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Modest improvement predicted

L.A. County Economic Development Corporation releases forecast for county, state for 2012-13

Posted: February 16, 2012 2:00 a.m.
Updated: February 16, 2012 2:00 a.m.
 

California’s economy will continue to heal, but the process is long, according to the Los Angeles County Economic Development Corp. economic prognosis for 2012, which was released on Wednesday.

California should experience modest improvement, LAEDC reported, but recovery in Los Angeles County, which was hit hard by the Great Recession, is lagging behind the state as a whole.

On the job front, however, nearly 500,000 jobs are expected to be added in the state’s economic growth in 2012 and 2013. Nationally, there has been a gain of nearly 2.9 million jobs since the beginning of 2010 through January 2012, representing a significant recovery of the 8.7 million jobs that were lost from the start of the recession through the end of 2009, according to the report.

And several industries are poised for growth in 2012, as the national economy continues to expand and recovery takes a firmer hold in the state economy, according to the report.

Statewide, the leading industry sectors are high-tech, tourism, international trade and entertainment.

County trends

By comparison, Los Angeles County’s largest industry clusters, by employment, are entertainment;, trade in the form of transportation, logistics and transportation, business services, knowledge creation and fashion, according to the report.

County trade gains are in store for the year ahead, as are increases in jobs, but concerns remain about the possibility of slower global economic growth on trade coming through the ports and airports, according to the report.

The entertainment industry has seen increased activity in L.A. County, LAEDC reported, with overall film production rising, and the outward migration of film production has slowed due to the state’s film tax credits program, which took effect in 2009.

The industry added 11,700 jobs in 2011, representing a gain of 9.6 percent, rebounding to a 10-year high. On-location film activity increased by 4.2 percent, feature-film production rose by 5.7 percent over the prior year, commercials were up by 4.4 percent and “other” production projects jumped by 12.6 percent. The number of permitted production days for television, however, fell 2.7 percent. In the fourth quarter, the Los Angeles area lost 10 one-hour TV drama series to other states, according to the report.

Tourism also saw an upturn in activity, with improved occupancy rates, rising room rates and room revenues increasing 12 percent over 2010. LAEDC forecasts more gains to follow in 2012 and 2013.

Private education jobs grew throughout the recession, and the sector is poised for continued growth in 2012. A number of local universities have national, if not global, recognition that can play an important role in attracting the region’s next generation of highly trained workers the nonprofit organization reported.

Health care services also added jobs during the course of the recession, and should see job gains continue this year and next. While many medical professionals serve the local population, university/teaching hospitals also attract patients from out of the area. LAEDC reported health care reform has lent uncertainty to this sector’s future.

Retail sales will respond to improving conditions for households, with somewhat faster growth projected in 2012 and 2013.

Construction activity, however, will take time to recover, but even a modest rise in job counts will be welcome.

Construction

Construction in Southern California is showing signs of recovery.

Overall, nonresidential activity will be a bright spot in an otherwise hard-hit sector with increases in valuations over the next two years. Residential permits will register sizable percentage increases, but this part of housing is coming off a very low base and will take years to recover, according to the report.

The market for industrial property in L.A. County held its ground fairly well in 2011. Industrial vacancy rates of 2.9 percent were the lowest rates in the nation, and new industrial space under construction totaled 531,390 square feet at the close of 2011. Increased leasing activity has helped stabilize vacancy rates, but there are signs leasing rates might soon turn the corner. LAEDC reported improvement in 2012 will depend largely on increases in port activity, manufacturing and population growth.

Mirroring the rebound in other commercial property sectors, leasing and occupancy of malls and shopping centers is slowing improving. Slowing the pace of recovery in this arena is the struggling housing market and weak job growth, according to the report.

Southern California’s office market is slowly starting to gain traction. Demand for office space is up, reflecting an uptick in hiring and near-record-low levels of new construction. Vacancy rates are so high, however, that even with the declines expected this year, the impact on rental rates will be minimal meaning the market will remain tilted in favor of tenants.

New housing will grow by, influenced in part by increasing number of households in the state, but the LAEDC believes the number of new homes constructed over the next five years will fall short setting the region and the state up for a housing shortage at some point in the second half of the decade, according to the report. 

Consumer and job growth

LAEDC forecasts that the consumer sector will be front and center in 2012. Accounting for 70 percent of economic activity, there have been meager annual gains of 2 and 2.2 percent respectively in the past two years, but even a slight change in consumer expenditures has the potential to create significant ripple effects throughout the economy.

For this to happen, a few things must change, the LAEDC reports. The pace of hiring must accelerate. The declining trends in labor productivity over the past several quarters suggest that firms will soon have to increase hiring.

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