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Wednesday, Oct 4, 2023

Broad-Based Growth Seen in Economy

Growth is expected in nearly all sectors of the Valley economy in the coming year, according to the San Fernando Valley Economic Forecast released last week by California State University, Northridge. The Valley’s job growth rate doubled last year, which saw the creation of 10,600 new jobs, a trend that shows no sign of slowing this year. The forecast predicts a 1.7 percent increase in jobs this year and next year, growing to a 1.9 increase in 2007. The average salary will go from $45,457 to $47,947 in 2005, and it should reach $51,662 in 2007. Most employment sectors will contribute to the continued growth, and the average worker will exercise more purchasing power as wages and salaries continue to climb. The forecast found in a survey of local businesses that half of its respondents are planning to add jobs in the next 12 months, while only a third of them had hired in the last two years. Private sector job growth in the Valley has consistently outpaced Los Angeles County’s economy and California as a whole, said Dan Blake, director of CSUN’s San Fernando Valley Economic Research Center. “You see 1.6 percent last year, very strong growth for the San Fernando Valley. California seems to be catching up, maybe we’re pulling them along a little bit. L.A., we’re still trying to move them forward, but not yet,” Blake said. Broken down by sector, almost every major group of Valley businesses is expecting a good year. The health and private education industry sector will cool a little bit from its 2004 pace, when it added 3,300 new jobs with a 3.9 percent growth rate. This year, the sector will grow at about a 3 percent growth rate, but the pace will quicken in 2006, when the sector is expected to grow by four percent as the Valley’s population ages and places more demand on the health care industry. The trade sector will also do well, but will not lead Valley sectors in job creation like it did in 2004. The sector will likely show the creation of 2,700 new jobs at a growth rate of 2.4 percent. In 2004, residential construction permits spurred the creation of 2,500 jobs in the construction sector. In 2005, the sector will likely add 1,900 jobs at a 5.6 percent growth rate as construction on newly permitted houses continue and non-residential permits continue to grow. An increase in demand for employment services and temporary help companies led to the created of 2,800 new jobs in the Professional and Business Services Sector, as companies increased their hiring to keep up in a growing economy. That sector will see about 600 jobs created in 2005. The hospitality sector added 2,200 jobs in 2004 at a 4 percent growth rate, reaching a sector record. That growth rate is expected to slow this year and start to pick up again in the next few years. The manufacturing industry is having a hard time holding onto jobs. The sector dropped 3,700 jobs in 2003 and almost 2,500 jobs in 2004 with another 400 expected to be lost during this year. The job losses do not stem from poor performance as many companies are increasing sales. Instead, manufacturers competing on an international scale are forced to increase productivity while keeping labor costs low. “The greater Los Angeles economy continues to enjoy primacy in manufacturing, it goes back and forth with Chicago, but it still is a tremendous base of manufacturing,” said Rohit Shukla, founder and chief executive officer of the Larta Institute. Shukla was a member of a panel which discussed the Valley economy on May 19 when the CSUN forecast was formally presented. “Unfortunately however, in the conventional and traditional sense, manufacturing is not going to be sustainable as it is right now in this economy.” Manufacturers in California and across the country have been forced to head overseas in order to find cheaper labor. Even manufacturers in other states that don’t face expenses like workers’ compensation rates are headed overseas. Shukla says they’d be making a mistake not to head for China and India. “Outsourcing on a regular basis is not going to stop. It would be fiscally irresponsible for a company to not outsource, frankly,” said Shukla. “I think it’s almost criminal to criminalize for having to do what they have to do in the interest of shareholders and profitability.” Despite the impacts of globalization, Shukla said Los Angeles should not be afraid to make explorations into scientific changes in manufacturing, like robotic automation. “This is the biggest economy, as a region, in the United States. (It is) diverse enough now to withstand the pressure shocks that we had in the 90s, and there’s absolutely no reason why we can’t . . . put our focus on design and coordination of robotics and so on and so forth that actually automates the process of manufacturing considerably, because that’s where it’s going to go.” The Information sector, which includes the entertainment industry, should pick up in 2005 after dropping jobs and showing no growth for the last two years. Job growth is forecast at four percent this year and two percent in 2006. Panelist Steve MacDonald, president of the Entertainment Industry Development Corporation, said the industry is coming off a tremendously successful 2004, which saw a record number of permitted production days. Feature film production, while paying the most money into Los Angeles’ economy, has actually been on decline since 1996. Television continues to grow, however. From December to April, there were 118 television pilots made in Los Angeles. Those pilots generate over $300 million in direct spending in Los Angeles. Permitted production days are up two percent in the first quarter even after record numbers posted in 2004. Against its 10 year average, MacDonald said, television production is up 78 percent. Beyond spending on pilots, networks and cable channels spend $2.5 billion on scripted television and reality programming in the Los Angeles area, MacDonald said. “Television has been a real bright spot, and it’s really fueled the growth that we’ve seen over the last few years,” said MacDonald. “We’ve seen a huge expansion in the amount of original programming on television. It used to be limited to a handful of broadcast networks that would actually go and spend the money to produce television programs. Now you have hundreds and hundreds of cable networks, and many of the cable networks are producing original programming, and that original scripted programming is what employs people and where money is spent.”

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