Manufacturing

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While major layoffs at Boeing Co., Johnson & Johnson Inc., Kellogg Co. and other companies are causing the nation’s manufacturing base to shrink, the situation in L.A. is quite different.

In November, Los Angeles County had 681,100 manufacturing employees its peak for the year, according to the California Employment Development Department. That’s 0.1 percent more than it had in October and 1.2 percent more than a year earlier. The growth in recent months, in fact, has enabled L.A. to regain its title as the nation’s No. 1 manufacturing center.

Nationwide, meanwhile, the number of manufacturing jobs dropped nearly 0.3 percent in November, to 18.6 million, according to the U.S. Labor Department. That total was nearly 1 percent less than a year earlier.

What’s the explanation for L.A.’s success? Economists cite a number of factors ranging from the size of the local companies to the stage of California’s recovery from the ’90s recession.

One of the big reasons centers merely on definition. To be categorized as manufacturing workers, employees don’t necessarily have to be in blue-collar, factory-type environments. They can be designers, managers and executives who happen to work for a manufacturing company as is often the case in Los Angeles.

Because of the way the U.S. Labor Department calculates industry employment, for example, workers at Mattel Inc.’s El Segundo headquarters are all considered manufacturing workers even though none of them actually does manufacturing work. Rather, they process invoices, market toys and handle payroll.

While such workers may be somewhat vulnerable in a downturn, they are far less likely to be laid off in the same numbers as factory workers, because their tasks are needed regardless of industry conditions.

L.A. has “gotten to be such a high-cost location that there won’t be much (actual manufacturing) here,” said Tom Lieser, executive director of the UCLA Anderson Forecast. “This is where the deals are done.”

One example of that, said Lieser, is the auto industry. While L.A. is home to the U.S. headquarters of Honda Motor Co. Ltd., Nissan Motor Co. Ltd., Toyota Motor Corp. and other Asian auto makers, no auto manufacturing plants are located here. So when the industry sees a downturn, it will affect manufacturing-heavy regions like Michigan, but not L.A. at least not to the same extent.

Another factor is that L.A.’s manufacturing sector like the rest of the area’s economy is dominated by small companies, many of them with 50 or fewer employees. That means those companies have fewer nonessential workers and are able to adapt more quickly to changes in the marketplace thus eliminating the need for layoffs.

And because Los Angeles has fewer publicly held manufacturing companies than other parts of the country, layoffs aimed at appeasing shareholders are less likely to occur here.

“The disposability of the labor force doesn’t seem to be as likely on the part of some of these smaller companies,” said Goetz Wolff, a professor of public policy at UCLA.

One part of L.A.’s manufacturing base in which the size of companies promotes employment stability is apparel. About 89 percent of the 12,000 apparel firms in California have fewer than 50 employees, according to the California Fashion Association. In L.A., there were 122,400 apparel workers in November up 0.2 percent from the previous month, and 4.6 percent from a year earlier. That 4.6 percent annual growth rate was substantially above the 3.3 percent rate for L.A. County’s overall employment base.

Nationwide, meanwhile, apparel employment continued its steady decline last month, dropping to 739,000 employees down 9.2 percent from a year earlier, according to the U.S. Labor Department.

Part of the reason for this stability, said Stephen Levy, director of the Center for the Continuing Study of the California Economy, is that Los Angeles is not dependent on any big employer, like Fruit of the Loom or Nike Inc., that can be undercut by foreign manufacturers. Rather, it has a large number of fashion houses, like BCBG, Monah Li and St. Vincent. Those companies don’t have to compete on a price basis, as long as their clothing remains trendy.

“The creative function of the industry is always there, as opposed to men’s socks or something where it’s the same every year and (profits are determined by) manufacturing costs,” Levy said.

Another reason the local manufacturing industry is faring better is that Los Angeles and California as a whole is earlier in its economic recovery cycle than other parts of the country. That means the area has yet to see a slowdown or reversal in the economy that other areas are seeing, said Wolff of UCLA.

“It’s a structural fact that we came out of the recession much later than the rest of the country,” he said. “Part of this is that you’re looking at Los Angeles and California growth at a different stage in the rebound.”

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