THE COUNTY BUDGET CRISIS : Layoffs Expected to Slow but Not Stop Economic Rebound : Recovery: Analysts say cuts could hurt region’s strong retail sales, modest real estate gains and low jobless rate. But other business sectors should overcome setback.
The massive layoffs of Los Angeles County workers would throw sand in the gears of the county economy just as the region is joining the rest of California in a steady, if slow, rebound from the severe recession of the early 1990s.
But the lost jobs would not stop the economic recovery altogether, analysts said. As devastating as the layoffs and demotions would be for the families directly involved, the cuts are still too small to grind the entire county economy to a halt, they said.
“The impact will not be enough to derail the economic recovery that seems to be emerging in the area,” said Lynn Reaser, chief economist at First Interstate Bancorp in Los Angeles.
Although county government is Los Angeles County’s biggest employer, with about 88,000 workers, the 5,200 county jobs expected to be lost represent less than 1% of the county’s total non-farm work force of 3.7 million, she noted.
In another context, the region’s shrinking aerospace and defense industry has lost five times that many workers in recent years, and yet the regional economy is still managing a recovery because of strength in other sectors such as international trade, tourism, entertainment and professional services.
The region’s latest defense cut came this summer, when the U.S. government announced the closure of the Long Beach Naval Shipyard, where 3,000 people work.
To be sure, Los Angeles County’s actions will be felt, economists said. The cuts could crimp three key trends that have worked in the region’s favor lately: A lower unemployment rate, robust retail sales and a modest pickup in the long-dormant housing market.
The county’s jobless rate stood at 8.6% in August, according to the most recent figures from the state Employment Development Department. That was 3 percentage points above the national rate, but it also was down from the county’s 10.3% unemployment rate of a year earlier.
Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County, a private jobs promotion agency, said the sheer size of the county’s layoffs could make many consumers nervous about spending money, at least temporarily, as they re-evaluate their own job prospects.
“The key question is . . . will it affect retail sales?” Kyser said. “When Orange County declared bankruptcy [in December], retail sales there hit the wall. In Los Angeles County, retail sales up until now have been surprisingly strong.”
The same inhibitions about spending “could have an impact on the nascent housing recovery” in the region, he said.
In August, sales of houses and condominiums in the county--new and used--totaled 7,795, a modest 1.6% increase from a year earlier, but the second-highest total since 8,352 homes changed hands in June, 1991, according to DataQuick Information Systems, a research firm in La Jolla.
But housing prices continue to slide. The median sales price of the properties was $163,000 in August, down 20% from $203,000 in mid-1991, DataQuick reported. (The median means half the houses sold for more than that sum and half for less.)
First Interstate’s Reaser said the housing market will keep building steam despite the county’s looming layoffs.
“Clearly it will have a damaging effect on home purchases by those directly involved,” she said, “but again, the psychological impact would not be large enough overall to dampen consumers’ willingness to buy a home.”
