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Economists say L.A. region doing well

Valley Industry and Commerce Association hosts forecast conference

Posted: October 21, 2012 2:00 a.m.
Updated: October 21, 2012 2:00 a.m.

Allan McArtor speaks at the Valley Industry and Commerce Association conference, which was held on Friday at the Marriott Burbank Airport hotel.

 

The economy won’t fully recover until businesses aren’t afraid to hire and families aren’t afraid to buy homes, a trio of economists told business leaders at Friday’s Valley Industry and Commerce Association business forecast conference.

A global, national and local business forecast panel discussion kicked off the business advocacy group’s 24th annual forecast, which also included break-out session panels and a keynote speech by Allan McArtor, chairman of Airbus Americas Inc., and special guest speaker Gov. Jerry Brown.

Los Angeles region

The local economy is faring well because of private sector hiring, said William Roberts from the San Fernando Economic Research Center at California State University, Northridge.

The construction sector in particular is improving steadily, although it’s not near 2006 levels, Roberts said. But the county issued $233 million in construction permits in the second quarter of this year — more than in all of 2011.

“It’s a good sign to see construction coming back,” he said.

Unfortunately, Roberts said, any improvements in the private sector is being offset by the federal, state and local public sector jobs cut in the county, mostly teachers. Roberts said the government needed to create “sustainable activity,” as opposed to short-term solutions that do nothing to boost the economy in the long-term.

But the local economy is hitting a wall because families are not purchasing homes – instead choosing to rent, mostly in multifamily housing – and employers are hesitant to hire more staff.

“We’re not willing to make decisions and pull the trigger,” Roberts said.

California

California is still strong because of its filming and technology sectors, said Demosthenes Vardiabasis, professor of economics at Pepperdine University. The four cities in the U.S. with the most patents are San Jose, San Francisco, Los Angeles and San Diego. But the state is losing “global capital” because of current immigration policies that bring foreign students to California universities, only to go back to their home country to get jobs and innovate.

“We need to do something to keep it here,” he said, particularly high-tech manufacturing.

National forecasts

The only full positive is the nation’s low and stable interest rates, said Gary Schlossberg, senior economist at Wells Capital Management. But they could be more volatile next year, he said.

Schlossberg said the best gauge of the national economy is the housing and auto industries. These industries best create the “multiplier effect,” where housing and car purchases result in more jobs and sales through remodeling contracts, appliance sales, mortgage refinancer hires, etc.

Upticks in these two industries was a little late, “but we’re starting to see it,” he said.

International impact

The biggest global competitors are in Asia, but their competitiveness isn’t because of low wages or low manufacturing prices, Vardiabasis said. It’s because of the entrepreneurial and hardworking expectations in countries like China and Thailand, he said.

Additionally, countries with a less-democratic government have the advantage of being able to implement policies that will help the economy, whereas the U.S. federal government is constantly in gridlock.

“Sometimes that works well – for them, at least,” he said.

Vardiabasis predicts that China’s economy will be equal to the U.S. in 15 years.

Upcoming election

Schlossberg touched on the effects of the upcoming presidential election on the economy. Regardless of who is elected in White House and Congress, we will most likely see a compromise that avoids sequestration.

“We think (the budget) will be whittled down,” he said, adding that it is not in either political party’s interest to allow the federal government to go off the fiscal cliff “Thelma and Louise style.”

One of the first break-out sessions further discussed the business implications of the upcoming elections, regionally and nationwide.

The U.S. Chamber of Commerce is the second biggest spender in the Congressional elections, said Dick Castner, executive direction of the Western Region of the U.S. Chamber.

California’s elections have been normally ignored due to their predictability, he said, but “for the first time in decades we’re paying attention to California, with the redistricting.”

Garry South from consulting firm California Strategies said Republicans – who are typically the ones who side with VICA on business issues – need to rethink their strategies in California. Half of Californians now are Latino or Asian, South said, and yet none of the Republicans in the state Legislature are of either demographic.

Additionally, Republicans are doing a poor job of trying to work with moderate Democrats or others that would be able to help form pro-business state legislation.

“They have to figure out smart ways to get involved in politics while recognizing Democrats have the power,” he said. “They need to deal with the reality that Democrats are going to have two-thirds control of the state Senate.”

smitchell@the-signal.com

661-287-5593

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