Slower L.A. County Growth Over Next 2 Years as Risks Abound

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Los Angeles County’s economy will grow slower in 2020 and 2021 compared to the past couple of years. But going forward, there are even more downside “slowdown” risks depending on the geography/industry in the county, as well as impacts from national/global geo-political factors.

That’s according to the most recent forecast presented and published by the Los Angeles Business Journal and the Center for Economic Research and Forecasting at Cal Lutheran University. The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Presented and published on Jan. 16 by the Los Angeles Business Journal and Bank of Hope Chief Analytic Officer Young Cho, entitled “2020 Economic Forecast and Trends: Survived 2019 — Thrive in 2020?”:

Los Angeles County’s economic growth will continue slowing down in 2020, although no recession is in sight. Employers are expected to add jobs to total employment (both payroll companies and independent consultant/freelancers), although at a slower pace as the record-long U.S. economic expansion gets even longer. The negative impact to exports and imports (foreign trade with China) is being felt throughout California, especially within the warehousing/logistics and distribution sector (movement of goods) and other sectors (manufacturing and agriculture). “While the risk of imminent recession has diminished considerably since a phase-one deal between the United States and China was reached, we are maintaining a cautious view as the calendar flips to 2020,” states Cho in the forecast report.

For all of Los Angeles County’s optimism going into 2020 — and the nation for that matter — this year still remains “cloudy” due to certain risks. Foreign trade with China remains a large concern. “Although the narratives surrounding trade policies have improved considerably as 2019 ended, whether the economy could thrive in 2020 remains cloudy,” Cho stated in the report. “People are still living in fear of the president’s tweets because the economic climate could change drastically at Trump’s fingertips. As illustrated by the U.S. Economic Policy Uncertainty Index, it seems the only certainty is uncertainty as the index rose by an average of 17 percent in 2019, compared with 2018. The sharp rise augurs a murky economic outlook and generates concerns that not only fed into policymaker’s perceptions regarding their policies, but also influenced businesses and consumers’ daily economic activities.”

The San Fernando Valley economy is forecasted to grow 3.4 percent in 2020 and 3.3 percent in 2021 (aka “local GDP”). While this represents an undeniable slowdown for the local economy, this is still a bullish forecast relative to any comparable geography for that future period. “The risks to the current forecast are likely to the downside on net, but they are not simply one-sided,” states the forecast report. “The single biggest downside risk to the forecast is the trade war and the impacts on business investment and hiring decisions. We are skeptical that any agreement reached with China will be an improvement over the situation that existed prior to the current trade battle. The question is not whether the trade war will impact the economy of the San Fernando Valley; the question is ‘by how much.’ The impacts will be muted relative to other regions of the United States, but we could be wrong.”

The structure and evolution of Glendale and Burbank’s economy are similar, yet different, to that of the San Fernando Valley — so much so that Burbank’s economic growth will dip lower than the other two regions in 2020 before coming back in 2021. Glendale’s economic growth tracks the San Fernando Valley’s growth rates closely. However, Burbank’s economy is much more volatile than Glendale’s economy, or for that matter most other regional economies in the United States. Burbank is home to a number of large project-driven enterprises including Warner Brothers Studios, Walt Disney Studios, The Burbank Studios, Nickelodeon Animation, the Cartoon Network, and the list goes on. “This (type of business activity and resulting employment) result in an extremely volatile local (Burbank) economy,” the forecast report states. “The economic forecast for Burbank implies a slowdown in 2020 (not a recession), and then a pickup in 2021.”

Click here to see the entire forecast on the "Your Economy - Your Credit Union" webpage!

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