L.A. Recovery Prospects Tied to Rest of Nation, Anderson Forecast Says

By LAURENCE DARMIENTO
Staff Reporter

Los Angeles should bounce back next year from the economic slowdown, as long as the rest of the nation doesn't enter into a double-dip recession.

That's the projection for the regional economy by the UCLA Anderson Forecast, which made the earliest call of the 2001 national recession and is expecting weak growth in the U.S. economy next year.

"Los Angeles is poised for a strong recovery," said Christopher Thornberg, senior economist with the forecast. "But probably the biggest weakness in Los Angeles is the U.S. economy."

L.A. County, which weathered the 2001 recession better than the nation as a whole, is being helped along by growth in the entertainment industry and the transportation sector.

Other bright spots include increases in port traffic, and the pickup of airport traffic and hotel occupancy rates in the year since the terrorist attacks. Holding down the region is a general weakness in manufacturing and construction.

If the forecast holds up, L.A. County, which has just under 4.1 million non-farm jobs now, would be expected to add 100,000 jobs by the end of next year. Overall, it is expected to outperform the Bay Area, which has yet to recover from the tech bust.

"The momentum has shifted. Southern California is doing better than the north," said Tom Lieser, another senior economist involved in the forecast.

The forecast also discounted fears that a strike at the ports would have long-lasting negative impact. The last major port strike a four-month walkout in 1971 and 1972 cut employment in the region's transportation and utility sector by 8,000 jobs but did little to slow down a recovery from a late 1960s recession, Thornberg said.

There are concerns about the county's red-hot real estate market, which saw the price for a single-family home hitting $286,000 in July, up 17 percent from a year ago. Using a measure that relates home values to rental rates, prices have approached bubble territory, but Thornberg stressed that "the jury is still out."

The big question is the national economy, which the forecast expects to grow at an annual 2.5 percent rate next quarter and top 3 percent in the second half of 2003.

That growth is dependent on keeping the consumer pump primed until businesses get ready next year to invest in factories, equipment and other items.

And with household debt rising, consumers who have propped up the economy since the tech bust will only keep spending on major purchases such as homes and autos if interest rates remain low.

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