LAEDC Report Says Economy ‘nearing bottom’ in ’09, modest growth likely in 2010
Negative trends in most business sectors. Some key industries–fashion, entertainment and aerospace–facing changed business models. Federal stimulus funding starting to arrive in Southern California.
Los Angeles— The U.S. economy “is nearing the bottom this summer” but modest growth is forecast for 2010, the Los Angeles County Economic Development Commission said in a report issued Wednesday.
In its 2009-2010 “Mid-Year Economic Forecast & Industry Outlook,” the LAEDC’s Kyser Center for Economic Research said difficult times would continue for the rest of 2009 and into 2010 for Southern California, the entire state and the nation.
“We think the economy is nearing bottom this summer, so the current economic news looks terrible,” said LAEDC Chief Economist Nancy D. Sidhu. “This recession officially began in December 2007 and looks like it will be the deepest downturn since the recession of 1981-1982.”
The LAEDC Forecast projects the U.S. economy will shrink by 2.7 percent during 2009 and then grow modestly — by 1.7 percent — in 2010. Inflation is unlikely to be a problem in the near term, declining by 0.8 percent in 2009.
The report indicates problems have deepened and will persist for the auto and housing industries, noting that conditions have drive two automakers and many suppliers to bankruptcy, while the U.S. housing sector has been shrinking for more than three years. However, the LAEDC said it appears the bottom is near for housing.
With business investment spending and U.S. exports also declining, the only sector that is growing is the federal government. U.S. economic recovery funds are beginning to appear in Southern California and their impact will grow through the rest of 2009 and 2010, the report found.
The continued economic weakness will be reflected in worsening unemployment, with the economy likely losing 5.4 million non-farm jobs for the year and the unemployment rate reaching 10.4 percent in 2010 — the highest since 1982.
“At mid-year 2009, California too is in a serious recession, and the economic news during 2009 has been dismal,” Sidhu said.
California’s housing industry should hit bottom by the end of 2009 but the recovery will be moderate at best, the LAEDC said. The state’s non-farm employment will fall by 694,100 jobs in 2009 and the unemployment rate will average a painful 11.6 percent.
While the state’s housing sector remains in a very depressed state, the retail sector is also being hammered, with sales expected to decline by 12 percent in 2009, following sales declines in both 2007 and 2008.
Jack Kyser, the founding economist of the Kyser Center for Economic Research, said the five Southern California counties will continue to suffer in 2009.
“Job losses will continue in construction, manufacturing, retailing and leisure and hospitality services,” he said.
With retail stores of all types continuing to close, the impact is being felt in such other areas as the apparel industry, which is undergoing a change in its business model as store closings reduce the number of potential customers, Kyser noted.
The motion picture/TV production industry is negatively affected by eroding broadcast network audiences and a growing concern for cost containment. The region is also suffering from erosion of in-state feature film production.
“This is not good news for below-the-line workers or the multitude of small suppliers to the industry,” Kyser said.
International trade activity at the region’s ports and airports will continue to decline.
With defense spending set to slow and profit-starved airlines reducing orders for new planes, the Southern California aerospace industry will continue to face difficult challenges in 2009 and 2010.
About the LAEDC
The LAEDC, the region’s premier business leadership organization is a private, non-profit organization established in 1981 under section 501(C) (3). Its mission is to attract, retain, and grow business and jobs for the regions of Los Angeles County. Since 1996, the LAEDC has helped retain or attract more than 152,000 jobs, providing $7.5 billion in direct economic impact from salaries and $128 million in annual tax revenue benefit to local governments and education in Los Angeles County. Visit www.laedc.org or call (888) 4-LAEDC-1.
[Editors: The study results will be posted @http://laedc.org/newsroom/Midyear-2009-07.pdf andwww.MayoCommunications.com/home.htm. Media please call George McQuade for advanced copy or link 818-340-5300 or 818-618-9229 or email Publicity@MayoCommunications.com.