By EDVARD PETTERSSON
Staff Reporter
Did you know L.A. has 521 talent agencies and managers with combined revenues of $881.5 million?
Or 5,536 fast-food joints with combined sales of $3.4 billion?
Neither did the federal government, until recently. A mountain of data is currently streaming in from the 1997 Economic Census that is improving available knowledge about business in Los Angeles.
L.A.’s economy long has been challenging to grasp by government statisticians, thanks to a variety of factors, including the area’s plethora of one-person businesses and the large number of firms owned by immigrants who are loath to cooperate with survey-takers.
“Under the (old) system, biotech firms are included with drug manufacturers,” said Tom Lieser, executive director of the UCLA Anderson Forecast. “So, when someone asks me how the biotech industry in Los Angeles is doing, I just say that I assume that it is doing OK, but I don’t really know because I don’t have any data except for on a company basis.”
A new system of industry classification used by the 1997 Economic Census promises to help solve some of those problems and provide forecasters with a better sense of what makes the Los Angeles area tick. That, in turn, could be influential in a variety of government policymaking decisions as well as such offshoots as private businesses analyzing potential new markets.
“The new categories will have a much closer correspondence to modern enterprise activity and relate more to what we think is going on in the local economy,” said Lieser.
Under the new system, a number of high-profile industry sectors are, for the first time, classified separately instead of being included with a range of unrelated industries. These include the information sector, the professional, scientific, and technical services sector, and the arts, entertainment, and recreation sector.
The latter category is especially relevant for Los Angeles, and gives a good indication of the importance of the entertainment industry for the local economy.
The new data show that as of 1997 there were 3,886 independent artists, writers, and performers in L.A. County, contributing $3.6 billion to the economy. In all of California, there were 4,544 independent artists, writers, and performers, who had combined revenues of $3.9 billion.
Thus, the new statistics demonstrate that in this category, 92 percent of the revenues for the state as a whole were earned in L.A. County.
Technology has been another sector notoriously difficult to quantify. There is plenty of anecdotal evidence that the software industry in Los Angeles was rapidly growing, but no hard numbers to verify it. Under the old system, software companies were included in the catch-all business services category, together with pest-control services, security-guard services, and temporary-help services, among others.
The new data provide a clearer picture of the local software industry. As of 1997, there were 1,900 businesses in Los Angeles County involved in computer systems design and services, employing 22,540 workers and bringing in $3.6 billion in annual revenues. Of these, 812 businesses specialized in custom computer programming services (writing customized software programs) and brought in $949.1 million in annual revenues.
Among other new high-tech industry classifications are fiber-optic cable manufacturing, cable networks, satellite telecommunications, and cellular and other wireless communications.
The 1997 census is the first set of economic data to use the North American Industry Classification System (NAICS), which was developed by the United States, Mexico, and Canada. This approach will replace the Standard Industrial Classification (SIC) system, which has been used by government agencies since the 1930s to divide up businesses into various industry categories.
“The economy has evolved into something entirely different since the old system was developed,” said Esmael Adibi, director of the Center for Economic Research at Chapman University. “The major changes and the majority of the new jobs have been in the services area, for which there has been no breakdown in the past.”
Although the new data give a clearer picture of the economic landscape, there is still a sizeable portion of the local economy that is not represented. “I suspect a lot of local business are not included in the census data,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp.
“Between 20 to 30 percent of the total number of businesses will be missing because they are small, independent consultant and contractor outfits that do not get surveyed,” he said. “Also, minority businesses are more likely than others not to be counted because they do not fill out the bureau’s survey. Often these people are immigrants from countries where the government is not necessarily your friend, and they will be reluctant to disclose information.”
Pam Powell-Hill, chief of the product classification branch with the Bureau of the Census, acknowledges that although businesses are required by law to report to the census, the bureau enforces this law only in the case of large companies whose data would impact the overall picture.
Another major drawback of the new classification system, said Adibi, is that it will be difficult to make historical comparisons. Although the Census Bureau is expected to update some historical data to make it consistent with the new classification system, Adibi believes budget restraints will make it unlikely that this will be done on the local level.
