Industrial News

A new feature of this year’s Mid-Year Forecast is an assessment of the performance of different areas within Los Angeles and Orange counties.

Among the risks on the 2006 horizon is the housing situation – will it be the “bubble” scenario or the “price ceiling” scenario? The LAEDC Forecast also asks questions about the business environment in the state. “Will there be a modest improvement or more slippage?” said Chief Economist and Vice President Jack Kyser, LAEDC. “To meet the growing demand from their customers, companies are willing to invest in plant and equipment but are still being cautious about hiring.” The Forecast also warns that some military bases in California are still on the Base Realignment and Closure (BRAC) chopping block; in fact San Diego County may lose two more military facilities when it’s over.

Nonfarm employment in California is estimated to grow by 1.8 percent, or 265,000 jobs, in 2005, and
by a forecast 1.7 percent, or 253,000 jobs, in 2006, compared to the one percent increase in 2004. In Southern California, the leader in job growth will continue to be the Riverside-San Bernardino area, where nonfarm job growth will run at 3.0 percent in both 2005 and 2006, or increases of 34,400 and 35,900 jobs respectively. Orange County should see a 1.9 percent, or 27,600 job, increase in 2005, and a 1.8 percent, or 27,400 job, gain in 2006.

Los Angeles County will continue to have muted nonfarm job growth, with a 1.0 percent, or 41,600 job, gain in 2005 and a 1.1 percent, or 44,500 job, increase in 2006. “There has been much hand wringing about LA County’s weak nonfarm employment performance, essentially 15 years of no job growth,” explained Kyser. “However, the civilian employment series (which includes the self-employed and unpaid family workers) indicates the County is at a new employment high. Clearly more people are working as independent contractors and in other ways that do not get captured in the nonfarm employment survey, and Los Angeles County is on the leading edge of this trend.”

The LAEDC Forecast ranks the performance of the region’s major industries, four of which received “A” ratings at mid-year 2005. These include classic aerospace, business & professional management services, technology and tourism. Two other industries got “B+” ratings – financial services and bio-medicine. The lowest industry ratings went to health services/hospitals with a “D”. The Forecast noted that while hospitals face intense financial pressures, there is a building boom in new facilities. The apparel design and manufacturing industry got a “C-“ with LAEDC’s observation that the industry is in a major transition that is not well understood by most people.

Ratings for two of Southern California’s signature industries were downgraded. Motion picture/TV production was moved from a “B” to “B-“. “While there will be job growth, this industry is coping with piracy, weak attendance/viewership, and a more intense threat of run-away production costs,” said Kyser.

International trade was moved from a “B+” rating to “B.” “Everybody will be holding their breath to see if congestion rears its ugly head at the local ports over the next few months,” said Kyser. “Another serious backup would have very negative business connotations for the region.”

A new feature of the LAEDC Mid-Year Forecas” is regional performance rankings for Los Angeles and Orange counties. The main indicator is employment, which was obtained from the California Employment Development Department’s ES 202 data files. These numbers understate the employment situation as they do not include independent contractors, which are a significant factor in Los Angeles County. The best performance in Los Angeles County’s regions, what the LAEDC called “overachievers,” came in the East San Fernando Valley, the San Gabriel Valley and West Los Angeles. Five regions turned in an “above average” performance, while three were noted as being “in transition.” “Two regions in Los Angeles County need more support – North Gateway (southeast area) and the South Los Angeles area,” said Kyser. “They need more thoughtful approaches to economic development and true involvement by business and government leaders.”

In Orange County, both the north and south regions have performed well job-wise, but the advantage went to the south. The LAEDC Forecast also contained 2004 gross domestic product (GDP) rankings. California placed eighth among the nations of the world, behind Italy and China (excluding Hong Kong) but ahead of Canada and Spain. The Los Angeles five-county area placed tenth, behind Spain and ahead of South Korea and Mexico. Los Angeles County ranked 17th in gross product, ahead of Switzerland and Belgium.

The LAEDC Forecast also spotlighted some longer standing concerns for the Southland including: congestion in moving both people and goods, K-12 education, and housing – both overall supply and affordability.

“The final concern is – who’s in charge,” said CEO and President Lee K. Harrington, LAEDC. “There is little confidence in the capability of politicians alone to devise solutions to Southern California’s many challenges. Business will have to become more involved, and that’s why we are forming the Southern California Leadership Council. The response so far has been strong and we believe that we can find solutions that will foster economic growth while improving the region’s quality of life.”

The Los Angeles County Economic Development Corporation is a private, nonprofit 501c businesss association with a mission to retain and create jobs in Los Angeles County. From 1995 to 2005, the LAEDC has helped to retain or create more than 100,000 jobs in Los Angeles County.

[Editors: For advanced interviews call: George McQuade or Aida Mayo, MAYO Communications
@ 818.340.5300 or 818.618.9229.]