Los Angeles County:

Slower Growth Projected Over Next 2 Years, Even as Downside Risks Abound

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.

Los Angeles County
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.”

It's important to remember that Los Angeles County is exposed to “greater levels of economic uncertainties arising from trade tension and slower global growth,” Cho stated. “Indeed, the ongoing trade war has weighed on cargo volumes through the Los Angeles and Long Beach ports. In November 2019, total imports at the two ports dropped 11.3 percent year-over-year and total exports shrunk by 7.1 percent. While many economists have expressed concern that the slowdown of international trade might lead to strings of employment losses in the Los Angeles area, the payrolls added remained solid and the unemployment rate stayed low. Los Angeles County added 81,900 non-farm jobs from November 2018 to November 2019, an increase of 1.8 percent.”

Another concern regarding the ongoing tension in foreign trade with China is its ripple effects on the housing market in Los Angeles County — one of the top destinations for Chinese home purchasers. “In 2019, Chinese retail investors purchased fewer homes in Los Angeles versus 2018 due to the weaker Chinese currency, tighter capital control from Chinese authorities, and trade war uncertainties,” Cho stated. “Although Chinese investors have slowed their home buying activities, domestic home purchases picked up recently thanks to lower mortgage rates and solid household income growth. According to CoreLogic, 6,746 new and existing houses and condos were sold in Los Angeles county in October 2019, up 5.6 percent year-over-year. With the underlying demand proven to be resilient, home prices in Los Angeles has remained elevated.”

The conference panels focused on the hot-button topics of foreign trade, tariffs, taxation, the impact of new legislation, and the outlook for residential and commercial real estate. To read more, view the special edition supplement Los Angeles Business Journal Economic Forecast and Trends. Topics and sections include: "Assembly Bill 1482 (Rent Control) is Now in Effect: Here’s How You’ll be Affected in 2020”; "Royalties and Licensing: Expanding Opportunities in Today’s Marketplace”; "Glutton for Punishment, You Are: Data and Cybersecurity”; "CCPA: The Next Horizon for M&A Deals”; "Strengthening Your Weakest Link”; "Construction Lending in 2020: Clear Skies Ahead”; "A Look to the Future with the Port of Long Beach”; and "With 2020, Businesses Face New Restrictions for Using California Consumers’ Personal Information.”

San Fernando Valley, Glendale, Burbank
Presented on Jan. 15 by the Center for Economic Research and Forecasting at Cal Lutheran University, entitled “2020 San Fernando Valley Economic Forecast”:

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 San Fernando Valley is a true economic hotspot, whose performance compares favorably to almost any other geography. The San Fernando Valley enjoys a substantial economic growth premium, which elevates it above the broader Los Angeles metropolitan area, above the nation, and even above a strong state economy. The valley is in the midst of a stretch of robust economic growth that is now entering its sixth year. “The lengthy creative and technological legacies of the San Fernando Valley, coupled with an attitude and with policies that, on-balance, embrace growth and economic dynamism, will surely continue to pay dividends,” the forecast report states. “As we have concluded in previous forecasts, the San Fernando Valley exhibits uncommon economic strength. We anticipate that the region will remain uncommonly strong in the years ahead.”

Over the past five years, economic growth in the San Fernando Valley has averaged more than 4 percent (aka “local GDP”). By comparison, the broader Los Angeles metropolitan area has averaged just 3.1 percent, and the nation has averaged just 2.5 percent. During this same period, California has enjoyed growth of 3.9 percent, nipping at the heels of the San Fernando Valley economy. But interestingly, estimates of state domestic product growth for 2019 (similar to national Gross Domestic Product—GDP) indicate that California’s economic growth rate slowed significantly while the San Fernando Valley’s accelerated. Even as California and the nation are experiencing economic slowdowns, San Fernando Valley’s economic growth continues. In this way, the underlying strength of the San Fernando Valley economy seems to provide a degree of insulation from outside factors and trends.

