The same diversity that protects the Los Angeles economy against a severe downturn is expected to dampen its job growth next year.
Mark Schniepp, director of the economic forecast project at UC Santa Barbara who issued a report for the UCLA Anderson Forecast, said the L.A. region has lost some of its edge from a year ago, when it was leading the state in economic growth.
“L.A. is like a big slug that works as a drag on the region,” said Schniepp. “There are individual centers in the San Gabriel Valley, in Burbank and Glendale, for instance, or at the airport and the ports that have comparable growth to other fast-growing areas in California. But, as a whole, Los Angeles is too big and too broad for these individual pockets to lift the whole county.”
As a result, the Greater Los Angeles region, which includes most of Southern California, is projected to post a job growth rate of between 1.6 percent and 1.8 percent next year. And L.A. County proper is projected to have a growth rate of 1.5 percent, about half the projected California growth rate of 2.7 percent.
Schniepp was quick to add that L.A.’s regional economy is fundamentally healthy and that there are no signs of a recession on the horizon. It’s just that other parts of California are doing better.
The Bay Area, for example, has an export-driven, high-tech economy that is less diverse than L.A.’s and therefore is more vulnerable to an economic downturn, as evidenced by how hard it was hit by the Asian crisis. But that same high-tech concentration is fueling the Bay Area’s boom.
The combined unemployment in San Francisco, Santa Clara and Oakland, for example, is currently below 3 percent, about half the 5.7 percent rate in L.A. County.
Los Angeles’ growth in 2000 will be curtailed by its lack of available space, according to the forecast report. “The most (economically) attractive areas in California Santa Clara and San Francisco are the ones that grew first,” Schniepp said. “Then followed San Diego and Orange County, then came Los Angeles, and now Central California is showing the strongest growth. As the labor supply becomes tighter, commercial and industrial space becomes scarce, and housing becomes less affordable, growth will slow down in an area.”
Other forecasters note that the shortage of affordable housing in Los Angeles is becoming an increasingly serious constraint on economic growth.
John Burns, senior management director with the Meyers Group, a real estate consulting firm, said the median new-home price in Kern County is $129,990, compared with $305,990 in the Santa Clarita and San Fernando valleys.
Despite such ominous predictions, L.A.’s growth rate translates to a sizable number of new jobs, because of the massive size of the local economy.
“Given our size and given the fact that by some accounts we already have as large a technology sector as Silicon Valley, 2 percent growth seems quite respectable,” said Tom Lieser, executive director of the UCLA Anderson Forecast.
Lieser says an economy as big as Los Angeles tends to be more self contained, producing a greater number of goods and services for the internal market than for export whether overseas or to other parts of the United States. That’s not to say that Los Angeles does not have a large export industry, but it is a smaller portion of the overall economy than that of Silicon Valley.
“I don’t know if we have the potential to grow as fast as Silicon Valley,” said Lieser.
Moreover, export industries are typically the ones that show the fastest growth.
“It’s not unusual to see 500 percent annual growth in an export-driven industry, whether it is computer or routers,” said Lieser. “These are typically industries that grow very fast for a short time.”
Meanwhile, the job growth rates for manufacturing, trade, and distribution major sectors of the Los Angeles economy have been relatively low, partly because of dramatic increases in worker productivity.
