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Tomorrow marks the fifth anniversary of one of the nation's worst civil disturbances. Jeffrey Kaye of KCET-Los Angeles reports on the economic aftermath of the Los Angeles riots.

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JIM LEHRER: Now, the economic aftermath of the Los Angeles riots. Tomorrow marks the fifth anniversary of one of the nation's worst civil disturbances. Jeffrey Kaye of KCET-Los Angeles reports.

JEFFREY KAYE: Five years ago Los Angeles poorest neighborhoods exploded. Three days of riots and looting followed the acquittal of police officers charged in the beating of black motorist, Rodney King. Fifty-five people died; two thousand were injured. Eleven hundred buildings were damaged or destroyed. The clean-up began immediately, but five years later there are mixed views of what's changed in South and South Central Los Angeles, the areas most affected by the civil unrest. About 80 percent of damaged properties have been rebuilt. At the riot's flashpoint at the intersection of Florence and Normandy Avenues there's a new auto parts store. Four miles away former basketball player "Magic" Johnson has built a movie theater complex. Non-profit groups have developed hundreds of new housing units. The mayor of Los Angeles, Richard Riordan, says the LA economy has turned around since 1992.

RICHARD RIORDAN, Mayor, Los Angeles: Our city income, revenue is back to its all time high. The jobs have increased dramatically. Even aerospace defense have gone up the last two years. Entertainment is at an all time high. We've become the international trade capital of the United States, over $173 billion going through our Customs district. LA is definitely back.

JEFFREY KAYE: Not the LA Eugene Grigsby sees. Grigsby is an urban policy professor at UCLA. In LA's urban core there are an estimated 200 vacant lots, casualties of the riots, and Grigsby sees a glass that is half empty.

J. EUGENE GRIGSBY, Urban Policy Professor: There's bifurcation of the economy. It is growing, for the most part, very well at the top. Those are high wage, high tech growth sectors that are doing very well. The other part of the economy that's growing is the low-tech service, low-wage, low-benefit jobs. That's growing very fast, but that's not paying sufficient amount of money to--for people to survive very well in the Los Angeles economy.

JEFFREY KAYE: Five years ago, a week after the riots then President Bush toured what remained of the Crenshaw Plaza. At the time the LA economy was sliding. Manufacturing and aerospace jobs were disappearing. Unemployment and homelessness were on the rise. As rebuilding started the federal government pumped in hundreds of millions of dollars in loans. Civic leaders launched Rebuild LA, or RLA, to try to attract investment. Its then president, venture capitalist Peter Ueberroth, offered a rosy projection.

JEFFREY KAYE: Five years from now what's LA going to look like?

PETER UEBERROTH, Former President, R.L.A.: (March 1993) I think the inner city will look more like the suburbs, hopefully.

J. EUGENE GRIGSBY: It doesn't look like the suburbs to me. No.

JEFFREY KAYE: Grigsby says that although the economy in general is improving, LA's large homeless population estimated at more than 60,000 shows that the have-nots have been left behind. And the neighborhoods hit hardest by the riots--predominantly Latino and African-American--remain mired in poverty.

J. EUGENE GRIGSBY: This is an area representative and reflective of what I'm calling the working poor. Most of these people are working every day; their kids are going to school; but they're just barely making enough to pay for their meager rent and to buy groceries and keep food, clothes on their kids' back, and any little catastrophe and they can go from this location down to the skid row type of environment. And this group here represents the fastest growing group of labor in the Los Angeles economy right now.

JEFFREY KAYE: The two sides of the LA picture are mirrored at the Crenshaw Plaza, the site visited by President Bush. Like other places rebuilt since the riots security here--guards and fences--has been increased since before the unrest. While many of the mall tenants have returned, discount stores and fast food restaurants reflect a low-income clientele. Dentist William Faulkner escorted President Bush on his 1992 tour. He's back working on patients in a new office at the same site.

YOUNG LEE: (May 29, 1992) Everything gone. Everything gone.

JEFFREY KAYE: Young Lee lost the discount store that she and her husband ran for nearly 25 years. At the mall today she is back in business, but the problem, she says, is business is not good.

YOUNG LEE: They don't have no job.

JEFFREY KAYE: Lee says many nearby residents are unemployed and that every day job seekers come by looking for work.

DR. WILLIAM FAULKNER: Unemployment is here in the inner city just the way it was before.

JEFFREY KAYE: Just the way it was before.

