SGV Economic Partnership Forecasts Slower Growth, No Recession

Thursday, Dec. 6th

By Bill Coburn

At a recent breakfast meeting at the Altadena Town and Country Club, The Foothill Workforce Investment Board presented speaker Jack Kyser, Senior Vice-President and Chief Economist of the Los Angeles Economic Development Council (LAEDC).  The subject of Mr. Kyser’s presentation was a thirty page report that the LAEDC prepared for the San Gabriel Valley Economic Partnership, titled “San Gabriel Valley, Los Angeles County, California 2007 -  2008 Economic Overview and Forecast.”

The report begins with a look at the U.S. Economy, noting that it had enjoyed a healthy expansion between 2003 and 2006, with 6.2 million new jobs created, and a declining unemployment rate.  It warned however that due to an increase in food and energy prices, inflation had increased from 2.3% to 3.2% during that period.  The report predicts that the economic expansion will continue through 2008, with the ongoing downturn in housing activity acting as a brake on the national economy.

Looking at the California economy, the report stated that growth in California is slowing, with a 1.4% increase in non-farm employment in 2007, down from 1.9% in 2006.  It predicted that economic activity will continue to move forward, but at a slower pace, with a 1.1% gain in jobs in 2008.  It pointed out that drought, court-mandated restrictions on water supplies, high energy cost and contentious labor negotiations in key California industries such as international trade and entertainment will challenge the state, in addition to the headline grabbing problems in the housing industry.

The report sees LA County’s economy turning in decent growth this year and next, with nonfarm employment rising both years.  Declines in new home construction should decline both years, and the condo/loft development boom in some locations could turn into a problem.  Extremely low industrial vacancy rates (1.8%) and low office vacancy rates could mean that non-residential construction might offset the housing industry problems.  Major public works projects could also be a benefit.

The report states that there are six significant economic drivers in the San Gabriel Valley, and that economic trends are generally favorable.  Prospects for tourism look good because foreign economies are performing well and the U.S. dollar has eased down against the Yen and European currencies.  Business and profession services should continue to grow, with accounting and legal services benefiting from the litigious environment in California, and infrastructure work and the state’s rapidly growing focus on being “green” should bode well for Architectural and Engineering firms.  With the abundance of higher education institutions located in the Valley, it should benefit from favorable growth prospects through 2009.  The other three drivers, healthcare, international trade and manufacturing are not expected to perform quite as favorably.

Trends in economic indicators such as population and employment growth are toward continued slow growth.  New homebuilding in the Valley is expected to continue to decline through 2009, and year over year home price declines are being posted in many Valley Cities, with continued weakness anticipated.  Taxable retail sales are expected to grow at a moderate pace through 2009, with 2008 sales increasing by 5.7% to just over $18 billion, with Pasadena leading the way with more than $2 billion.  Hotel/Travel and Tourism are also expected to remain strong.

Overall, the report states that economic growth in the San Gabriel Valley will continue through 2009, but the Valley will face challenges in traffic congestion, at the ports, with a shortage of land for economic development, housing, and getting the message out about the Valley’s unique assets.

To get a copy of the report, which includes numerous charts reflecting San Gabriel Valley economic indicators looking back for several years, contact Norma Lerma of the Foothill Workforce Investment Board, at (626) 584-8392.  For more information on the Foothill Workforce Investment Board, visit www.foothilletc.org.