Ray of Sunshine Cracks California's Gloom: Study Predicts Growth

EVEN though California is mired in its deepest slump since the Great Depression, the state's long-term economic outlook remains very strong, according to a study released this week.

Job growth alone will add 5 million people to the state this decade and nearly as many next decade.

Though the state's most recent jobless rate - hovering around 9.5 percent - is higher than the national average, the current losses from defense and aerospace cutbacks conceal longer-term opportunities in technology, foreign trade, and export-oriented services.

"The most important thing for California businessmen and policymakers is not to misinterpret the current, very severe downturn as meaning demographic and job growth are going to be permanently depressed," says Steve Levy, director of the Palo Alto, Calif.-based Center for the Continuing Study of the California Economy (CCSCE), which produced the report.

Other analysts agree with Mr. Levy's conclusions.

"I wouldn't use this report to say California has nothing to worry about," says Joel Kotkin, senior fellow at the Denver-based Center for the New West. "But he [Levy] is correct in saying the long-term prospects remain very strong, something you don't hear too much about in the media's current feeding frenzy."

Mr. Levy's study shows that all the significant state and regional agencies that project population growth - the California Department of Finance, the Southern California Association of Governments, the Association of Bay Area Governments - agree that population will continue to grow, driven primarily by job growth. The number of Californians, which increased by 8 million during the 1980s, is expected to grow another 6 million this decade, reaching about 36 million.

"Economies do recover from recessions and that is going to happen here," Levy says. "The state has to prepare for another onslaught of population."

Part of California's recent budget crunch has resulted from the net increase in non-taxpayers, another factor that will change over time.

During the 1990s, baby boomers will make the 35- to-54 age group - the one with the highest income - the fastest-growing segment of the population, rising from 7.5 million in 1990 to 10.9 million by 2000. That represents a gain of 41 percent.

One less-productive age group, consisting of those over 65, will constitute a lower share of total population in the state than the national average.

According to the report, new state jobs will focus in the fields of foreign trade, tourism, entertainment, and high technology. Some of these fields are experiencing growth even in the current downturn. Foreign-export tonnage in the port of Los Angeles, for instance, grew 0.2 percent in the year ending June 30, while the port of Long Beach reported containerized cargo up 8.5 percent. Tourism figures have stabilized somewhat in the $7 billion industry, after rioting, earthquakes, and fires had hurt early parts of the season.

California has been hit harder than the rest of the nation by welfare and social-services caseloads - a situation that is expected to easy significantly due to projected job growth and the end of recession, the CCSCE study shows. More than 30 percent of immigrants to the United States have chosen California as a place to live and work. But as evidence from several large state agencies indicates, immigrants use social services at only average rates during times of full employment

"From the standpoint of 10- to 20-year outlooks, it's important that California not discard plans to accommodate private-market growth and public infrastructure like schools and roads because of recent events," Levy said.

The report also says that California is, and will increasingly become, the nation's largest multicultural society. By the year 2000, Hispanics, Asians, and blacks will represent half the state population - up from 42 percent in 1990. In both the 1980s and '90s, ethnic minorities will account for more than 75 percent of the state's population growth.