ECONOMY—Forecast Says Area To Avoid Recession But Growth Lean

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Southern California will stave off recession in the final half of the year, but not without running into some lean times, according to a mid-year forecast by the Los Angeles County Economic Development Corp.

In a study to be released July 30, Chief Economist Jack Kyser said the county would not be immune to factors that have slowed the state and national economies, and that labor actions by the Longshoremen and Directors Guild could prove a further drag.

The report shows that the region will see growth at a much slower rate than in previous periods. Employment is projected to grow at a paltry 1.4 percent over the balance of the year, while housing starts will grow at a healthy 10.4 percent.

On the technology side, the picture also is mixed. Southern California aerospace employment, which has been in a free-fall for much of the last decade, is expected to bottom out and venture funding for startups is likely to remain minimal. But the report finds encouraging signs in more advanced technologies, which Kyser found would still attract investor dollars.

Core sectors like shipping and apparel would be hit hard through the year, the report states, with textile manufacturing losing 2,800 jobs. The value of trade through the Los Angeles Customs District will come to a virtual halt growing by 1.8 percent after 2000’s gain of 16.7 percent.

Priming the economic engine will be major public works projects, including expansion at the local ports and the Blue Line extension to Pasadena. The energy crisis is fading with increased supply and soon will no longer be a liability.

The EDC’s forecast pains a slightly rosier picture than that delivered last month by the Anderson School at UCLA, which reported an 80 percent chance of national recession and “the most troublesome period since the early 1990s” for California.

The Los Angeles County economy continues at a slow chug, with personal income expected to rise 3.5 percent by year’s end. Kyser projects that growth in retail sales will grind nearly to a halt, posting a 1.4 percent increase this year after two years of double-digit gains.

Large public construction projects expansion of the ports, the Alameda Corridor, the Blue Line extension to Pasadena will provide jobs and demand for materials that will act as economic stabilizers to keep the region afloat.

International trade, meanwhile, is taking a hit. Don Wylie, managing director of maritime services at Port of Long Beach, said the two ports are seeing modest growth, but nowhere near the 16 percent he has become accustomed to in recent years.

In fact, the Port of Long Beach is behind last year’s pace, Wylie said. The port reported 2.3 percent less container volume handled through the first six months of 2001.

Wylie said economic fundamentals remain strong and that consumer perception has dragged down business at the ports. With the back-to-school and Halloween seasons on the horizon, he’s expecting retailers to increase orders.

While activity at the ports of Los Angeles and Long Beach is slightly ahead of last year’s pace, tourism and motion pictures are failing. “The major growth industries are dead in the water,” Kyser said.


Tourism takes a hit

Employment numbers among the studios are down nearly 8,000 jobs from December of last year. The industry hustled to stockpile productions in anticipation of strikes by writers and screen actors, and while the strikes never materialized, the backlog in production has lessened the need for labor.

The region’s tourism industry, which Kyser predicts will grow only 0.4 percent for overnight visitors, has fallen victim to suffering in the three Ds: Disney, dot-com and dim bulbs.

Disney’s California Adventure, which opened to lukewarm response earlier this year, was in part responsible for dampening tourism visitors through the region, Kyser said. Secondly, Northern California, a major source of visitors to L.A., has been crippled by the technology industry’s implosion, lightening wallets and dampened spirits among the pool of potential travelers.

Also affecting tourism is the state’s energy crisis. Few people outside the region understand that the city of Los Angeles have their own power sources and are not subject to blackouts, Kyser said.

Bruce Baltin, a hospitality consultant with PKF Consulting, said the lack of business travel is having more impact on the local economy than tourism. Travel among certain industries is down more than others, including entertainment, financial services and technology.

While business travel is down, there is no indication of a crisis, especially with plans to expand the convention center and entertainment-related developments Downtown.

“When it does recover, it won’t take long because we’re coming off a very strong base in 2000,” Baltin said. “Measuring against that, it’s soft, but not down to the levels of the early ’90s.”

Also not down to early ’90s levels is the region’s real estate market. The industrial market remains particularly strong, Kyser said, because supply is low and production has stopped. Commercial office space, with a number of buildings under construction on the Westside and Burbank, could struggle.

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