Surging Growth Seen for Region
Southern California’s robust economy, bolstered by a long-awaited rebound in Los Angeles County 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 here.
“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 another 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, he 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 services and wholesale and retail trade.
Puri expects the five-county region to add 146,000 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 another 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 offices--which has remained dormant during the past 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 but that most of the growth “may be behind us.”
The biggest risk is that rising labor costs will rekindle inflation, said Laufenberg, who presented the national segment of the forecast. That could prompt the Federal Reserve Board to raise interest rates, which would stifle economic growth. However, Laufenberg said he doesn’t see a return to double-digit consumer price increases.
In Orange County, where the unemployment rate has hovered just over 3% all year, Puri said the key concern is: “Are we headed for a labor shortage? Do we have the room to grow?”
He believes that the demand for workers will be met by an increased flow of Inland Empire residents to jobs in Orange County, and that people who were sidelined during the recession will return to the work force.
“We believe there is still slack in the local economy,” he said. “More people can move in.”
Orange County’s growth is being spurred largely by technology exports, economists said.
Last year, high-tech exports from the county reached $6.4 billion, and accounted for more than 120,000 jobs. By 1999, they’re expected to hit $8.9 billion, and add 20,000 more jobs to county payrolls, according to Cal State Fullerton economist Vincent Dropsy.
More than half the county’s exports go to Asian-Pacific nations, Dropsy said, but Mexico has become the fastest-growing foreign market for county-produced goods.
The growth in exports is being fueled by global demand for electronics, aircraft parts and biomedical and telecommunications products.
Foreign markets now account for half of the sales at Rockwell International Corp.’s semiconductor systems unit in Newport Beach, said company spokeswoman Eileen Algaze.
The Rockwell unit supplies 80% of the computer chips used in fax machines manufactured in Japan, Its chips also go into digital cameras, digital cordless phones and minicomputers produced in the Asia Pacific region. “It’s been a consistent growth market for us over the past several years,” she said.
David Anast, publisher of the Biomedical Market newsletter in Costa Mesa, said this region has become the world’s premier medical products manufacturing center.
“There are, in Southern California, two times as many medical manufacturers as 10 years ago, each of which are producing more products,” he said. Foreign nations are itching for locally produced medical devices, such as lasers and noninvasive surgical instruments, he said.
Business services also experienced rapid growth in Orange County, adding 30,000 jobs since 1991, Puri said.
Disneyland’s planned expansion should also contribute to job growth in the years ahead, he said.
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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:
PAYROLL EMPLOYMENT (in thousands)
Southern California
1998: 6,308
1999: 6,416
2000: 6,552
2001: 6,691
2002: 6,829
****
Orange County
1998: 1,251
1999: 1,274
2000: 1,307
2001: 1,340
2002: 1,374
****
Los Angeles County
1998: 3,951
1999: 4,014
2000: 4,093
2001: 4,170
2002: 4,248
****
PER CAPITA INCOME
Southern California
1998: $25,471
1999: $26,427
2000: $27,551
2001: $28,673
2002: $29,771
****
Orange County
1998: $30,007
1999: $31,168
2000: $32,423
2001: $33,678
2002: $34,867
****
Los Angeles County
1998: $25,649
1999: $26,699
2000: $27,953
2001: $29,249
2002: $30,541
****
TAXABLE SALES (in millions)
Southern California
1998: $162,591
1999: $171,122
2000: $180,882
2001: $191,263
2002: $202,677
****
Orange County
1998: $35,465
1999: $37,167
2000: $39,360
2001: $41,603
2002: $44,016
****
Los Angeles County
1998: $94,126
1999: $99,456
2000: $105,125
2001: $111,222
2002: $117,896
****
HOUSING STARTS (in thousands)
Southern California
1997: 43.3
1998: 56.0
% change: 29%
****
Orange County
1997: 12.7
1998: 14.6
% change: 15%
****
Los Angeles County
1997: 10.8
1998: 15.5
% change: 44%
1997 figures are estimates; 1998 are forecasts
****
High-Tech Headway
The value of Orange County high-tech exports will also continue to grow, with best-case forecasts showing nearly $9 billion worth by fiscal year 1998-99. Here is the trend, in millions:
1993-94: $4,465
1998-99: $8,913
Source: Cal State Fullerton’s Institute for Economic and Environmental Studies