DR. WILLIAM FAULKNER: Just the way it was before. It's just the same amount of people, you know, basically walking around with nothing to do. That really hasn't been changed at all.

JEFFREY KAYE: Dr. Faulkner says new buildings mask a deeper reality.

DR. WILLIAM FAULKNER: You could put a hammer to a nail and, you know, stucco, and put some plumbing, electricity in, and you can repair the physical aspects of the demise that had taken place. But as far as the people, the people have not been repaired, and the people are what tore these buildings down.

JEFFREY KAYE: Linda Griego is more optimistic. Griego, the outgoing president of R.L.A., says the area's poor communities are home to 15,000 small to medium sized manufacturing firms. She believes they reflect a healthy part of the economy.

LINDA GRIEGO, President, R.L.A.: What I found in terms of--specifically about the economy is that these little companies were actually doubling their sizes. And they were--the work force is predominantly immigrant.

JEFFREY KAYE: According to R.L.A., small businesses and industries such as foods, apparel, toys, and furniture manufacturing are responsible for $54 billion in annual sales. That finding convinced Griego not only that LA's industrial economy was growing but that R.L.A.'s original intent, trying to coax large companies to move to Los Angeles, was wrong.

LINDA GRIEGO: So what we did is we changed the focus to look at what strength does the community have already, can we build on what we already have, and that's what we've been doing is building on the smaller companies, because as they grow, our unemployment goes down, and as they become more competitive and improve their productivity, wages go up.

JEFFREY KAYE: That's been the case at Cisco Brothers, a furniture manufacturer owned by Francisco Pinedo. Five years ago Pinedo employed 15 people. Today his company's work force numbers 150.

FRANCISCO PINEDO: We have people who started working for us making minimum wage, you know, four or five years ago. Now, you know, they make 9, 10 dollars an hour.

JEFFREY KAYE: But some merchants have not been so fortunate. There are about 150 vacant lots, the sites of liquor and convenience stores destroyed in the riots; like this one owned by Desung Huang, the majority are owned by Korean Americans. Huang has had to work for friends since his own liquor store was destroyed. He says he hopes to rebuild soon but he complains the city has made it difficult for liquor store owners to get back in business. Griego has little sympathy.

LINDA GRIEGO: Many of those 150 plus vacant properties are former liquor stores. They are not likely to rebuild.

JEFFREY KAYE: As liquor stores?

LINDA GRIEGO: As liquor stores. The community that is surrounding those particular properties, in many cases, has said not here; we have enough liquor stores; we want other kinds of services.

JEFFREY KAYE: A few former liquor stores have been converted to Laundromats, and in some of the riot-torn areas, there are new food stores. But there is general agreement that much remains to be done. Non-profit developer Anthony Scott has renovated a hotel, the Dunbar, and built 41 apartment units, Somerville Place, as well as a child care center. But he says his work is a drop in the bucket, given the need.

ANTHONY SCOTT, Dunbar Economic Development Corp.: Somerville Place and the Dunbar, that's just a small dot in the larger context of this overall community. That's going to make a difference, but it's not nowhere near going to make the kind of differences necessary to "turn this area around."

JEFFREY KAYE: There is also universal agreement that to turn the area around better education and job training are badly needed.

MAYOR RICHARD RIORDAN: Every person should have access to a quality living wage job or access to the middle class, but that will never happen unless children, young adults are given the tools to compete, which means a strong education system. And when you consider in the inner city today a six-year-old has about a 12 percent chance to read and write at the eighth grade level, we're not giving those tools. And the other side of that is that businesses are not going to come to LA unless they have the skilled labor to do it. Right now we're importing skilled labor from other countries because we don't have the educated people in LA to fill those jobs.

JEFFREY KAYE: Some programs are underway to teach job skills. The Carpenters Union is helping inner city residents enter the construction trade. The Urban League and Toyota have trained some 400 auto mechanics in a new school erected soon after the riots. But for every step forward there are fears of many steps back. In particular welfare reform will send many in this community in search of jobs that right now don't exist.

LINDA GRIEGO: We've got welfare reform looming. This is something that's going to happen, and we need to be prepared for it. We need to produce more jobs, be able to help some of these companies create more jobs because we can't wait till that reform takes place and we find that people don't have a means to live.

JEFFREY KAYE: Government and private groups have ambitious lists of plans for the area's future development, but five years after the riots promises that LA's urban core would come to resemble the suburbs still seem like distant dreams.

JIM LEHRER: Still to come on the NewsHour tonight the prime minister of Japan and military teachers.

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