Expect a good year for L.A.’s economy in 2018 – but get ready for some challenges, too.

A check of local economists points up the general health of the marketplace, and the likelihood it will range from reasonably good to strong as the year moves forward.

Hopes for a great year seem to be held in check by two key concerns: a labor market that remains tight, with high costs for housing aggravating the condition and little relief in sight; and the potential for the Trump Administration to upend various trade agreements or impose import tariffs.

The Business Journal surveyed eight local economists to get their take on what lies ahead for the area economy in 2018. Each economist was asked two questions:

QUESTION 1:

What do you see as the biggest factor affecting the Los Angeles-area economy for this coming year?

QUESTION 2:

How do you think the local economy will perform in 2018?

Here are the responses to each of the queries:

STEVEN BANKS

Chief Economist, Los Angeles County Economic Development Corp.

1 A lot will depend on monetary and fiscal policy at the national level. The Los Angeles area economy is running at full employment. That is resulting in huge pressure on wage rates, housing costs and labor costs. These are huge inflationary factors that L.A. economy will have to absorb. There will have to be some wage adjustments: This will be the year we see substantial wage growth. Factor in that the minimum wage is going up and that will add to this pressure.

2 I see unemployment rates in L.A. remaining fairly stable. There may be slight movement downward, continuing the trend in recent months. But overall, it’s a full employment scenario. I also don’t see any major shift in corporate income growth. On the individual side, I see an increase in wage growth and personal income growth and a resulting moderate increase in consumer spending.

JERRY NICKELSBURG

Director, Anderson Forecast at Anderson School of Management, UCLA

1 U.S. economic growth is [a] key factor for the L.A. economy: increased consumer demand prompts more imports through the ports. But the Trump administration indicates they will take action on trade in 2018, either by pulling out of more trade agreements or by raising tariffs. If that happens and the administration’s actions reduce imports, that adversely affects our logistics industry here in the Southern California area.There’s also the impact on housing of the new tax bill. Limiting deductibility of property taxes and home mortgages means that demand for housing will be somewhat weaker as homes become more expensive to the buyer. Fewer people will be able to buy homes and there will be less incentive for building new homes.

For reprint and licensing requests for this article, CLICK HERE.

Prev