Wages/20″/mike1st/mark2nd
By EDVARD PETTERSSON
Staff Reporter
Local technology start-ups may not be making much money for themselves, but they are generating substantial earnings for the area’s workforce.
Based on July figures from the California Employment Development Department, L.A. County added 17,600 new jobs in the business services sector over the past year. Many of those are higher-paying jobs at software and Internet-related companies, said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman Univeristy.
“Overall, business services is showing tremendous growth, and it all goes back to technology,” said Adibi.
That sector’s growth, which has been underway since 1992, is unlikely to slow anytime soon, according to Ross DeVol, director of regional studies with the Milken Institute.
“There is most definitely an under-supply of skilled labor in this area, but we could be seeing a unique trend in reverse migration from Silicon Valley,” said DeVol. “Talking to people at U-Haul, I found that a lot more people are moving to Los Angeles from Silicon Valley than the other way around. These are young developers in e-commerce who think that there are better opportunities for them here.”
While job growth in the business services sector has been especially robust, L.A.’s overall job growth rate remains more modest.
Since last July, the county has added 75,400 new non-farming jobs, even though there was a decrease from June of 28,600 jobs because of seasonal factors. The biggest monthly decline came from jobs in education due to the end of the school year.
“Los Angeles has a very strong technology sector, but it’s a relatively small part of the overall economy compared to San Jose and Orange County,” Adibi said. “That is why, in Los Angeles, job growth in that sector will have a smaller impact on the job market.”
L.A. County’s business services sector represents just 8.6 percent of the total job market. That compares with 16.4 percent for the manufacturing sector and 22.2 percent in the trade sector.
While L.A. County’s overall unemployment rate fell to 5.5 percent in July, from 5.7 percent in June and 6.5 percent in July 1998, local joblessness remains higher than California’s 5.2 percent rate and the nation’s 4.3 percent rate.
And with L.A.’s aggregate payroll increasing just 1.9 percent for the 12 months ended July 31, Los Angeles is lagging the state, which saw a 2.8 percent increase. It also lags Orange County and Riverside-San Bernardino, with 2.8 percent and 4.1 percent payroll growth, respectively.
“The 2 percent is pretty close to our potential, given the size of our market and the fact that we’re surrounded by areas where disenchanted businesses can flee,” said Tom Lieser, executive director of the UCLA Anderson Forecast. “The biggest constraint on our growth is that Los Angeles, because of the rising housing costs, is becoming an expensive place to live and to do business. This weighs particularly against job growth in the lower to mid-range wage sectors, which are going to, for example, the Inland Empire.”
Nonetheless, several L.A.-area job sectors besides business services saw strong growth in July.
For example, the movie-production sector added 2,900 jobs in July from June, in spite of widely publicized concerns about runaway production.
Another strong sector is construction, which added 6,200 jobs in July from a year ago. That growth, fueled by strong demand for homes and industrial space, could lead to price inflation as the tight labor market puts upward pressure on wages.
“Normally, you can’t say about a regional economy that it is overheating or that it has full employment,” said Adibi. “The mobility of the labor force will typically compensate for shortages in some regions. But, in the case of construction, there is a labor shortage everywhere.”
The average hourly wage in the L.A.-area construction industry has climbed 3 percent since July of last year. At $23.02, it is considerably higher than the statewide average of $22.13.
At the same time, there is anecdotal evidence of tightness in other areas.
“We are starting to hear complaints from employers in the San Gabriel Valley about workers showing up late, or not at all, and their lack of workplace etiquette,” said Jack Kyser, chief economist with the Los Angeles County Economic Development Corp. “That is something we haven’t heard in years, and it is an indication that in some areas we are scraping the bottom of the barrel.”
While many sectors see strong job growth and low-single-digit unemployment, the local aerospace industry continues to dwindle. In July, another 300 jobs disappeared, bringing the total job loss in that sector to 6,000 since July 1998.
