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Thursday, May 19, 2022

LA Jobs Recovery in Full Swing, but Will It Last?

Los Angeles County’s economic recovery continued in March with a second straight month of substantial job gains and another slight drop in the unemployment rate.

According to figures released April 16 from the state Employment Development Department, employers in Los Angeles County added 34,000 people to their payrolls in March, following a gain of 48,000 jobs in February.

That’s 82,000 jobs added in two months after three straight months of declines as the devastating coronavirus winter surge forced another round of business closures and restrictions.

The EDD also reported that the unemployment rate fell to 11.3% in March from 11.5% in February, which in turn was down substantially from the 12.6% reading in January.

Even more encouraging, several local economists predict continued robust job gains in the months ahead as the economy continues to reopen. They cite the rapid pace of vaccinations, the relatively low levels of Covid-19 cases and hospitalizations, and the billions of dollars in federal stimulus money that are expected to course through the economy over the next several months.

“Los Angeles County was one of the hardest hit economies with the lockdown last year, so the snapback should be steeper here,” said Taner Osman, research economist with Westchester-based Beacon Economics.

The leisure/hospitality sector should be the biggest beneficiary of this rebound, according to Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Westchester.

“As leisure/hospitality will continue to be the main driver of the recovery, the employment gains in Los Angeles County should be faster than the state as a whole,” he said.

Yet even amid this surge in optimism, local economists said there are potential trouble spots lurking.

One is the size of the hole Los Angeles County has to dig out of just to return to pre-pandemic 
job levels. In March and April of last year, the county lost a staggering 772,000 payroll jobs, or roughly one out of every six jobs in the county.

Since then, according to figures compiled by the Los Angeles County Economic Development Corp., the county has regained exactly one-third of those lost jobs — and that’s after the substantial gains of the past two months.

“I’m optimistic about the months ahead, but there is still a long way to go,” said Shannon Sedgwick, director of the LAEDC’s Institute for Applied Economics. “The L.A. County region will not likely return to pre-pandemic employment levels until 2024. This is because there was real damage done to many businesses in the region, especially small businesses, and that will have a longer-lasting impact on jobs.”

There is also increasing concern about the two-track recovery that’s underway — not just the much-documented widening of the gap in the prospects for low-income and high-income earners — but also between the prospects for large businesses and small businesses.

Sedgwick pointed to a pair of data sets for L.A. County from private sector market research firms that were pulled together by Opportunity Insights, a nonprofit organization located at Harvard University.

The first data set shows that in L.A. County, total consumer spending for the week ending April 4 was down only 1.9% from the pre-pandemic level of January 2020. But cumulative revenue for small businesses in L.A. County was down 30.2% for the week ending March 31 as compared to the pre-pandemic level recorded in January 2020.

Garcetti’s plan

“Consumer spending is rebounding in Los Angeles County, but small business revenue is not rebounding,” Sedgwick said in a briefing last week hosted by the Los Angeles County Economic Development Corp.

Instead, she said, the money has been redirected to large businesses, especially Amazon.com Inc.

Los Angeles Mayor Eric Garcetti last week in his State of the City address promised more assistance for the city’s small businesses, including a $25 million program to give $5,000 checks to 5,000 struggling small businesses within the city.

That’s a miniscule portion of the overall stimulus dollars that will be flowing through the L.A. economy in coming months from the $1.9 trillion American Rescue Plan enacted last month.

The city of Los Angeles is slated to receive $1.3 billion from that plan while the county will get roughly $1.9 billion. Individuals and businesses within the county will be receiving billions of dollars more.

“Last year’s stimulus dollars helped stabilize things, especially for people who lost their jobs or had their hours sharply cut back,” Beacon’s Osman said. “But that stimulus didn’t trigger as much spending by higher-income people who largely kept their jobs since there was little to spend it on during the lockdown. They piled money into savings.”

Pent-up demand

This time around, Osman said, things are much different. “There’s huge pent-up demand coming right as the economy is reopening and lots of higher income people in the county have padded savings they can now draw on. That money will begin to course through the economy now,” he said.

Sedgwick pointed to other ways that the stimulus money will be felt. She said the expansion through the summer of unemployment benefits will help the unemployed with housing and food costs while the money going to local governments will be disbursed to address a wide range of needs.

“The funding will boost economic activity and spending in the near term, which is great in terms of reducing the chance of a near term recession,” she said. “But it is important that money headed for public entities and government to be invested in a way that will improve outcomes and systems in the long run.”

Sedgwick pointed to one potential trouble spot down the road: the end of renter and landlord assistance programs that were crafted shortly after the pandemic hit last year, including a ban on evictions for renters unable to pay rent due to Covid-related layoffs or reductions in work hours.

“As eviction protections expire later this year, it is important that we collaboratively develop solutions to avoid a rise in homelessness,” she said.

Howard Fine
Howard Fine
Howard Fine is a 23-year veteran of the Los Angeles Business Journal. He covers stories pertaining to healthcare, biomedicine, energy, engineering, construction, and infrastructure. He has won several awards, including Best Body of Work for a single reporter from the Alliance of Area Business Publishers and Distinguished Journalist of the Year from the Society of Professional Journalists.

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