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Strong Economic Outlook for Region

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Times Staff Writer

Southern California’s economy will outgrow the national economy this year and next, capitalizing on strong outlooks for aerospace, high technology, international trade, professional business services and tourism and travel.

But the region’s entertainment and retailing industries face challenges. And housing will provide less stimulus than before, as sales of existing homes will decline this year while prices flatten.

Those are among the predictions in the latest forecast by the Los Angeles County Economic Development Corp., a nonprofit business advocacy organization.

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The forecast calls for the five-county Southland region to grow 3.7% this year, versus 3.6% for the entire state and 3.3% for the nation. Next year, the Southland will grow 3.3%, versus 3.2% for the state and 3% for the nation, the forecast said.

Job creation should be healthy this year, paced by Riverside-San Bernardino, which will post the region’s fastest job growth rate at 2.1%, or 25,200 jobs. Orange County’s jobs will grow 1.6%, or 24,300 positions, and Los Angeles County will expand 0.9%, or 37,900 jobs, the report said.

“But it’s a much more competitive business environment than most anybody understands,” said Jack Kyser, the LAEDC’s chief economist. Other cities, states and nations continue trying to lure away pieces of the region’s aerospace, film production, trade and tourism industries, he said.

“If Disneyland and Grauman’s Chinese were on rollers, they’d be after them too,” Kyser said.

In addition to runaway production, the entertainment industry is pressured by new technologies and labor unrest, the report said.

The retail industry faces department store mergers and store closings by specialty companies and grocery chains. Major chains such as Mervyn’s, Gap Inc. and Sears, Roebuck & Co. may prune less-profitable stores in the region, Kyser said.

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The region’s housing boom is slowing, but office construction will help offset softness in residential real estate, the forecast said. Office vacancy rates continue to fall, encouraging construction, the report said.

However, the high cost of commercial real estate offers challenges. Companies owning valuable real estate can sell or relocate, especially if the destination state offers incentives, the report said. Shortages of available land in the urban cores of Los Angeles and Orange counties and a tight market for industrial space also pose challenges.

A recent ruling could result in job losses, higher taxes or reduced services, Kyser said. The ruling requires governments to determine pension fund shortfalls and retiree healthcare liabilities and find a way to pay for them, the report said. Cities without a strong tax base, such as Gardena and Hawaiian Gardens, would be hurt, Kyser said.

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