A few weeks ago I had lunch with an acquaintance whose business is tied to the entertainment industry. He lamented that he knows of many companies that have left Los Angeles in recent years or were thinking of doing so now.
A look of disgust came over his face. “If I didn’t have to be here, I’d leave, too,” he said.
His complaints were the usual ones: high costs, high taxes, lots of rules and regulations, and what he viewed as feckless local political stewardship.
Those are the kinds of comments you hear but you kind of brush off. Like the weather, everyone complains about taxes and weak-kneed leaders, but on net, not that many businesses really leave. Do they?
Well, if you look at the new midyear economic update from the Los Angeles County Economic Development Corp. (which is to be available to the public this week), you’ll say, “Uh oh.”
As everyone knows, the situation right now is bleak. L.A. County’s unemployment rate of 11.5 percent is much higher than the national average. The number of nonfarm jobs in L.A. County this year is expected to go down by 168,000; that means 4.1 percent of payroll jobs will be lost in 2009. Last year, L.A. County lost 1.3 percent of its payroll jobs and next year we’re expected to lose an additional 2 percent.
According to the report, L.A. County is forecast to have fewer payroll jobs this year than in any other year in this decade. And next year, fewer still. Does that tell you that businesses are moving here, staying here and growing here?
Hold on, you might say, these are unfair comparisons because this is a recessionary period. OK, take out the recession. Let’s select the one year in this decade with the highest number of payroll jobs. That was in 2007, when the county had 4.122 million jobs. But in 2000, there were 4.072 million jobs. If you do the math, there was an increase in payroll jobs of 1.23 percent from the beginning of this decade to the peak in 2007. Any way you cut it, that’s meager. Especially considering that the county’s population increased 7.3 percent in that same span. Especially considering there was an economic boom in that time.
It gets worse. This county has been bereft of any real growth in payroll jobs for 20 years. As you can see from the story on page 1 of this issue, reporter Howard Fine writes that the number of L.A. County payroll jobs hit a peak in late 1989. We have never again had as many payroll jobs despite the economic booms since.
However, Fine points out that what has increased is the number of so-called informal jobs, or freelancers, contract workers, independent consultants and the like, along with underground workers.
Some could argue that greedy businesses are moving their work off the books by cynically dismissing payroll employees and hiring them back as cheaper private contractors. Maybe some of that is true, but I suspect most businesspeople would much prefer to keep their payroll employees for consistency, predictable work flow, steady customer relations and a number of other reasons. But employers here are so burdened with costs and rules that they are forced to do one of two things: go the freelance route or move to a business-friendly state. The numbers sure seem to indicate that they’re doing one or the other.
The burden is on policymakers. First, they must realize that L.A. County’s economic problems have not been caused by the recession, they’ve been revealed by it. Then they must look at ways to make Los Angeles business-friendly truly business-friendly and stop the phony posturing and stupid speeches that do nothing to lighten the burdens on businesses here.
Charles Crumpley is editor of the Business Journal. He can be reached at
[email protected].
