Southland Seen Leading 49 States in Economic Growth

Southern California as the 51st state? Don’t count on it anytime soon. Still, the booming economy of the 10-county region will overshadow that of every other state--including New York--within two decades, according to a new study.

The report, prepared by San Francisco-based Wells Fargo Bank, makes that projection even though it assumes that the growth of the Southern California economy will slow somewhat between now and the year 2010. It predicts that the value of products and services in the region will grow 3.5% per year from now until 2010, down from a 3.8% rate over the past 10 years.

That growth, however, still is expected to create growing pains and to be ahead of the 2.8% growth rate forecast for the nation. By 2010, the region’s annual production of goods and services is expected to total $778 billion annually, or 62% of the entire state’s output.

“We were amazed to find that there is still tremendous growth potential in Southern California,” said Joseph Wahed, a Wells Fargo senior economist and author of the report. Titled “Southern California Economy: Toward the 21st Century,” the report focused on the area ranging from San Luis Obispo and Kern counties to San Diego County.

Buoyed by what the report called abundant natural resources, forward-looking manufacturing, service and research industries and an innovative and competitive work force, the Southland is expected to produce nearly 7 million new jobs. And there will be plenty of people to fill those jobs: The region’s population is predicted to reach 24.7 million by 2010, an increase of 7.8 million. While unemployment may rise during a recession, the jobless rate generally will be 5% to 6% over the next two decades, Wahed said. “Unemployment will not be a problem in the region in the foreseeable future.”

The study said most of the new jobs will be in the service sector, including such industries as retailing, finance and the professions. In fact, 80% of the jobs in Southern California will be in service-related industries, compared to 74% currently, according to the report.

Employment and output also will grow in manufacturing, according to Wahed. Defense, aeronautics and electronics will continue to be the dominant manufacturing industries. However, the manufacturing sector is diversifying, with companies involved in textiles, furniture, paper and high-tech fields such as biotechnology, robotics, advanced telecommunications and medical instrumentation leading the way.

Many of the new jobs will be created by small and medium-sized businesses, enterprises that will proliferate over the next two decades, according to the study.

“Gains likely will be strongest in the outskirts of the major metropolitan areas as retailers are attracted by rapid population growth and manufacturers by lower costs,” said the report. “Small business growth will likely be greatest in Ventura, Riverside and San Bernardino counties, and in San Diego (County’s) medium-sized cities.”

By 2010, 59% of the region’s population will be minorities, compared to 39% in 1980, according to the study, and one out of four of the jobs created by that time will be filled by Latinos. The number of Latinos will rise to 40% from 24%; the number of blacks will rise to 10% from 9%, and that of Asians to 9% from 6%, the report said.

“Southern California’s multiracial and ethnic population sets it apart from many areas of the world,” the report said. “Our region’s vibrancy and future success must include patient assimilation of minorities into the economic mainstream of our society.”

In addition, the report said, to ensure continued development while improving the quality of life, regional leaders must meet the following challenges:

- Domestic and foreign competition. To compete successfully, the report said, the region must retain leadership at educational and research institutions.

- Traffic congestion, termed the most serious and and visible problem facing Southern California.

- Infrastructure shortcomings, including concerns about the repair and upgrade of bridges, roads, water systems, schools and sewers. The job could cost from $100 billion to $150 billion, the report said.

- Demands for slow growth. The report said slow growth efforts could make it more difficult to maintain the region’s strong economy.