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Sunday, May 22, 2022

How Bad (Good) Will It Be?

How Bad (Good) Will It Be?

Bumpy New Year Brings Risks, Some Opportunity

by Mark Lacter





Brace yourselves.

Coming off the scariest, most unpredictable year in memory, pity anyone charged with figuring out what 2002 will bring whether it involves the economy or more terrorist attacks.

Conventional wisdom has it that the nation will wrest itself from recession sometime in the next few months, and that L.A. will get spared the brunt of the damage (unlike the last recession a decade ago that so pummeled the region that it resulted in a massive economic overhaul).

But those projections are only as good as the computer models on which they originate models, it should be remembered, that are based on past assumptions. And, of course, there’s little about the current recession that resembles past events.

Thus comes the curious circumstance of 2002: relatively upbeat forecasts that no one is prepared to believe. Not yet anyway.

For all the uncertainty, there are a few signposts to anticipate starting with how government and the consumer respond over the next few months. But perhaps the biggest imponderable is the supply of money, whether through bankers, the stock market or venture capital portfolios. There won’t be any sustained recovery until these and other stockpiles of cash are used for business expansions and acquisitions. And that won’t happen until there is more confidence among investors that significant growth is just around the corner. No one is betting good money on when that might happen.

As for L.A., it’s true that the economic climate is more durable than in 1991, when the area was so reliant on aerospace. These days, a variety of drivers trade, manufacturing, entertainment, technology, tourism provide a more stable economy. If one or two sectors falter, the others could more than pick up the slack.

Anyway, that’s the theory. Whether it works this time around will help determine whether L.A. manages to skirt the really bad stuff.

Mark LacterBrace yourselves.

Coming off the scariest, most unpredictable year in memory, pity anyone charged with figuring out what 2002 will bring whether it involves the economy or more terrorist attacks.

Conventional wisdom has it that the nation will wrest itself from recession sometime in the next few months, and that L.A. will get spared the brunt of the damage (unlike the last recession a decade ago that so pummeled the region that it resulted in a massive economic overhaul).

But those projections are only as good as the computer models on which they originate models, it should be remembered, that are based on past assumptions. And, of course, there’s little about the current recession that resembles past events.

Thus comes the curious circumstance of 2002: relatively upbeat forecasts that no one is prepared to believe. Not yet anyway.

For all the uncertainty, there are a few signposts to anticipate starting with how government and the consumer respond over the next few months. But perhaps the biggest imponderable is the supply of money, whether through bankers, the stock market or venture capital portfolios. There won’t be any sustained recovery until these and other stockpiles of cash are used for business expansions and acquisitions. And that won’t happen until there is more confidence among investors that significant growth is just around the corner. No one is betting good money on when that might happen.

As for L.A., it’s true that the economic climate is more durable than in 1991, when the area was so reliant on aerospace. These days, a variety of drivers trade, manufacturing, entertainment, technology, tourism provide a more stable economy. If one or two sectors falter, the others could more than pick up the slack.

Anyway, that’s the theory. Whether it works this time around will help determine whether L.A. manages to skirt the really bad stuff.

Mark Lacter

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