Throughout its economic history, Los Angeles has been able to count on one thing above all else: growth. People have always come here for the fine weather and laid-back lifestyle. Businesses and jobs followed.

Recessions caused no long-term downturn. More people eventually flooded in. No one cared greatly if businesses left. Plenty more businesses popped up to serve all the people.

But have we hit the outer limit of all that growth? Has our capacity been filled? Have we hit the wall?

The Washington Post's Steven Pearlstein came to Los Angeles a few weeks ago and, with the sharp eye of an outsider, seemed to spot something that residents may not have noticed.

The economic slowdown in Los Angeles is not only pronounced but it feels different this time. He wrote a column a couple of weeks ago in which he suggested that the slowdown seems more permanent. L.A.'s long era of easy growth may be at an end.

"It is hard to overstate how reliant the Southern California economy has always been on population growth to drive its economic growth in oversimplified terms, building houses for the next wave of home builders," wrote Pearlstein, who won a Pulitzer Prize in commentary last year. "But in recent years, this perpetual growth machine has pretty much run out of steam as residents old and new confronted the realities of two-hour commutes, bad air, a shortage of water and a backlash against illegal immigration."

If Pearlstein's premise is right, it means that the population growth of Los Angeles is slowing, or the population might even be shrinking. So I took a look at the newly released census data. It shows that L.A. County's population increased 3.6 percent from the census' baseline of April 1, 2000, through July 1 of last year. That's meager growth for an eight-year span.

However, the picture gets more unsettling if you look at the components of that growth. That's because all of L.A.'s population increase can be attributed to foreign immigrants and the natural growth that occurs when there are more births than deaths.

If you look at the number of American-born residents, a net of more than 1 million moved out of L.A. County over the eight-year period. No other county had a higher absolute number of these people, called domestic outmigrants.

Another way of looking at it: Nearly 11 percent of L.A.'s American-born residents in 2000 moved out by mid-2008, even after accounting for the American citizens who moved in from other parts of the country. That's getting uncomfortably close to Wayne County, Mich., the home of economically imploding Detroit, which had a 13.6 percent rate of domestic outmigration.

Boiled down: L.A. is still a magnet for foreign-born immigrants, but it is quickly shedding American-born residents.

So, yes, Pearlstein is definitely on to something. Los Angeles can no longer depend on growth to salve all economic wounds.

The importance of this shift means that L.A. needs to shake off its old mind-set the mind-set that says don't worry, be happy, because more people will flood in and the jobs and businesses will follow.

It should be replaced with the mind-set that's been developed in places that don't enjoy L.A.'s natural gifts. It's a mind-set that can be summed up in two words, two words that don't come easily to policymakers anywhere in California.

Those two words: business friendly.

Charles Crumpley is editor of the Business Journal. He can be reached at
ccrumpley@labusinessjournal.com.

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