Cloud Hangs Over Southland Economy

By JERRY HIRSCH

Jan. 10, 2001 12 AM PT

TIMES STAFF WRITER

Slower national growth, coupled with surging California energy prices and the potential for bitter Hollywood strikes by writers and actors this summer, will make 2001 the most turbulent economic year for Los Angeles since the Asian economic crisis three years ago, according to the latest forecast on the region’s economy for 2001.

The report, issued Tuesday and prepared by Chapman University in Orange, stopped short of predicting a recession either in the region or nationally.

There’s little chance the Los Angeles region can avoid what the report predicts will be a slowing in the national economy from a growth rate of more than 5% last year to barely 3% this year. The Los Angeles region will experience slower job growth, less robust consumer spending and a cooling in international trade.

The report was similar to a December forecast for the state prepared by economists at UCLA. However, the UCLA report signaled warnings of a national recession, while forecasting that California would experience a moderate slowdown. The Chapman forecast generally mirrored a report on the region prepared by the Los Angeles Economic Development Corp.

“There’s no doubt that growth in Los Angeles will be slower, but it will still be positive, helped by increases in defense spending and healthy exporting,” said Esmael Adibi, the economics professor who directs Chapman’s annual forecast.

Of course, the energy crisis remains a cloud over the state. However, Adibi said the economy is strong enough to deal with the current electricity and natural gas rates.

Adibi said the 9% rate increase won by the state’s electric utilities last week amounts to an extra $1.6 billion cost to businesses and consumers over a year.

“If you think of that as almost an energy ‘tax,’ it is almost offset by the quarter-point decline in the sales tax enacted for this year,” Adibi said.

Chapman forecasters said the county’s economy will add about 75,000 jobs next year on a base of almost 4.1 million, a 1.8% growth rate. That would be a dip from the 2.1% recorded last year, the fastest pace of job creation since 1990.

A strike in Hollywood could shave job growth to 1.6%. The key to how much damage a strike inflicts on the county’s economy is its duration, Adibi said.

Declines almost uniformly represent changes in how fast various economic indicators are growing rather than reversals into negative territory.

Taxable sales, for example, will decline from its torrid pace of 6.8% growth last year to 5.5% this year--nearly $110 billion.

Home prices will continue to rise, helped by falling interest rates, continued job creation and strong demand. The average resale price of an existing single family home will rise 7.4% this year to $338,000, finally surpassing the 1990 peak, according to the Chapman economists.

Growth in international trade, one of the key drivers of the Southern California economy, will slow to about 9.3% this year from 11.7% last year. But even with the slowing, according to Adibi, trade is still growing at a rapid pace and it remains an important factor in the region’s economic health.

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Anatomy of a Slowdown

The slowing U.S. economy, a looming entertainment industry strike and higher state energy prices will cloud the Los Angeles region this year, economists predict.

The rate of job creation is expected to slow ...

(year-over-year percentage change in total payroll employment)

1999: 1.6%

2000 estimate: 2.1

2001 forecast: 1.8

... and people won’t feel as wealthy ...

(year-over-year percentage change in personal income)

1999: 6.6%

2000 estimate: 6.3

2001 forecast: 5.5

... so they will think twice before spending.

(year-over-year percentage change in taxable sales growth)