The Los Angeles economy is chalking up a year of exceptionally strong growth, according to the latest forecast from the Los Angeles County Economic Development Corp.
In particular, record growth in international trade is driving the local economy and is expected to buffer the effects of the long-anticipated “soft landing” of the national economy.
The LAEDC reports that the total output of goods and services in Los Angeles is expected to increase by 5.3 percent this year, compared to growth of 5.1 percent last year. Total personal income is expected to increase by 6.3 percent this year, up from an increase of 5.8 percent last year.
The value of two-way trade through the Los Angeles port district will be an estimated $229.8 billion this year, a 16.6 percent increase over last year, and is projected to grow an additional 10.3 percent next year.
“International trade is the poster child of regional economic growth,” said Jack Kyser, chief economist with the LAEDC. “It’s growing like a house on fire, just like the entertainment industry used to do a few years ago, and it has become one of the linchpins of the local economy.”
Fueling the stream of imports through the ports is the insatiable appetite of U.S. consumers for everything from toys to apparel to electronic gadgets from Asian countries. At the same time, the recovery of the Asian economies over the last two years has stimulated demand for U.S. exports.
As a consequence, the ports of L.A. and Long Beach have seen month after month of record container volume. The surge has not just created jobs and work for longshoremen, but also for truckers, freight forwarders, logistics operators and affiliated support services. At the same time, the growing volume of goods arriving at the ports is creating concern about the ability of the infrastructure to handle the flow.
In addition to infrastructure concerns, the near-term outlook for international trade, and hence the economic wellbeing of L.A., depends on Alan Greenspan’s view on the sustainability of rapid economic growth on the national level. If the Federal Reserve were to increase interest rates further this year to ward off inflationary pressures, it might lead consumers to be a little more frugal this Christmas and leave importers with warehouses full of unsold merchandise.
“The most immediate concern of the Fed will be to tighten consumer spending,” Kyser said. “Consumer confidence and retail sales have been strong lately, which may be reason enough for Greenspan to increase rates in August and maybe again later in the year.”