Signs of economic strength in the San Fernando Valley are broad-based and enduring. During the past year, only the small and highly volatile agriculture and resource extraction sectors saw declines in economic output. That is, every single sector of the non-farm, non-extraction economy saws gains. The fastest growing sectors were construction, transportation and warehousing, and information and technology. Information and technology — a broad sector that includes software engineering, internet development, and motion picture production — continues to be a significant driver of the valley’s strong outlook. Output in this sector increased 5.9 percent in the past year and is up more than 100 percent since before the Great Recession of 2007 – 2009.

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.”

Local Home Affordability Vs. Job Growth
The National Association of Realtors recently released a study (“Home Affordability Index Ranking and Payroll Job Growth") showing trends in how local housing affordability can contribute to slower local job growth by employers. View the data table for local metropolitan information in California and Nevada.

Local County-Level Perspectives
The California Department of Transportation (Caltrans) has released its updated 2019 – 2050 demographic forecast sometime in late 2019 for all counties in California regarding local jobs, wages, home prices, population, personal income, taxable sales, net migration, wildfire issues, public policy implications, legal cannabis, industries, workforce, and more.

For forecasting purposes, the shorter-term economic projections for 2019 – 2024 within this annual county-wide report by Caltrans do not factor in an economic recession into its local scenarios. They are only highlights stemming from a baseline projection (view the report above for more information).

L.A. County Occupational/Industry Trends
Additionally, download Chmura Economics and Analytics’ latest Los Angeles County Economic Overview to see 10-year future trends in worker occupations, employment, wages, cost of living, and industries.

Your Local Region’s GDP: 2001 - 2018
The U.S. Bureau of Economic Analysis has released an overview and history on "Local Area Gross Domestic Product from 2001 - 2018" for individual counties in California, Nevada and the entire nation. It includes highlights and trend breakdowns for large, medium and small-population size counties, as well as the U.S. dollar size of economies for each county. Tables and files are included for download and review.

Latest CA Population and Demographic Trends
The California Department of Finance has released its latest news — "State's Population Increases by 141,300 While Rate of Growth Continues to Decline" regarding 2018 to 2019 population growth, which includes highlights and snapshot trends of each county and region across the state. (You can also download the long-term 2010 to 2019 demographic tables by clicking here)

Also, the department's deeper demographic breakdown (age, race, income, employment, poverty, health care, education, and social/housing characteristics), courtesy of the American Community Survey by the U.S. Census Bureau, can be found by clicking here.

County Income and Poverty Estimates
The U.S. Census Bureau has released its "Small Area Income and Poverty Estimates (SAIPE) Program", which gives single-year estimates of income and poverty for all counties in California, Nevada and the entire nation — as well as estimates of school-age children in poverty for all 13,000-plus school districts.

Demographic Profile and Projections: Southern California*

  • *(Combined counties of Los Angeles, Orange, San Bernardino and Riverside)
  • Total population: 18.3 million (and will hit 19 million by 2025).
  • Working-age individuals (15 - 64 years old): 68 percent of total population in 2015 (and will fall to 64 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 8.9 million out of 14.3 million adult population.
  • Labor force participation rate (adults who “want” to work): 62 percent (or 8.9 million individuals).
  • Unemployment rate: 3.5 percent (versus 3.9 in CA and 3.5 in U.S.)
  • Unemployed workers: 321,000.
  • Median household income: $72,800 as of 2019 (compared to $71,800 for CA and $60,400 for U.S.)
  • Poverty rate: 16 percent (versus 15 in CA and 13 in U.S.)
  • Education of population: 31 percent have a college degree; 29 percent some college; 21 percent high school diploma; and 19 percent no high school diploma.
  • Employment sector growth: click the following links for local future growth breakdowns (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance: Los Angeles County; Inland Empire; and Orange County.
  • * Data as of September 2019 from the California Center for Jobs and the Economy; California Employment Development Department; California Department of Finance; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; and U.S. Census Bureau

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