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CSULB Professors See Steady, Slow Growth In Employment

Published: June 1, 2011

Slow and steady. It was the mantra for the tortoise in his race against the hare and it’s good advice when driving on local busy streets. However, when it comes to the recovery of the current economy, steady improvement is good; it’s the slow improvement that doesn’t sit so well.

Still, slow and steady improvement was the prediction from professors with the CSULB Office of Economic Research (OER) as they presented their 2011-12 Regional Economic Forecast on May 13, before approximately 300 area business and civic leaders at the Hyatt Regency Long Beach.

Looking at a five-county region that includes Los Angeles, Orange, Riverside/San Bernardino and Ventura counties, the forecasters anticipate a 1.3 percent gain in employment throughout the region this year, which equals about 83,000 jobs. They also expect job growth to increase by 1.7 percent and 2.3 percent in 2012 and 2013, respectively.

Considering the region has been reporting job losses since 2008, including significant losses in 2009 and a 1.5 percent decrease in 2010, a report on positive job growth is good news. But, is it enough?

“Things are getting better in the economy, but we’re all impatient, and the economy isn’t really getting better fast enough,” noted Joe Magaddino, director of CSULB’s OER and professor emeritus of economics. “The economy started turning around in June 2009. That’s when the recession ended, but since that time we’ve only seen what we could call modest growth, and our forecast calls for steady but modest growth for the next several years.

“So, things are getting better, but if we focus on the economic and political metric of employment and unemployment, things aren’t getting better fast enough,” he added. “I mean, from the peak to the trough, we lost about 7.2 million jobs nationally during the recession, and it is going to take us a long time to make that up.”

Within the region, Orange County is leading the way in economic recovery as it began to see positive job growth in the third quarter of 2010. In fact, the OC has now had three consecutive quarters of job growth. Looking ahead, the forecast is anticipating that the county will see employment growth of 1.4 percent this year, making the county the fastest growing area in the region. In 2012-13, Orange County will see employment growth of about 3 percent.

“For Orange County, one factor that is a little different is we actually think that the housing-related sectors are going to recover this year with positive growth. That’s the construction/finance sector,” said Lisa Grobar, director of the CSULB Economic Forecast and professor of economics. “Now, it’s not going to be a lot of jobs in those sectors, but in recent years, those sectors just lost a lot of jobs. So, that’s one of the reasons why Orange County is leading the recovery of the region because the housing-related recovery — not housing per se, but the finance and construction jobs — is on a faster track than the rest of the counties in the region.”

One feature of the expected regional recovery that Grobar found particularly interesting is the fact that employment increases are taking place entirely in the private sector.

“We’re not relying on government jobs at all. As a matter of fact, federal and state and local governments are losing jobs,” Grobar explained. “So, the job creation in the region in 2011 is going to be 100 percent private sector job growth, and most of it is coming from three sectors alone — professional/business services, education/health services and leisure/hospitality.

Grobar pointed out an interesting divergence within those sectors, focusing on the professional/ business services sector. Looking at Los Angeles and Orange counties, she said there is a lot of growth in an area that’s called professional, scientific and technical services. These are jobs that include lawyers, accountants, engineers, programmers — positions that pay on the average more than $82,000 a year.

“So in Los Angeles and Orange County we’re seeing significant growth in high-wage sector. That’s some good news,” Grobar said. “By contrast, while there is some growth in Ventura, Riverside and San Bernardino counties in professional/business services, in those areas it is in another sub-category called administrative support services, and those positions are not as highly paid.”

“I think another thing that is true region-wise, the leisure/hospitality sector is benefiting from two things,” she continued. “One is that people are going back to restaurants. Consumers cut back so much during the recession but they are starting to spend and that’s a discretionary type of spending that’s really starting to create jobs everywhere in the region. Then, of course, travel is up as well and that creates demand for hotels and that type of employment.”

Almost every sector will return to positive job growth within the region in 2011, according to the forecast. The only exceptions will be construction, government, and nondurable manufacturing. Construction, a significant drag on the regional economy for several years now, will see only a small further decline in employment this year and is expected to stabilize by 2012.

Magaddino closed out the event with a report and forecast on the Long Beach ecomomy, which showed signs of an economic recovery being underway in 2010. Overall, the professors are expecting employment gains on the order of 2,300 in 2011 and approximately the same number in 2012. These projections have Long Beach employment falling short of 200,000 jobs until at least 2013.

“One of the factors that helps Long Beach is the Port of Long Beach. In the last year, we saw the cargo traffic in the port improve markedly, and we expect the container traffic to continue to grow,” Magaddino said. “The port is a big generator of jobs, and that’s a big plus.

“We are, however, anticipating cuts in the public sector. Long Beach is really dominated by the public sector, much more so than the region because you’ve got a large school district, the university, the community college and CSU headquarters, and then of course, you’ve got the city government,” he continued. “Those entities together are all going to suffer because of cuts to the state budget. That outlook certainly is not bright. The good news is that growth is going to be a lot stronger in the private sector, so on balance, it will compensate for the jobs that are lost in the public sector.”

Other predictions from the forecast for each individual county included:

Los Angeles County
Los Angeles County experienced a loss in employment of 1.4 percent in 2010. The county returned to positive quarterly employment growth in the fourth quarter of 2010, and the forecast predicts that the county will see a gain in employment of 1.1 percent this year, followed by a gain of 1.6 percent in 2012 and 2.1 percent in 2013.

“A sector that is going to see growth in Los Angeles is the information sector because we’re adding a lot of jobs in motion pictures,” Grobar noted. “In 2009, California started a program where they put $100 million in tax incentives through 2014 to help the local motion picture industry. It looks like that is having an impact. Even over the last 12 months, L.A. County has gained 15,000 jobs in motion pictures employment. That is sizeable. Then, you get multiplier effects from that.”

Riverside/San Bernardino County
Despite the serious sub-prime mortgage crisis that has plagued the Inland Empire for several years, employment in Riverside/ San Bernardino is beginning to show signs of an imminent recovery. Though the region has not yet seen positive quarterly growth in employment, the losses are moderating. The forecasters are anticipating that Riverside/San Bernardino will see a small positive gain in employment of 0.5 percent this year, followed by employment growth of about 2 percent annually during 2012-13.

“Riverside/San Bernardino are the only counties in the region still losing jobs, but the job losses are quite small even in that area,” Grobar pointed out. “That area was just hit a lot harder during the downturn, so it is going to take them a little bit longer to break through to positive job growth. But, we think that by the end of this year and for the year as a whole they will be positive slightly. So, we think that they will very soon cross over into positive job growth but it is not going to be much in job growth until 2012. It is lagging, but it’s not too far behind.”

Ventura County
Ventura County’s economy turned the corner to positive economic growth in the fourth quarter of 2010. This year, the forecast is calling for employment growth of 0.6 percent for the county, accelerating to 1.4 percent next year and 1.8 percent in 2013.

“Ventura County overall, looks more like Los Angeles,” Grobar said. “It is on track to see job growth this year, and in fact, already has two quarters of growth.”