L.A. County tops in factory jobs
When Casey Loyd was looking to expand his spa-manufacturing business three years ago, several other states aggressively courted him to leave Southern California.
The offers were tempting, but the Southland’s ample supply of skilled labor and his own fondness for the area led Loyd to keep Cal Spas in Pomona.
“If I was a bean counter and I was in a publicly traded company, I probably would have gone,” said Loyd, the company’s president. “But being a family-owned business and privately held and having [community] values intact were the reasons we’re still here.”
Loyd’s decision was good news not only for Cal Spas’ 600 employees but for Southern California itself.
Although companies such as his are easy to overlook, manufacturing plays a crucial role in Southern California’s economy.
There are 808,000 factory jobs in the five-county Southern California region, making up a bit more than 11% of the region’s total employment, according to the Los Angeles County Economic Development Corp.
Defying the assembly-line image, the region’s manufacturers are primarily small businesses with the potential to grow. More than two-thirds of all manufacturing jobs in Los Angeles County are at companies with fewer than 250 employees, according to the county economic group.
Taken by itself, Southern California’s manufacturing base would rank third among states, after California as a whole and Texas. Los Angeles County is the nation’s largest manufacturing center, with 462,300 jobs, topping Chicago by more than 72,000.
Manufacturing generally churns out well-paid middle-class jobs with good benefits, especially in Southern California, which often tends to have higher-skilled positions, experts say. The top sector in Los Angeles County, for example, is computers and electronic products, the economic group said.
The average manufacturing salary in Southern California is $53,113, 14% higher than the average of all industries, according to the California Economic Forecast, a private economic research firm based in Santa Barbara.
“It’s sort of the forgotten sector, but we shouldn’t forget it because it has so many benefits,” said Jack Kyser, the county group’s chief economist. “A lot of people sitting in high-rises in downtown Los Angeles probably get a lot of their business from manufacturing firms.”
Manufacturing nationwide has shrunk steadily in recent years, and California is no exception. The state has lost a net 464,000 factory jobs since 1990, almost 350,000 of them in Southern California, according to the group. Los Angeles County itself has lost almost 360,000 jobs. Riverside and San Bernardino counties, by contrast, have added a net 48,000 employees.
Southern California suffers from the same factor imperiling manufacturing nationwide: It’s often cheaper to produce goods overseas. And California has the added albatross of higher costs and more stringent regulation than other states.
Land values, labor, taxes and workers’ compensation insurance are generally higher in California than in other states, said Mark Schniepp, executive director of the California Economic Forecast.
Nevertheless, the fact that so many manufacturing jobs have disappeared actually makes the industry an unexpected economic bulwark, Schniepp said.
The high-skill manufacturing jobs that have managed to stay in Southern California this long are likely to remain, he said.
“We’re down to a stable core of manufacturing jobs and a manufacturing industry,” Schniepp said. “Even in a downturn, it’s not likely to lead to a serious decline in the workforce, simply because those jobs are not there to lose anymore.”
Manufacturing also has what economists dub a high “multiplier” effect, meaning the industry creates related jobs in other fields. Apparel makers, for example, often hire freelance designers who aren’t technically counted as being in the manufacturing industry.
And when a manufacturer sells a product, the revenue from that sale normally comes from outside the region, Schniepp said. That contrasts with an industry such as retail, which simply recirculates money within a region.
A big impediment to manufacturing is the state’s extremely low industrial vacancy rate, Kyser said, which makes it difficult for companies to find affordable space. Especially in Los Angeles, many industrial areas have been rezoned and their buildings converted by developers into lofts and other high-end residential uses, he said.
“You have people running around wringing their hands saying, ‘The middle class is disappearing in Los Angeles,’ ” Kyser said. “The simple answer is, ‘Pay attention to manufacturing.’ ”
For companies like his, Loyd said, Southern California has a few advantages over other locales.
One of the biggest, he said, is the availability of high-skilled labor. Cal Spas makes a variety of outdoor entertainment products -- including hot tubs, barbecues and saunas -- that require well-trained workers, Loyd said.
“Some of the smartest people in the world live here, and if I was to move the company outside of California I would lose some of those good, qualified people that I might not be able to find” elsewhere, Loyd said.
Another lure is California’s harbors, which make it easy to ship products to his company’s increasingly international customer base, Loyd said.
Local loyalties -- Loyd grew up in Pomona -- also helped persuade him to stay put.
In the end, Cal Spas doubled the size of its half-million-square-foot plant and plans to add another half a million square feet next year once the housing downturn shows signs of abating, Loyd said.
But even companies that are loyal to California are frustrated by what they see as excessive regulation and a less-than-friendly attitude toward business.
The result in some cases is that companies maintain their headquarters and a core of high-end jobs in the Southland but move lower-level operations out of state.
Virco Manufacturing Corp., which makes children’s furniture, is based in Torrance but creates most of its new jobs at its Arkansas facility, where regulation is much lighter and energy costs are four times lower, said Robert Virtue, Virco’s president.
“The overregulation is a real deterrent to growth,” Virtue said. “Many of the jobs we’re adding are in Arkansas because the business climate there is good.”
Nevertheless, Virtue plans to stay in California because of the skilled labor force and the fact that many of its sales are in California and other Western states.
“The market here is good,” Virtue said. “That’s probably as big a factor as anything else.”
Southern California will always have a solid manufacturing industry, Schniepp said.
“It still employs a lot of people and still pays above-average salaries,” he said. “It’s not dying away. It’s just not a growth industry.”
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