A Man With a Long Memory San Fernando Valley Economic Research Center Director Dan Blake has watched the region’s economy for three decades. By MICHAEL HART Staff Reporter Dan Blake feels sometimes like he’s seen it all. Today, he is director of Cal State Northridge’s San Fernando Valley Economic Research Center. But he has been an economics professor at the university for more than three decades. He arrived in the San Fernando Valley with a newly minted Ph.D. in 1971, and has been watching the regional economy ebb and flow, wax and wane, ever since. Blake was here for what he calls the Valley’s “mall phase,” the rise and fall of the aerospace and defense industry, the emergence of a reinvigorated entertainment industry, earthquakes, recessions and more than one economic boom. These days, he does more than just watch the Valley’s economy. As director of the economic research center since January 2001, he’s measuring it as well. To be perfectly clear, Blake says neither he nor the center is in the business of forecasting the local economy’s future. Nevertheless, he shared some of his perspective as a very close observer of more than 30 years with Business Journal editor Michael Hart. Question: How has the recent national economic downturn affected the Valley? Answer: Employment was essentially flat in 2000. We grew .2 percent in 2000, versus 3.5 percent in 1999. Payrolls grew at the same time at 4.7 percent. That means the average paycheck went up, so it wasn’t really hard times. But it was a real slowdown in employment growth and you began to see a sluggish economy. The numbers I’ve seen for 2001, particularly in terms of unemployment, suggest we took our major slowdown in 2000 and really didn’t slow down as much as L.A. and California did in 2001. My recent analysis is we’re still not as sluggish as California overall, or even Los Angeles overall. Q: What kept the Valley from feeling the brunt of the recent recession? A: One thing that’s kept the economy from really going into a deep recession here is consumers willing to spend, and part of that has been increases in the value of homes. In the Valley, you have more homeownership than in parts of Los Angeles that are more dense and concentrated. We’ve seen home prices go up here by 50 percent since 1997. That means people who own homes have experienced growth in their equity. That has given them increased wealth in this period of recession. The increased wealth has allowed these people to spend. Q: What further impact can the Valley expect from this economic downturn? A: One thing the Valley has always been is a port of entry for immigrants, particularly the northeast Valley. I’m anxious to look at some numbers and see if that inflow of workers is responsive to economic hard times. As an economist, I wonder if that’s slowed down. Q: How would Valley secession affect the local economy? A: If secession happens and somehow government became more responsive to needs of residents and businesses in this area, then some years from now we might be able to see the effect of that. Over the years, and that would be a very evolutionary process, we might see some effect and we’ll probably never be able to measure it. The other issue is something like the business tax. It’s expensive to run a big metropolitan area. The gross receipts tax feeds probably $300 million a year or more into the coffers of the city. At the same time, it repels some businesses that have alternatives to locate outside of the Valley. Should a new city here find different and less business-repellant ways to fund itself, then it might foster growth. I think the business tax is something the city of L.A. has to deal with in terms of the signals it sends to businesses. If we have secession, that’s an issue also the new city would have to deal with sooner rather than later. Q: Give me a picture of the Valley economy when you first started observing it back in 1971. A: When I first came here the defense industry was kind of in the doldrums and it was a period of time when there wasn’t a lot of activity. The defense buildup really started in the 1980s with the Reagan administration. That’s when you saw the Valley boom. It was the same companies that were always involved Rockwell, McDonald Douglas, Lockheed, so on but the defense contracts were, by all appearances, huge. Q: Why did the defense/aerospace gravy train eventually end? A: Well, of course, we had peace. With the fall of the Berlin Wall, peace broke out and people called it the end of history. It was certainly a new chapter for the aerospace industry in the Valley. During the ’90s, a lot of big businesses were sort of cherry-picked out of the area by developers from other states. Some of the aerospace businesses went to the East Coast, because that’s where some of the political power went. There was a lot of consolidation, a lot of downsizing. It led the Valley into the recession of 1991. That recession lingered so much longer in the Valley than it did throughout the rest of the United States. If you look at the data, that recession lasted in the Valley through 1993. Q: But the Valley economy has been fairly robust for the past several years. What made the difference? A: Two things happened. First, it was the earthquake and the reconstruction that really finally pulled the Valley out of recession of the 1990s. Second was that the entertainment industry took off. There was an increase in demand for entertainment that seemed to focus on Los Angeles. It was always around here, but it was not as evident. I have numbers that go back to 1990. We show a decrease in the entertainment industry in ’92. Employment in the Valley entertainment industry in 1992 was running below 40,000. By 1999 and 2000, this industry is two and a half times beyond what it was in 1993. So there was a tremendous buildup from ’93 to ’99. Q: And yet you can’t really say today that the Valley economy is dominated by the entertainment industry, can you? A: No. As I see it, the economy is not dominated by huge businesses as it was before, by the Lockheeds, the McDonald-Douglases, the General Motors. There are a number of middle-sized and start-up businesses. It’s true that up until recently the big push was in entertainment, and it’s grown phenomenally. But now you’re seeing a diversity in the economy. Entertainment has slowed down and what’s attracting businesses to the Valley, even though we’re in a recession right now, is really the infrastructure: the training institutions, the skilled labor force we already have here, the financial institutions, the access to venture capital. Q: What kind of long-term economic challenges do you see for the Valley? A: We’re going to continue to attract people to the Valley, and we have to figure out how to deal with population pressures. We’re not doing it right now. We’re not building houses like we did in the ’80s, largely because there isn’t the room left. We’re building farther and farther into the hills. We’ve built the freeways out to the edges. We have to decide on more efficient ways to house people and transport people if the Valley’s going to grow. That’s our major challenge. We’ve got to grow smart, rather than just grow. Q: What role do you see for the economic research center in all that? A: I would like to assist in those kinds of efforts, by helping governments and businesses plan for smart growth by providing data that will help them understand the structure of the economy, so they can make plans that incorporate the realities. I’m interested, and the college is interested, in bringing the expertise we have here to bear on the community, the legislature, all sorts of people who need that. SNAPSHOT: Daniel R. Blake Age: 59 Title: Director, San Fernando Valley Economic Research Center, and economics professor, Cal State Northridge Education: B.A. in economics, University of Montana; M.A. and Ph.D. in economics, University of Oregon Career-turning point: Becoming a college professor and enjoying career flexibility Most admired person(s): Maxine Johnson, economic researcher at the University of Montana during undergraduate years, and Cal State Northridge Prof. Rick Moore Personal: Married, two children and two stepchildren