NewswireToday - /newswire/ -
Los Angeles, CA, United States, 2006/02/10 - Southern California’s economic growth will depend on International Trade, Tourism, Aerospace, High Tech, and Non-Residential Construction, according to latest report.
The motion picture/television production industry, housing, and retail better be on the lookout as each industry will face major challenges in the coming years, according to the “2006-2007 Economic Forecast & Industry Outlook” released today (February 8, 2006) by the Los Angeles County Economic Development Corporation (LAEDC).
“Much of the challenges for Hollywood are due to changing business models, fractious unions, and runaway production,” said Jack Kyser, LAEDC chief economist. “Another vulnerable industry is retail, which must deal with over-capacity and consumers’ changing buying patterns. This is not good news for local cities that have staked their future on retailing and the attendant tax revenue.”
The LAEDC Forecast noted concern about the housing market, in resale and new construction. In the resale market, Kyser sees a modest decline in unit sales, while the median price in 2006 in the state and region should move sideways. “However, there is still demand for affordable housing in the region due to both population growth and the healthy economy,” said Kyser. The LAEDC Forecast calls for a modest decline in new home construction.
The Forecast also highlighted a looming challenge for all governmental agencies in the state. A recent ruling by the Federal Government Accounting Standards Board requires governments to determine pension fund shortfalls and retiree healthcare liabilities, and find a way to pay for them. There is fear that some agencies could face bankruptcy.
“Keep in mind that overall, Southern California will actually see steady growth in 2006 and through 2007. While there has been a tendency to look for bad economic news both nationally and locally, the reality is that both are at mid-economic cycle, with a lot of upward momentum,” said Kyser.
Industries with favorable outlooks for 2006, according to the LAEDC Forecast include:
- International trade
- Professional business services
- Tourism and travel
Another source of growth in 2006 will come from nonresidential construction. “Office and industrial vacancy rates around Southern California are heading down,” said Kyser. “In fact, Los Angeles County and the Riverside-San Bernardino area are the two strongest industrial markets in the nation, as measured by vacancy rates. International trade is expected to have another good year in 2006, and the container count at the two local ports could hit 15.8 million TEUs (twenty-foot equivalent units). This means continued healthy demand for industrial space.” The LAEDC Forecast noted that a lot of major projects are underway around the region, including transportation, hospitals, and power plants. Such projects in Los Angeles County alone are valued at more than $32 billion.
Setting the pace for Southern California employment in 2006 will be the Riverside-San Bernardino area, with nonfarm employment up by 2.1 percent or 25,200 jobs. Tied for second place will be San Diego County, an increase of 1.8 percent or 22,600 jobs, and Ventura County, also up by 1.8 percent or 5,100 jobs. Orange County will see nonfarm employment growth of 1.6 percent or 24,300 jobs, while Los Angeles County will see growth of 0.9 percent or 37,900 jobs.
“While the overall outlook for the region in 2006 is favorable, there are several things that we will need to monitor over the year,” said Kyser. This list includes:
- Inflation, where the national consumer price index (CPI) rose by 3.4 percent in 2005, while the CPI for Southern California increased by 4.5 percent. The pressures locally came from energy and housing. For 2006, the local CPI is forecast to increase by 3.5 percent.
- The fate of the proposed state infrastructure bond issue. These funds will be of critical importance in dealing with growing congestion on local roads and rail lines. The bond has already encountered opposition in Sacramento.
- Land availability in the urbanized areas of Southern California has become constrained, while there is growing unhappiness with sprawl into rural areas. Resolving these issues points to re-use of land as well as more density. Yet, the latter is a fighting word in some parts of the region.
- Regulation coming out of Sacramento seems not to take into consideration that the state is in a fight for its business base, beset by other states and off-shoring. “All government leaders need to understand that business is not the enemy, but part of the solution,” said Kyser.
[Editors: For interviews call: George McQuade]