Los Angeles County should see more robust job growth for the remainder of this year, while surrounding counties will see their growth slow as the impacts of interest rate hikes kick in.

That's the conclusion of the latest economic forecast from California State University Long Beach, which predicts payroll growth in Los Angeles County will rise to 1.2 percent in 2006 from 0.5 percent last year.

The additional hiring is expected to be led by professional and business services and government agencies, while manufacturing, which had been a drag on the local economy, has stabilized and will only see very slight job loss this year, according to the forecast released last week.

"Some of the problem areas that had been holding back L.A's economy in the earlier years of this decade are now resolving themselves," said Lisa Grobar, professor of economics at Cal State Long Beach and an author of the forecast.

"But there are still some problem areas. One of those is durable goods manufacturing, especially with continuing job losses in the apparel sector."

Also, the forecast projects that sales tax growth in Los Angeles County, which had been robust at 7.8 percent in 2004, will slow to 5 percent when all the data for 2005 are collected. "We expect sales tax growth to hold in that range through the foreseeable future," Grobar said.

The slowdown is being pinned on the impact of rising interest rates, which are expected to act as a check on consumer spending. Also, sustained high gas prices could force consumers to rein in spending in other areas.

Overall, the forecast calls for job growth for the Southern California region to slow to 1.5 percent for all of 2006 from 1.7 percent for 2005. That's because payroll job growth rates in surrounding counties will slow, after having significantly outpaced Los Angeles County for each of the last three years.

A big contributing factor to the regional slowdown: Rising interest rates will choke off activity in the housing and construction sectors, as well as the finance sector. The most significant slowing is expected to occur in Orange County (to 1.2 percent in 2006 from 2.3 percent in 2005) and the Inland Empire (to 3.2 percent in 2006 from 4.9 percent in 2005).

"Orange and Riverside counties will be especially hard hit by the cooling off of the housing market," Grobar said.

By comparison, Los Angeles County is underweighted in housing-related employment, which is why it's expected to buck the region-wide slowdown in payroll job growth.

But the forecast concludes the regional slowdown will only be temporary; job growth is expected to tick up to 1.8 percent in 2007, thanks in part to healthier public sector budgets and an infusion of funds for public works projects.

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