Jobs Data Reveal Rest of State Still Lags Los Angeles

By KATE BERRY

Staff Reporter

Los Angeles is poised to lead California out of its current economic slump even as the San Francisco Bay area struggles to regain the footing it lost two years ago.

Revised employment data released by the state Employment Development Department show that L.A. County has weathered the downturn far better than its northern counterparts and even Southern California neighbors such as Orange County.

Declines in tourism, manufacturing and trade have been offset by a patchwork of gains in defense, government and a variety of professional services everything from accountants to ambulance drivers.

“L.A. has a vibrant economy that is just waiting for everyone else in the state to get their act together,” said Christopher Thornberg, senior economist at the Anderson School at UCLA. “We’re going to lead the recovery.”

Meanwhile, counties in Northern California, such as Santa Clara, were found to have much higher unemployment rates than believed earlier.

“The employment situation in California is not as good as we previously thought, especially in the Bay Area,” said Keitaro Matsuda, senior economist and senior vice president at Union Bank in San Francisco. “Southern California has a more balanced, diverse economy now.”

It was already well known that L.A. was managing better during the economic downturn than parts of Northern California. But recent revisions to the methodology in determining state job growth show the contrast in starker relief.

New measure

The EDD made two significant changes to its methodology.

First, the department updated its annual revision called benchmarking, in which tax filings are used to update the previous year’s employment figures.

Also, for the first time the department used a federally mandated industry classification system that ensures statistics produced by members of North American Free Trade Alliance are comparable.

The new North American Industry Classification System, which replaced the old Standard Industrial Classification, breaks down job classifications into more specific categories.

Job losses in the Bay Area that previously went uncounted represented most of the revisions, with 183,100 additional jobs lost in December alone. The impact raised the unemployment rates dramatically in San Francisco, San Jose and Santa Clara counties.

Economists believe the old method did a poor job of measuring unemployment in the technology sector, where new companies come and go quickly. By some estimates, half of the job losses in the state came from Silicon Valley.

“Everybody had been talking about the Bay area doing so well because stock options and perks are sexy,” said Thornberg. “Meanwhile, L.A. was the one doing good.”

That’s not to say that L.A. is on fire.

In the past year, Los Angeles County added just 45,000 jobs to its labor force of 4.7 million, a paltry growth rate, said Bill Freed, a labor market analyst with the EDD.

Yet compared with San Jose, which has lost 150,000 jobs in the past two years roughly one in five jobs since the dot-com peak in late 2000 Los Angeles is booming.

With L.A.’s strong performance, the state figures look better. Unemployment rose slightly, to 6.5 percent statewide in January, versus 6.4 percent in January 2002. In a separate survey, the state actually added 216,000 jobs.

“Los Angeles has been insulated from what has been the major shock to the overall economy and the recession and that is investment in information technology,” said Fred Furlong, an economist at the Federal Reserve Bank in San Francisco.

Ironically, the Bay Area seems eerily reminiscent of Southern California in the early 1990s, when exposure to the aerospace and defense industries crippled the economy.

In the four-year recession in the early 1990s, L.A.’s jobless rate peaked at 9.8 percent in 1993. This time around, Los Angeles was one of the few areas where unemployment fell year-to-year, to 6.4 percent in January from 6.7 percent in January 2002, seasonally adjusted.

Outshining neighbors

Even Orange County, which outperformed L.A. during the boom periods, now lags its northern neighbor.

Job growth in Orange County slowed to a standstill last year with just 11,500 jobs added, said Ann Marshal, a state labor market analyst, who attributed the slowdown to a migration of employers to Riverside County, which added 28,100 jobs in the past year. By contrast, the county added 29,400 jobs in 2001 and 43,800 jobs in 2000. (These figures are based on the old system; EDD says they’re out of date.)

San Diego also is growing slightly better with the addition of 13,400 jobs, a 1.1 percent growth rate.

Despite the changes, Jack Kyser, chief economist for the Los Angeles Economic Development Corp., says the state still underestimates employment in Los Angeles County by about 380,000 jobs. This so-called “underground economy,” which includes an array of workers and cash-based businesses that are not captured in the jobless data, are largely small businesses contributing to stronger growth in Los Angeles.

“We have so many people who work in a such a way that it just doesn’t get captured by the statistical mills entrepreneurs, the self-employed or entertainment workers,” Kyser said.

What the statistics do not show is whether a recovery is imminent. Investment and hiring plans at many companies are on hold.

Mark Zuccolo, vice president of marketing at On Assignment Inc. in Calabasas, said the temporary staffing industry is in the depths of another recession, which happens every 10 years. But it is among the first to see signs of a rebound.

“Usually we lead the recovery by four to six months,” he said. “The fact that our business hasn’t started to come back yet indicates to me that the economy is not yet recovering.”