"California is tip-toeing along the edge of a recession, while some of its larger metropolitan areas have been in one since mid-2007," the report states. It shows the balance of 2008 and much of 2009 seeing a mixture of good and bad news for California, "with the outcome looking more and more precarious."
Since the Downtown Los Angeles-based LAEDC's last report in February, the Southern California region, the state and the nation have undergone myriad changes, namely skyrocketing costs of energy and commodities. And "don't forget, you have the intensification of the financial sector problems," says Jack Kyser, one of the authors of the report and chief economist for the LAEDC.
"Look at what's happening at IndyMac; in a way it's kind of funny to watch these people clamoring to pull their money out of IndyMac, and it's historically one of the most solid financial institutions around and these people are panicking," Kyser says. "You have a lot of fear out there among consumers."
The report, which focuses on California and the Southland region, also offers a glance at the authors' views of the US economy. The report forecasts modest growth for the US, with the GDP rising 1.7% this year and about the same in 2009, which "is going to be a little bit better than '08, but it's not going to be a wonderful year," Kyser says. "It's going to be 2010 before people start being comfortable about what's going on."
The forecast offers differing outlooks across the state. "Things look rather good in San Francisco," Kyser notes, while in Southern California, "of the five metro areas, three are in recession." The report calls for comparative economic hard times in Ventura, Orange and Riverside-San Bernardino counties based on the magnitude of employment losses, and the relative lack of anticipated personal income growth in those areas.
The report pins the brunt of economic woes in those three counties on the housing slump, which is taking its toll on office space in Orange County as financial firms fold, is hurting retail and industrial space leasing and sales prices in the Riverside-San Bernardino area as jobs dwindle, and has caused job losses and loss of income-growth in Ventura.
The report shows Los Angeles and San Diego counties withstanding the downturn best, Kyser says, adding, "they're inching along" thanks to continued growth in the health services industry, international tourism bolstered by a weak US dollar and technology.Industries like bio-medicine and technology will be Southern California's strong suits over the next few years, while financial services, and just about any sector related to residential real estate, will be economic drags, the report shows.
As for housing, the report is bleak: "We're looking for early 2009 in LA County for signs of stabilization," Kyser says, adding and "In Riverside-San Bernardino, we think it's going to be 2010."
Gas prices may continue to play a role in slowing the Riverside-San Bernardino area, as people begin to factor in the cost of commuting to the relatively cheaper cost to live in those areas, the report shows. "I think in some cases you're going to see shifts in how people develop out there. It's going to definitely act as a drag on retail in that area," Kyser says.
The LAEDC today issued a separate report, "Foreign Direct InvestmentIn Los Angeles County," which the group has compiled for the first time. The report outlines direct investments from 15 countries and 4,512 separate firms directly generating more than 136,000 direct jobs and $7.6 billion in payroll for L.A. County.
Kyser believes that as the dollar continues to lag, investment by foreign firms will only continue to grow. "We feel that this is an opportunity because the dollar is weak right now and firms can come in and get a lot of benefits," he says.
The report shows Japan is still the largest foreign direct investor Southern California, followed by the UK, France, Germany and Canada.
Los Angeles, with 1,591 foreign establishments, topped the Southern California list of places with the most foreign investors, followed by Torrance (310), Long Beach (212) Santa Monica (134) and Pasadena (127). The top five industry sectors for foreign-owned and affiliated businesses are: Retail trade, wholesale trade, manufacturing, finance and insurance, and transportation and warehousing.
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