Unemployment is down and economic output is up in Los Angeles County, says an economic forecast released Wednesday, but experts said more high-paying jobs are needed to replace those giving way to lower-wage service-sector positions.
The economic study released by the Los Angeles County Economic Development Corp. reports that the county’s gross domestic product grew by 2.2 percent in 2016, down slightly from 3.6 percent the previous year but ahead of the national rate. The report predicted that the county’s GDP would grow by 2.7 percent over the next two years, also higher than the nation.
Unemployment, meanwhile, dipped to 5.1 percent in the county last year, reaching its lowest point since 2007. The LAEDC report estimated the unemployment figure would slowly dip further over the next two years, falling to 4.9 percent before settling at about 5 percent at the end of 2018.
“Job growth has been positive since 2011, averaging 2.0 percent since 2012,” according to the report. “This is expected to slow to 1.5 percent for the next two years as there are fewer jobs needed to be added and as the labor market tightens.”
But while the report painted a generally positive picture, LAEDC officials noted that the region needs to tackle a growing problem of too many lower-wage, service-sector jobs being created in place of skilled positions that pay higher salaries.
As part of that effort, LAEDC officials announced they have raised more than $1 million from a dozen institutions in support of a “Strategic Plan for Economic Development,” which is aimed at creating higher-paying jobs, making the area more business-friendly and preparing the workforce for skilled positions.
Among those contributing to the effort are Bank of America, various California State University campuses, Citibank, JPMorgan Chase, Wells Fargo and the Roy & Patricia Disney Family Foundation.
According to the LAEDC, the county lost about 90,000 manufacturing jobs with an average annual wage of $52,000 since 2007. Over that same period, the county gained about the same number of positions, but they were primarily injobs such as food service, with an average wage of about $20,000 a year.
LAEDC officials said such a trajectory is “unsustainable” for the region, prompting the push for the five-year strategic plan. According to the LAEDC, the plan’s goals include strengthening the area’s export-oriented industries to create jobs; becoming more business-friendly; removing barriers to infrastructure development; building more livable communities; and increasing “global connectedness.”
Unemployment will continue to decline and the number of jobs will continue to grow this year and next in Los Angeles County, but at a somewhat slower pace then in the past four years, according to an economic forecast released Wednesday.
The report by the Los Angeles County Economic Development Corporation predicted that the county’s unemployment rate will fall to 6.2 percent this year and 5.9 percent next year — both down from the current rate of 6.7 percent.
“The county added 94,700 jobs in 2015, equivalent to a 2.2 percent annual increase,” according to the report. “A majority of the county’s major industries added jobs last year, as broad-based growth pushed wage and salary jobs to a record high. Los Angeles County should continue to add jobs at a 1.7 percent annual rate this year, followed by a 1 percent annual rate in 2017.”
According to the LAEDC, personal income will continue an upward trajectory, with anticipated gains of 4.4 percent this year and 5.3 percent next year. Combined with a stronger dollar and weaker inflation, household purchasing power should increase as the year goes on, leading to increases in taxable sales of 5.5 percent this year and 6.8 percent next, according to the
“This means local sales and use tax revenues will climb, putting local government agencies on a sounder financial footing,” according to the report.
The county is likely to add more than 100,000 residents over the next two years, even with a relatively low growth rate.
“Most of the recent population growth in Los Angeles County has been due to natural increase — births outnumbering deaths — while net migration was slightly negative again last year,” according to the report. “The county’s high cost of living and lack of affordable housing unites for low and middle-income households are contributing to the slowdown in population growth.”
Continued improvement in the national construction and automobile industries, along with rising consumer demand, will translate into lower unemployment in California over the next 18 months, according to a UCLA economic forecast released Wednesday.
The UCLA Anderson Forecast says California will see employment growth of 2.5 percent this year, 2.1 percent next year and 1.3 percent in 2017.
“We expect California’s unemployment rate to be insignificantly different from the U.S. rate at 4.9 percent during the forecast period and employment growth to then be constrained by the growth in the U.S., immigration and natural growth in the working-age population,” senior economist Jerry Nickelsburg wrote in his California economic forecast.
He said the state’s unemployment rate will hover around 6.2 percent for the rest of the year then fall through next year, averaging about 5.2 percent.
By 2017, the California unemployment rate will be around 5 percent, roughly the same as the national figure, according to Nickelsburg.
Nickelsburg notes in the report that ongoing economic expansion has led to a spike in long-term unemployment.
“This roughly corresponds to the decline in manufacturing, the shrinkage of a construction sector bloated by the housing bubble, and the changes in the finance, legal and professional services sector,” he wrote.
He noted that the younger set of long-term unemployed still have potential to “move their skill sets into expanding sectors,” but people who are late in their careers “do not have too many potential years left to recoup the cost of obtaining new or enhanced skills and therefore their incentives are much lower.”
But Nickelsburg states in the report that California job creation “continues to be widespread.”
“In the 12 months ending April 2015, the top sectors in job creation were health care and social services, leisure and hospitality, administrative services, professional technical and scientific services, construction, retail and wholesale trade,” he wrote.
On the national front, senior economist David Schulman wrote in his analysis that despite a “weather-induced” bump in the road during the first quarter, the U.S. economy remains on track for 3 percent growth in the GDP by the third quarter, with the pace continuing through next year
“In this environment, the unemployment rate will drop below 5 percent, inflation will move above 2 percent and the Fed will embark on a gradual tightening process starting this September,” Schulman wrote.
He said the money that has been saved by consumers by the drop in gas prices has not trickled into the retail market.
“Simply put, instead of spending, it appears that cash-strapped consumers are paying down debt and increasing their savings,” Schulman wrote.