economic picture differs among Oregon communities. Portland is growing like a watered pumpkin; Klamath Falls lost 390 jobs earlier this year when Weyerhaeuser shut down some of its operations there. ``We're not going to be able to grow at the boom pace we have in the last few years,'' says William Conerly, vice president and economist with First Interstate Bank of Oregon in Portland. ``But the Northwest will probably be the only part of the country to really avoid recession.''
Like Oregon, Washington State is anticipating an economic cooling off, but not serious recession. Washington has seen some job loss in the timber industry, but is less dependent on federal supplies than Oregon and therefore less affected by the recent listing of the northern spotted owl as a threatened species.
After several years of adding 10,000 jobs a year, Boeing Company (the state's largest employer) has cut back about 5,700 this year, mostly through attrition. But recent contracts with major airlines (including one with United Airlines for the new 777 jetliner that could top $22 billion) is good news for Boeing. So too is the survival, though with a funding cutback, of the B-2 Stealth Bomber in the federal budget package. The B-2 accounts for 7,500 full-time and 2,500 part-time jobs at Boeing.
``We're assuming that between 1991 and '93 we will see about a two- or three-thousand job-per-year increase in the aerospace industry,'' says Chang Mook Sohn, the state's chief economist. ``That's not as strong as the increase in past years, but a lot better than the declines of 1990.''
``It's important to note that Boeing's production rates are rising, even with relatively stable employment levels,'' says Doug Pedersen, an economist with Security Pacific Bank.
While US military spending overall is coming down, Washington State has several other things going for it on defense besides the B-2. A new aircraft carrier battle group will be home-ported in Everett; the nuclear submarine base at Bremerton will not be part of any ``peace dividend''; the mothballing of older ships at the Puget Sound naval shipyard is providing new work.
In sum, the West Coast economy may be a bit more laid back than its recent surf's-up period. But it's still tanned and fairly fit.