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In California, an economic divide that pits west and east


SAN BERNARDINO, Calif. » For decades, California has been seen nationally and by its own residents as a state divided into north and south, the urbane tree-huggers of the north versus the car-obsessed beach hoppers of the south. But the more meaningful division, it turns out, may be between east and west.

Communities all along the state’s coastline have largely bounced back from the recession, some even prospering with high-tech and export businesses growing and tourism coming back. At the same time, communities from just an hour’s drive inland and stretching all the way to the Nevada and Arizona borders struggle with stubbornly high unemployment and a persistent housing crisis. And the same pattern holds the length of the state, from Oregon to the Mexican frontier.

"This is really a tale of two economies," said Stephen Levy, the director of the Center for Continuing Study of the California Economy. "The coastal areas are either booming or at least doing well, and the areas that were devastated still have a long way to go. The places that existed just for housing are not going to come back anytime soon."

Nick DePasquale, who runs a Ford car dealership here, can see it clearly. When he looks at the sales figures for dealerships less than 100 miles away, DePasquale sees signs of hope. Sales are up, if not drastically, at least enough to show that more people there are trading in their aging vehicles for spiffier models.

But when he glances at his own bottom line, the reality is grim. Less than five years ago, he was selling 300 cars a month. These days, the number rarely budges above 75. Even if customers come in looking to buy, few of them are able to get a loan approved, if their credit is pockmarked with defaults and foreclosures.

"We’re trying to climb out of the depths, but we were about the first in this mess and it looks like we will be the last ones out," DePasquale said. "There aren’t enough people feeling good enough to buy a new car around here."

Asked if he could imagine anything changing soon, he let out a little chuckle and said, "The hottest-selling thing in this city is a $5,000 used car, and we don’t have a lot of those on this lot."

San Bernardino County, which with Riverside County makes up what is known as the Inland Empire, a sprawling area now scattered with vacant homes built in the past decade, posted an unemployment rate of 12.6 percent in March. Compared with Orange County, on the more prosperous, western side of California’s vertical divide with an unemployment rate of 8 percent, it can feel like another world.

The disparities have played out in all kinds of ways. The Inland Empire and the San Joaquin Valley, in the center of the state, have some of the highest rates of poverty in the country. El Centro, on the state’s southeast edge, has the highest unemployment rate for any metropolitan area in the country, nearly 27 percent. Stockton, 550 miles to the north and also on the eastern side of the divide, became the first city to test the state’s new process for possible bankruptcy.

At the same time, the gap between the per capita income in the San Francisco Bay Area compared with the Inland Empire grew to more than $40,000; it was $26,000 four decades ago. While suburbs in the eastern parts of the state were some of the fastest-growing areas in the nation in the past decade, that growth has slowed to a near halt.

Investors are moving in to snap up foreclosed homes selling for a quarter of what they once did, but a housing glut remains. And the psychological toll in the area is almost palpable: While people here read about an upswing in other parts of the state and country, they look around their blocks and see friends out of work, shuttered stores and vacant lots. In January, Forbes magazine named Riverside the hardest city in the country in which to find a job.

During the boom times, many middle-class workers who lived along the coast moved east, eager to gobble up affordable housing in exchange for a difficult commute. By some estimates, roughly a third of working adults who live in the Inland Empire worked in neighboring coastal counties.

"During the first part of the century, when things were booming again, we saw the coastal areas moving inland and there was a lot of discussion about how jobs would follow," said Hans Johnson, a researcher with the Public Policy Institute of California who has studied the widening disparities between east and west. "But people were just following the building of roofs, so what you end up with in a bust, areas that were dependent on growth suffer tremendously when it dries up."

The Valley Restart Shelter in Hemet, a small city in eastern Riverside County, used to draw the chronically homeless. Now, many residents are laid-off teachers, former loan officers and construction workers who have been jobless for two years or more.

"Because jobs are so scarce, it all just seems to snowball and people don’t feel like they can get their hands around a path to their own recovery," said Linda Rogers, who has run the shelter for more than a decade. "The people we see now are people who went from having a house to having a smaller house to having an apartment to having cars to having a job to having just nothing. They are willing to take anything, but anything just doesn’t seem to be out there."

By contrast, business owners in Orange County are more optimistic than they have been since 2004, according to a survey by the business school at California State University, Fullerton.

Joseph Cervantes, a senior executive vice president at R.D. Olson Construction, said that for the past several years it was focused on renovating hotels in Orange County, because building new ones seemed out of the question. But this year he completed a 130-room Residence Inn in San Juan Capistrano, a small town a few miles from the shore. The hotel caters to upscale business travelers — one of its selling points is a putting green — and has been at 81 percent capacity since it opened in February.

"That’s a crazy high demand we could only hope for a couple of years ago," Cervantes said. "Clearly it hit the market at the right time."

The differences between the west and east are not limited to the economy; several studies have shown that the coastal areas are more politically liberal than their inland counterparts. New environmental laws, for example, may be embraced in cities focused on preserving the beach but viewed as anathema to some inland political leaders who see regulations as a path to driving businesses out of the state.

Perhaps no other politician exemplifies the divide better than Jeff Stone, a conservative Riverside County supervisor who last summer proposed legislation to split off his county and 12 others to form a 51st state, South California.

Many leaders in the state ignore his area’s plight, he said.

"I’m not optimistic to think that our beauty is enough to sell Southern California," Stone said. "Here we see nothing but more chain restaurants because the mom-and-pop places can’t make it anymore. The folks in Sacramento just have their hands out and don’t realize how much we are struggling."

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