Economists were generally optimistic about the economic climate in the coming year. Some are predicting more success than others, but in general they see companies hiring and nothing to significantly derail the housing boom. To look ahead to 2006, the Business Journal spoke with four economic experts about what they see on the horizon. Mark Schniepp Director California Economic Forecast “I don’t expect to see the same type of bursting growth in things like housing and commercial real estate demand and retail dependency, but we’re not going to see a huge change in the cards. “The retail build-up won’t be as great simply because it’s starting to run out of gas. Consumers are just getting to the point where they’re not really leading the charge in terms of spending. They’re just flowing along right now, they’re not spending quite as much as they were. “Job growth will also be OK, but not great. The housing market is going to be a big factor there. The reason things are going OK is because we don’t see the housing bubble exploding yet. If it does, all of the bets are sort of changed. “Interest rates are not rising that fast, mortgage rates kind of went up and stopped. There’s nothing major in fundamental economic news that will necessarily dash the market. “The state budget problem in California is resolving itself, we’re not out of the woods yet, it’s still going to take a few more years but we’re moving in the right direction. I just hope the legislators don’t spend all the money that’s coming in and let it go to debt reduction. “We have high-profile trade at the port. All areas will benefit from port activity, that creates jobs in a variety of markets. Warehousing and industrial markets will be quite vibrant.” Scott Anderson Senior Economist Wells Fargo & Company “We’ve surveyed 400 major businesses in Southern California, including Los Angeles and Orange County, and we were quite surprised by the responses in the sense that we saw extreme optimism across all industries, from services to construction to manufacturing. “Construction looked very solid, with maybe a pretty insignificant slowdown in the coming year. It was the most optimistic of the three segments in terms of future demand and employment. “Entertainment has been doing pretty well in Southern California, even though it’s kind of unpredictable from month to month. We’ve seen a pick up in television location shooting in the area. I think there are some longer-term potential problems, runaway production remains a risk with a lack of production incentives in California. There’s also some concern that move ticket sales are down so much with that prized demographic of 13 to 25-year-old males. “Los Angeles County has kind of been an economic laggard in the Southern California region, but lately we’ve seen some stellar home price appreciation. The San Fernando Valley numbers according to the California Association of Realtors in October, year over year, showed close to 20 percent appreciation, 27 percent in the Northeast San Fernando Valley. “Oil prices will continue to be elevated, not much help at the pump as gas prices remain high, although I don’t expect a major increase. “There are signs that at least lower-income households are being squeezed in terms of income growth. Personal saving rates have turned negative, people are really relying heavily on gains in home equity to sustain spending and that worries me a little bit. It will certainly be less attractive for people to borrow off that equity if adjustable rate mortgages continue rising.” Joel Kotkin Author, “The City: A Global History” “In the Valley right now things are looking pretty good, although a lot is going to depend on what happens with the entertainment industry. The movie business is in a bit of a downturn, but the TV industry is booming and I think the Valley is more dependent on TV than on the movies. “I think that obviously we’ll feel some effect if the housing market starts to slow down, although the Valley is less susceptible to that than downtown or Santa Monica because we don’t have as many expensive homes. I don’t think the Valley is a place where real estate purchases are as speculative. People tend to buy houses here to live in them. “Unfortunately, the industrial sector in the city of Los Angeles has never had much attention paid to it. When you talk to manufacturers in the Valley, what you find is that companies located in Glendale or Burbank or someplace outside the city of Los Angeles tend to be happier, and I don’t see anyone fighting that hard for the sector. “The Valley has been retreating from having a strong sense of self, something that it had going in and coming out of the secession movement. It seems to me that the Valley’s elders are much more willing to get along and be a part of the downtown crowd. Basically, we seem to elect people from the Valley who then act amazingly like downtown people. “The Villaraigosa administration is basically an alliance of organized labor, meaning public employees, and the Westside liberals, and I don’t see the Valley having much of a voice. I don’t see anyone saying, ‘maybe we shouldn’t be spending $200 million on a convention hotel downtown,’ or ‘maybe a subway going to Wilshire isn’t the best way to deal with traffic.'” Dan Blake Director San Fernando Valley Economic Research Center “One of the big economic movers is going to continue to be construction, basically what we’re charting is that there are a lot of additions and remodeling activities still going on. “Retail looks sound, we don’t expect to have the same growth as before. We expect more or less normal growth in the tourism industry, which has sort of caught up over the last two years. “Entertainment is dicey, but we’re still looking for that to add employment but there are big players in that and there could be some big moves by those big players, so that’s a riskier part of the forecast, things can happen there. “Warner Bros. is talking about some longer term downsizing and DreamWorks just got acquired and it’s in the Valley. It depends on what the acquisition does to the company and how the buyers position the company. “(Entertainment) had I think 2.3 percent growth last year, we’re looking for a little bit less that that, but above the 1.7 percent for the rest of the Valley. “One other thing that’s going on with the entertainment industry, and we’re working on identifying that sector much more closely, is the video gaming industry, which has had a lot of growth. We haven’t tracked the Valley component of that too well yet. “We expect that the job losses in manufacturing to continue, but they’re slowing down and that has helped. Basically what we’ve had to do is compensate for that with growth in other industries and given the slowdown of losses there we should be in better shape. “Health care industry growth is continued, that one thing that’s going on all the time. With the aging of the baby boomer population I’m afraid they look at health issues much more closely. That sector has had between 2 and 2.5 percent growth all along for the last four years or so.”
