Southland Economic Indicators Increase

Times Staff Writer

The Southland will post modest economic growth over the next three to six months, but won’t really pick up a full head of steam until the middle of 2004, according to a projection released Monday.

Cal State Fullerton said its index of leading indicators for Southern California had increased 0.65% in the third quarter, marking the gauge’s fourth straight quarterly increase. That momentum should continue into the new year, according to economist Adrian Fleissig, author of the index. But he said a robust expansion was still a few quarters away.

Recently released gross domestic product figures show that the U.S. economy grew at a scorching 7.2% pace in the third quarter. But Fleissig’s research suggests that the Southland’s gains will be more tepid. While the state’s fortunes are inextricably linked to the health of the national economy, some unique factors may constrain the region’s near-term growth, Fleissig said.

California’s budget crisis, for example, means that communities statewide will continue to keep a lid on hiring and supplier contracts.


The recent wildfires may extract a toll as well. Although insurance proceeds will cover much of the damage and will boost construction and retail spending down the road, Fleissig said lost sales, snarled deliveries, absenteeism and other fallout from nearly two weeks of blazes could prove a drag on growth in the short run.

In addition, California’s workers’ compensation system remains the most expensive in the nation and a barrier to hiring, despite recent efforts to reform the system.

“We’re just not seeing much growth in employment ... which is what drives consumer spending and purchasing power,” Fleissig said. “It doesn’t look as if Southern California will be falling back into recession, but it doesn’t look like there is going to be a huge recovery” anytime soon.

Cal State Fullerton’s Southern California index projects economic activity for a six-county area consisting of Los Angeles, Orange, San Bernardino, Riverside, Ventura and Imperial counties. It includes national as well as regional components.


Five of those components -- the Standard & Poor’s 500 stock index, the interest rate spread, real money supply, Pacific region consumer confidence and the unemployment rate -- showed improvement last quarter. Two other components -- Southern California building permits and regional employment -- posted declines.

The 0.65% third-quarter increase in the index compares with a 0.9% gain in the second quarter. The index declined 0.57% in the third quarter of 2002.