Some L.A. Companies Have Good News to Share

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After several painful quarters, signs of economic recovery are finally starting to emerge at some of L.A.’s largest public companies.

Last week, Big 5 Sporting Goods Corp. in El Segundo and Reliance Steel & Aluminum Co. in downtown Los Angeles each said they expect third quarter earnings to be strong. Even the much-maligned homebuilding sector appears to be on the mend: KB Home, an industry bellwether, announced Sept. 25 it had trimmed its latest quarterly losses by more than half compared with the same period last year.

The promising signs have analysts practically bullish on the region’s economic outlook.

“We are at the bottom and the economy is beginning to turn up,” said Nancy Sidhu, chief economist at the Los Angeles County Economic Development Corp. “For the U.S. as a whole, the third quarter’s gross domestic product will be solidly positive.”

Leading indicators of economic recovery including stock market indexes, consumer optimism and the money supply have been improving for several months, she said.

In Los Angeles, stocks have been on the rise for more than six months. The LABJ index of local stocks has climbed more than 50 percent since early March, when it hit its lowest level in more than a decade.

Recession-tracking economists divide statistics into three categories: leading indicators; coincident indicators, which closely track the down-and-up movement of the economy; and lagging indicators, which may take months or years to improve after the resumption of economic growth.

The coincident indicators, such as industrial production and retail sales, are now beginning to show incremental improvement. Sidhu pointed to the quarterly sales figures of Big 5 as a good indicator of the turnaround, in part because the company sells goods aimed at bargain-hunting shoppers.

The sporting goods retailer said last week that it expects a 1.6 percent year-over-year increase in same-store sales. That number is up from a mere 0.3 percent increase during the second quarter and a 4.4 percent decrease in the first quarter.

“Big 5 Sports is where I expect to see sales growth,” she said. “It’s got to happen at the consumer level and (the store) is positioned in the right place for the market.”

Still, the economy is far from recovered. The two main lagging indicators the job market and the home foreclosure rate won’t improve anytime soon, Sidhu predicted.

Foreclosures present a particular problem, she said, given that a real estate bubble precipitated this recession. Sidhu noted that in the economic turmoil of the early 1990s, foreclosures didn’t peak until 1996, even though the economy began to recover three years earlier.

Meanwhile, the unemployment situation continues to get worse.

“Employment is still falling,” she noted.

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