SoCal remains manufacturing leader, despite job losses, challenges

SoCal remains manufacturing leader, despite job losses, challenges    Manufacturing in Southern California remained a mixed bag of gains and losses during 2006, economic experts revealed Tuesday, with Los Angeles County recording sizable job losses but maintaining its position as the nation's top manufacturing center.
   “Orange and Ventura counties, and the Riverside-San Bernardino area all added factory jobs during 2006, which was counter to the national trend,” said Jack Kyser, chief economist of the Los Angeles Economic Development Corp. “However, Los Angeles County saw 9,400 factory jobs disappear from 2005 to 2006. Despite this, Los Angeles County was still the nation’s No. 1 manufacturing center. Its 2006 manufacturing employment average of 462,300 jobs was well ahead of No. 2 Chicago’s average of 390,200 jobs. Detroit remained in third place with 268,800 jobs.” The latter two areas also experienced job losses.
   The statistics come from the LAEDC report, “Manufacturing in Southern California,” released Tuesday in conjunction with the WESTEC Manufacturing Technology Exposition and Conference at the Los Angeles Convention Center.
   The LAEDC report calculated that during 2006 there were 911,000 manufacturing jobs in Southern California, defined by the LAEDC as the Los Angeles five-county area plus San Diego County.
   “This would make the area the nation’s third-largest manufacturing ‘state,’ behind California, with 1,505,000 jobs, and Texas with 926,000 jobs,” Kyser said.
   “What are the implications of this large factory workforce?” he asked. “This sector represents a huge market for all types of suppliers (goods and services), and means that local manufacturers can find inputs right in their backyard.”
   The LAEDC report also revealed that Southern California manufacturing firms have made a heavy push to raise productivity by investing in plant and equipment and by using temporary help. Thus, manufacturing output has held at high levels despite the decline in employment.
   Local manufacturing firms are under heavy competitive pressure, the report found, often from offshore production. Many are being wooed by other states that point out the high cost of doing business in California.
   Proposed environmental legislation, such as the state’s greenhouse gas legislation AB32, represent serious challenges to manufacturers said the report. Determining the full impact of this could bring some unpleasant and costly surprises.
   Another challenge the report pointed to is industrial real estate. “While the manufacturing employment news for Southern California has been generally downbeat, the industrial vacancy rates for the region have been stunningly good,” Kyser said.
   In Los Angeles County at year-end 2006 the rate was 1.5 percent, which was the lowest in the nation. Ventura County had a 2.4 percent industrial vacancy rate, San Diego County was at 3.6 percent, while Orange County was at 3.8 percent. The LAEDC report pointed out that there are other users of industrial space, including the fast growing international trade/logistics industry, printing and publishing, and the region’s signature industry, motion picture production.
   “Large blocks of developable land are becoming scarce in Los Angeles and Orange counties, and residential developers have been buying industrial land either for conversion of an existing structure to a “trendy” loft, or to build high-rise residential, many with retail on the ground floor,” Kyser observed. “With the tight real estate market, many industrial firms are nervous that they will soon get significant increases in their lease rates, or, worse yet, have their building sold out from under them. Either event could be devastating.”
   The LAEDC report forecast that there would be continued manufacturing employment growth in Orange and Ventura counties and in the Riverside-San Bernardino area in 2007. The latter would move to a new high level of factory employment, an average of 125,200 jobs.
   “We need to pay more attention to manufacturing, as the sector still offers opportunity,” Kyser said. “However, it will take some innovative thinking to stabilize jobs in the sector.”