Region’s Robust Growth Expected to Continue
Southern California’s robust economy, bolstered by a long-awaited rebound in Los Angeles and continued growth in Orange County, is now strong enough to withstand an expected slowdown in the national economy late next year, Cal State Fullerton economists said Tuesday.
The accelerating regional economy will lead to more jobs, increased output, higher incomes and a resurging real estate market in the coming year, they predicted.
The big difference from last year is that Los Angeles County has joined the economic renaissance, said economist Anil K. Puri, who presented the school’s annual economic forecast in Irvine.
“When L.A. County bounces back, you know the region is going to do well,” he said.
Even a slowdown in the national growth rate, which is expected to occur late next year, will only slightly dampen Southern California’s bright prospects, Puri said. A latecomer to the national recovery, the region now has enough momentum from its rebounding manufacturing, construction and service sectors, foreign trade and tourism to keep the expansion going well into the next century, he said.
Until now, Orange County has led the area out of the recession. By last year, it had recovered all the jobs lost during the downturn, said Puri, director of Cal State Fullerton’s Institute for Economic and Environmental Studies.
The county will add 34,000 jobs this year, an increase of 2.9%, and an additional 32,000, or 2.7%, next year, thanks to burgeoning tourism, construction, business services and high-tech exports, he said.
Over the next five years, the county will average a 2.3% annual increase in payrolls, he predicted.
Job growth in Los Angeles County, which has more than 63% of the region’s employment, will be somewhat slower, at about 2% a year through 2002, Puri said.
But he noted that the surging motion picture industry now employs as many workers in the county as aerospace did at its height in the late 1980s.
The hectic pace will continue, he said, “given the revolutionary changes in technology and the growing worldwide demand for entertainment industry products.”
Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., agreed that the county “is back. We are on a roll.”
Though the county has yet to recover all the jobs lost during the recession, Kyser believes the official government statistics understate the amount of growth in fields such as computer software and multimedia. As escalating real estate prices in Northern California make that region less affordable, much of the state’s high-tech growth will be funneled to Los Angeles and Orange counties, he said.
The Riverside-San Bernardino area is also gaining speed, thanks to a manufacturing revival, Puri said, while in Ventura County, growth is being spurred by wholesale and retail trade and services.
Puri expects the five-county region to add a total of 146,000 new jobs this year, a 2.4% increase, and 128,000 next year, a 2.1% gain.
Through 2002, payrolls should grow at about 2% annually, and unemployment will continue to fall, he predicted.
The demand for workers is expected to lead to higher wages. Personal income will rise 6% this year, and more than 5% annually for the next five years--a healthy sign for retail sales, Puri said.
A similar optimism is also evident in real estate, he said. The number of building permits in the region this year will hit the highest level since 1990, and will jump an additional 30% next year, he predicted.
“National builders are not just having a look, they’re moving in,” said Michael Meyer, managing partner at E&Y; Kenneth Leventhal Real Estate Group in Newport Beach.
Even so, he said, they can’t keep pace with swelling demand, and that’s translating into higher prices across the board.
Meyer also sees more jobs being created in the construction industry as the building of new offices--which has remained dormant during the last several years--begins to heat up.
Daniel E. Laufenberg, chief U.S. economist at American Express Financial Advisors, said the 6 1/2-year-old expansion isn’t over.
The biggest risk is that rising labor costs will rekindle inflation, said Laufenberg, who presented the national part of the annual forecast. That could prompt the Federal Reserve Board to raise interest rates, which would stifle economic growth. However, he said he doesn’t see a return to double-digit consumer price increases.
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Good Times Roll
Continued growth in Orange County and a revived Los Angeles County will help keep Southern California’s economy booming into the 21st century. The expansion will mean more jobs, higher incomes, increasing sales tax revenue and the continued invigoration of the housing market. Here are the forecasts:
(Please see newspaper for full chart information)
PAYROLL EMPLOYMENT (in thousands)
PER CAPITA INCOME
TAXABLE SALES (in millions)
HOUSING STARTS (in thousands)
*--*
1997 1998 % change Southern California 43.3% 56.0% 29% Orange County 12.7% 14.6% 15% Los Angeles County 10.8% 15.5% 44%
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Note 1997 figures are estimates; 1998 are forecasts
Source: Cal State Fullerton’s Institute for Economic and Environmental Studies
