Job Upturn in California Could Aid a Wilson Bid

After worst recession in 50 years, California shows signs of rebound

CALIFORNIA Gov. Pete Wilson (R) was glad-handing his way through New Hampshire and New York this week when a home-state headline that could look promising on his White House job application hit the stands: ''Golden State Getting Lost Jobs Back.''

By the time the race for president shifts into full swing next year, California will regain more than 520,000 jobs lost in the deepest recession here since the 1920s, according to a study released this week by the forecasting group at the University of California at Los Angeles. The state has already added about 330,000 jobs in the past 18 months and by 1996 will recover the rest, says Tom Lieser, report co-author.

''After its worst downturn in 50 years, the state finally appears to be coming back very well,'' Mr. Lieser says.

Led by federal cuts in aerospace and defense funding, between 500,000 and 800,000 jobs were lost in California from 1990 to 1994. The state fell into recession later than the rest of the country, but also far deeper. Now, despite the peso crisis south of the border and California's rapid-fire succession of floods, riots, and earthquakes, projections of growth in personal income and employment may surpass the national average for the first time since 1990.

''We are thrilled because [these] independent figures jibe with our own that this recovery is broad-based,'' says H.D. Palmer, assistant director for the state Department of Finance. Noting significant job rises over 1994 in manufacturing, trade, business services, and construction, Mr. Palmer says the new study bodes well for California's annual budget battle that heats up in May. That, in turn, may aid Mr. Wilson in his presidential bid.

Two years ago, legislators and the governor could not agree on billions in budget cuts in time for their July 1 statutory deadline, and the state had to issue IOUs to pay its bills. If the new figures are correct, projected tax revenues would mean such a protracted battle might be likely this year, though proposed tax cuts by Wilson still leave room for tension.

Several economists here privately question the optimism of the UCLA study, however, which toned down a rosier forecast in December and cast some doubt on the veracity of the study's new figures. Project authors had forecast that state employment would rise 3.6 percent in 1995 rather than the revised 2.1 percent. They also said personal income would rise 6.9 percent instead of its December 9.3 percent projection.

ECONOMISTS also give mixed reviews on whether or not Wilson can claim any personal credit for the economic turnaround.

''There is an unresolved debate among policymakers as to the role of lawmakers in state economic health,'' says Steve Levy, director of the Center for the Continuing Study of the California Economy. ''Some say [that health] relies on taxes, business regulations, and such while others hold it relies on intangibles such as quality of life, clean-air, education, and infrastructure.''

On the first criterion, most here give Wilson high marks for streamlining business regulations, overhauling the costly workers' compensation system, and committing resources to retaining key businesses.

''There is no doubt Wilson can claim credit for turning around some extremely negative business conditions,'' says Joel Kotkin, senior fellow at the Denver Center for the New West.

Others say Wilson's emphasis on undoing regulatory overkill has done little to promote the state's underlying strengths.

''I cannot see Wilson running [for president] on the record of his economic development in California,'' says David Friedman, a fellow in the MIT Japan Program. ''Philosophically, he identified bureaucratic bloating as a problem, but he did nothing to stimulate such key industries as electronics, textiles.''

Right or wrong, the new study figures will no doubt make their way into Wilson's campaign speeches and literature as evidence that he made good on key promises. ''We must rebuild the California economy job by job by job,'' Wilson said pointedly in his 1993 state-of-the-state address.

But Joe Wahed, chief economist for Wells Fargo Bank, says California's economic fortunes -- both positive and negative -- have more to do with traditional economic cycles than with who is running the government. ''Business cycles are self-corrective and a matter of time,'' Mr. Wahed says. ''Just as cuts in federal defense spending or earthquakes or floods cannot be blamed on Wilson, so he cannot take credit for the current upturn.''

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