Southern California economic recovery is forecast
Southern California is headed for a gradual economic recovery in 2010 and 2011, along with the rest of the state and the country, according to a forecast released today.
Unemployment will remain elevated, but the entertainment, international trade and tourism sectors will push growth regionally, according to the report from the Kyser Center for Economic Research at the Los Angeles County Economic Development Corp.
“The feeling is that the worst is past and we are looking at a modest recovery,” said Jack Kyser, founding economist of the center. “But there’s still fear out there. We’ve got a ways to go to get back to our peak.”
Although the economy is improving, there won’t be much short-term relief for California’s unemployed. The state has lost more than half a million jobs since 2008 and isn’t likely to see employment growth until 2011. The state’s unemployment rate, which hit 12.4% in December, is projected to stay there, averaging 12.4% for 2010 and falling only slightly to an average of 12% next year.
Tight credit and uncertainty over federal healthcare reform and the staying power of the budding recovery have made employers reluctant to hire, Kyser said. As business picks up, he said, many are coping by giving their employees more hours or by hiring temporary staff instead of full-time workers.
“There’s been a lot of pain around the region,” he said.
Nationwide, the unemployment rate will average 9.9% in 2010 and 9.4% in 2011, compared with the 9.7% rate posted last month.
Job losses should slow dramatically in Southern California. Los Angeles County is projected to lose 19,200 jobs this year after losing 154,000 in 2009. Riverside, San Bernardino, Orange and San Diego counties are also expected to post modest job losses this year. But the region is likely to see net job gains in 2011 -- more than 80,000, according to the forecast.
California’s housing market also will continue to improve. Permits for new homes are expected to rise, but nowhere near the levels seen during the housing boom. More than 6,300 permits in 2010 and 9,845 in 2011 are projected to be filed in Los Angeles County. That’s up from 5,610 last year but far short of the 26,935 permits recorded in 2004.
Home construction this year should accelerate statewide to 45,000 permits, a 24.3% increase over 2009. But the permit value of commercial building probably will drop 12.4%, the forecast said.
Personal income, which declined 1.5% in L.A. County last year, is projected to increase 1.8% in 2010 and 3.8% in 2011. That should help the recovery of the retail sector.
But manufacturing, traditionally a source of solid jobs with benefits, will stay distressed as it battles outsourcing and overseas production.
“They’re trying to be as lean and mean as possible,” Kyser said. “The sector has really been hammered and continues under extreme pressure.”
Several major infrastructure projects across Southern California, including at the ports and Los Angeles International Airport, will bolster the local economy, Kyser said.
The entertainment industry is benefiting from a state incentive program, the slow return of advertising and a “binge” of pilot orders from broadcast TV networks and cable channels.
The recent opening of the JW Marriott hotel near the Los Angeles Convention Center, along with additions and improvements at theme parks, will drive tourism traffic into the area, Kyser said.
Other bright spots in Los Angeles County include healthcare services and private education, which will each add thousands of jobs in 2010, he said.
But the state budget crisis will weigh on the economy, Kyser said. Municipal and county budgets have shrunk, and staff layoffs and service cuts are on their way.
And if the Defense Department halts Boeing Co.’s C-17 program, thousands of local support and assembly employees and subcontractors could lose their jobs.
“It’s going to be interesting,” Kyser said. “A few smaller cities might have to declare bankruptcy.”
