Report: SoCal economy to turn in ?decent? 2007 performance

Report: SoCal economy to turn in ôdecentö 2007 performance    How can you tell the Southern California summer is in high bloom?
   Kids out of school? Everyone on vacation? The beating sun?
   All true, but another sign of the season is the Wednesday release of the Los Angeles County Economic Development Corp.'s mid-year forecast of the Southern California economy.
   While the much-anticipated “2007 Mid-Year Economic Forecast” does not predict that the region's economy during the second half of the year will be as hot as the noonday summer sun, the region will turn in a “decent” performance.
   The LAEDC predicts that 2007 will end with a slight employment increase over 2006 of 1.4 percent, or 98,100 non-farm jobs, despite the region facing a housing slump and possible labor disruptions in the regions two leading employment sectors.
   “Housing won’t be the only thing to worry about,” said Chief Economist Jack Kyser for the LAEDC. “The film industry has a string of critical labor contracts to negotiate. In addition, international trade is facing environmental challenges, but in 2008 will also bring a labor contract of its own to negotiate, although the two parties have agreed to start negotiations early.”
   The report also predicts that job growth will be highest in the Riverside-San Bernardino area through the end of the year and throughout 2008. A once booming area for job growth, the two-county area's numbers have been pulled down by the region's housing slowdown. “Laggards” in the report include Orange and San Diego counties, with the LAEDC pointing to the former being hurt by the meltdown in sub-prime lending and the latter by overbuilding of condominiums.
   The group, a private, non-profit organization charged with attracting, retaining and growing business in the region, also predicts that 2007 will mark an important milestone for Los Angeles County'non-farm employment (an average of 4,142,600 jobs) will finally surpass the previous record set in 1990 (an average of 4,135,700 jobs).
   Local industries with the best growth prospects over the next two years, according to the LAEDC's findings, include professional, scientific and technical services (which include accounting, law, engineering, computer software design, and scientific research and development), health services, and leisure and hospitality services. International trade will also provide support, with the ports of Long Beach and Los Angeles predicted to increase their cargo volume by 6.3 percent to 16.75 million containers for the year. On the other side of the coin, “laggard” industries in the region for 2007 will include residential construction, durable goods manufacturing, and finance and insurance.
   The report is especially hard on the housing sector.
   “A frequently asked question is when the housing industry will turn around,” Kyser said. “We are a tad bearish, forecasting a distressing 33.7 percent decline in the number of new housing permits in the five-county area in 2007 and a 6.8 percent slide in 2008. This comes on the heels of declines in 2005 and 2006. Housing weakness will remain in evidence through late 2008, and the recovery will be restrained. Don’t look for a return to double-digit gains in prices.”
   Another leading industry in Southern California facing rough going is the motion picture/television production industry, with the Writers Guild contract expiring in October, and the Screen Actors and Directors guild contracts up for renewal in June 2008.
   “The dialogue between the two parties has been rather harsh,” Kyser observed. “There is a high potential for a disruption in this industry, either a strike or a ‘de facto’ strike. Stockpiling of filmed product is already underway.”
   On the upside, Kyser notes in the forecast that support for the Southern California economy will continue to come from major construction projects, both public and private. More than $1.3 billion in improvements are underway at Los Angeles International Airport, while ground was broken in mid-2007 for the convention center hotel in downtown Los Angeles.
   Still, Kyser predicts that the national economy will outperform the Southern California region. Gross domestic product, according to the report, should increase by 2.2 percent in 2007 and by 3.1 percent in 2008. While not stellar, the report does not believe the national numbers point toward a recession.
   All in all, Kyser said that 2007 and 2008 could be trying times for California businesses.
   “While the forecast is for continued growth in the Southern California economy during 2007 and 2008, it won’t be easy for the business community,” Kyser explained. “There is a looming state health care plan with unknown costs, possible tweaks to the workmen’s compensation insurance program, and ambitious plans on the environmental front. The cost of doing business in the state will go up.”