Roberts Economists saw slow but stable economic recovery for the region, state and nation as they gave their forecasts at the Valley Industry & Commerce Association’s 22nd Business Forecast breakfast on Oct. 28. James Paulsen, chief investment strategist for Wells Capital Management, began the forecast with optimism, saying the current recovery period is faring better than those of the past. “This is the best recovery we’ve had in 25 years,” Paulsen said, adding that the real growth domestic product rates grew by 3 percent in the first year of recovery. That is far better than growth during the recession recoveries of the early 1990s and 2000s, he added. He also said it took a year to see positive payroll gains in the early 1990s and a year and nine months for the gains in the early 2000s. Meanwhile, it only took six months to see payroll gains in the current recovery period. Stimulus help Paulsen said he believes the effects of federal stimulus spending still have yet to fully kick in, which should help improve the economy. William Roberts, director of the San Fernando Valley Economic Research Center at California State University Northridge, said that while the economy is in recovery mode, overall improvement is expected to move at a very slow pace. “I see the economy is recovering, but we’re going to get modest GDP growth for at least the next nine months,” said Roberts, adding that he estimates growth of about 2 percent. The private business sector is seeing improvement, with employment rates in the greater Los Angeles area having increased by 1.1 percent over the last 10 months and average weekly wages having increased over the same period by 3.2 percent, he added. “The private business sector is doing a really good job,” he said, addressing an audience of business executives and leaders. “You’ve been hit, slammed, regulated, taxed, they’re changing the rules of the game on you all the time, but you pop back and you chug us forward.” However, he added that overall unemployment rates will not likely decrease more significantly until the middle of next year. Meanwhile, housing prices and sales in the San Fernando Valley have stabilized. Roberts said the San Fernando Valley region will be able to use its diversity to its advantage in its recovery process. Diverse area “The Valley is diverse in employment (and) diverse in its population,” he said. “So, we’re going to kind of take advantage of that diversity, and slowly and gradually in different areas we’ll expand.” Bill Watkins, executive director of the Center for Economic Research & Forecasting at California Lutheran University, agreed with Roberts that recovery is going to occur slowly. His center is forecasting no economic growth for the state the rest of the year, more job losses over the next four quarters and unemployment rates in the double digits for the next two years. However, he added that the San Fernando Valley region is likely to recover faster than most of the state. VICA’s business forecast event also included several panels addressing subjects such as health care, technology, transportation, media, politics and land use. Technology panel In the technology session, panelists discussed topics such as solar energy and other green-related businesses as well as other trends such as cloud computing. “That has become a big deal for people who want to save money,” said Dave Rogers, government technology strategist for Microsoft. He said it would become an even bigger business technology trend in the next three to five years. Cloud computing is a technology that uses the Internet and central remote servers to maintain data and applications. Cloud computing allows consumers and businesses to use applications without installation and access their personal files at any computer with Internet access. Health care panel While the new health care reform law has led to some positive changes in insurance practices, small and large businesses still have concerns about how it will impact their costs, said panelists at VICA’s healthcare session. Some of those concerns include insurance coverage costs for companies that previously did not offer coverage, penalties for not providing insurance coverage to correct levels and a proposed “Cadillac” excise tax on wealthier insurance plans. Employers are also concerned about a new tax provision in the law that would require businesses to file 1099 tax forms to client businesses for transactions of $600 or more per year. The change is expected to result in increased accounting costs and extra paperwork. The panelists advised companies to keep up with what the law requires of them to make sure they remain in compliance. Magan Ray, a tax and investment consultant for Greenberg Traurig, said one of the concerns she has been hearing from clients is whether they will be able to provide coverage for their employees or whether they will be participating in the state-based health insurance exchanges, which states must start operating by 2014. Employers are also updating their plans to match with changes that already are in effect. “We’re focusing on a lot of communications, plan documents that need to be updated, design features, looking at the structure of the plans you have, if they are grandfathered or not and if they are going to be compliant,” she said. Ray predicted employers largely would not abandon the employer-based model of health insurance because it is a model that dominates the market. Other panelists said smaller employers overwhelmed with regulations and costs will likely opt instead to use the state-based exchanges. “We’re probably going to see a lot of small businesses just dumping their employees into the exchanges,” said Michael Shaw, the National Federation of Independent Business’ legislative director in California. “Some businesses won’t, but some businesses, I think, are going to make the decision that they don’t want to deal with it anymore.”
Although Agreeing It’s Slow, Economists Still Differ
