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Thursday, Jun 8, 2023

Forecast: Valley to Add 11,000 New Jobs

Forecast: Valley to Add 11,000 New Jobs By SHELLY GARCIA Senior Reporter The San Fernando Valley economy will get a substantial boost this year, as a recovery that began in 2003 moves into full swing. That’s the conclusion of the CSUN Economic Forecast of the San Fernando Valley and the Los Angeles region about to be published this week. The report, produced by the San Fernando Valley Economic Research Center at California State University Northridge, reveals a surprising countertrend in the Valley, where job growth outpaced that of the county last year and where job and income growth will lead the overall region in 2004. “Frankly both in the survey that we did for this and the numbers we collected from the Employment Development Department I was a little bit surprised,” said Dan Blake, director of CSUN’s Economic Research Center. “I didn’t think it would be that strong in 2003. It clearly got a good start in 2003 and that is continuing.” The forecast, which is based on a model that takes into account last year’s trends, data from a variety of sources including the state’s Employment Development Department as well as the results of a survey of hundreds of Valley businesses, projects that the Valley will add 11,000 new jobs, accounting for 1.7 percent of the area’s total jobs. The increase follows a threefold boost in the number of new jobs in 2003. Most of that growth will come from the professional and business services sector, health care and information services, which includes the entertainment industry. Temporary jobs will make up the bulk of hiring in the professional and business services sector, which is expected to add a total of 4,400 jobs in 2004, compared to 1,400 jobs that were added in the sector in 2003. The health services sector, which in 2003 added 2,800 jobs, is expected to add that same number of positions this year. The construction industry, which last year lost a small number of jobs, this year is expected to add about 1,000 jobs. And a sector the forecast defines as the information industry, including entertainment and media companies of all kinds as well as Internet services, library workers and retailers like movie theaters and video rental stores, is expected to add 2,000 new jobs after losing 500 jobs last year. The Entertainment Industry Development Corp. has already seen signs suggesting renewed strength in the industry. Although the agency does not measure job growth, it does track the number of permits issued for all types of filming, including features, television, commercial production and music videos. “For the year to date through April we’re up about 16 percent over last year,” said Steve MacDonald, president of the EIDC, “so that’s a really good sign. We’re hoping that it results in jobs.” Leaving Canada Also encouraging, MacDonald said is the favorable exchange rate that the U.S. has enjoyed over Canada, which appears to be shifting at least some production back to domestic locations. During 2003, the Valley added a total of 6,247 jobs, three times as many as were added in the prior year, for an average of 660,673 jobs over the year. That compares with only 2,004 jobs added in 2002. Some of that growth came from areas expected to decline this year. The leisure sector, for example, which includes hospitality, restaurants, arts and entertainment, picked up 2,500 jobs in 2003 but will drop about 800 jobs this year. And financial activities, which includes banks, brokers, insurance companies and real estate, will add about 1,600 new jobs, down from 3,000 jobs added in 2003, largely as a result of the anticipated decline in refinancings that drove up employment in the sector in recent years. But generally, the Valley is expected to benefit from the varied mix of businesses it houses as well as an anticipated upturn in the county economy overall. “Given that growth is going to resume in L.A. County, that will spread benefits to the Valley,” said Blake. “But it seems that without that growth through L.A. County that the Valley improved by itself.” The Valley’s recovery has not only outpaced the county to date, it also runs counter to a statewide trend that shows California’s job growth lagged well behind that of the nation. Although 300,000 jobs were created in the nation in the month of March, California added a mere 21,000 jobs, despite the fact that the state accounts for the largest percentage of the national labor force. There are several reasons for the disconnect, chief among them the weak economy that continues to plague Northern California and the greater expense involved in adding jobs in California as a result of the state’s health insurance and workers compensation costs, Blake said. Because of those costs, employers often choose paying overtime as business improves rather than hiring on new workers. L.A. County has been impacted by those same dynamics, but in the Valley, where manufacturing accounts for a smaller percentage of the overall economy, and where areas like entertainment and business services are rebounding, the problems of the manufacturing sector have not had the same effect on growth. “One of the reasons for the difference in performance is manufacturing,” Blake said. “L.A. County lost 6.4 percent of their manufacturing jobs last year whereas the Valley lost 2.8 percent. So obviously they have to generate a lot more other jobs elsewhere to make up for that loss than we do here. So whatever job growth we had in other areas counted more out here.” Manufacturing continues to be the weakest sector in the Valley economy, losing 3,000 jobs in 2003. “We’re looking for a loss in manufacturing,” Blake said. “It isn’t quite as bad as last year, but it is a loss.” Stemming the flow? The Valley’s manufacturing sector is expected to shed 2,300 jobs in 2004, but the study suggests that the worst may be over. By 2005 Blake said, that number should drop to about 500 jobs. Perhaps just as important, the drop-off in manufacturing employment is not having a commensurate effect on allied businesses, Blake said. Typically, when the manufacturing sector is weak, it has an effect on allied services like marketing, retailing and financial services, but that has not happened to the extent that might be expected because manufacturers have continued to produce at significant levels despite the lower levels of employment. “They’ve actually experienced output growth,” Blake said. “The competitive pressure is so great on them to meet prices and competition from elsewhere they have been the focus of all the productivity gain, so it isn’t quite the drag on the economy that it would be if they weren’t experiencing these productivity gains.” Perhaps the most significant change in the employment picture for this year is an anticipated real wage growth, which did not occur last year even as jobs were added. According to the forecast, inflation adjusted wages last year went down to an average of $43,800 in the Valley from $44,500 in 2002. In 2004 the forecast projects real wages will rise to an average $45,400. “When you start increasing hiring then naturally you attract people in and compete for some of the good workers out there and that tends to raise wages,” said Blake. Thanks to both an anticipated increase in the number of jobs and the projected wage growth, total payroll for the Valley will actually rise even higher, Blake added. The results of the Economic Forecast, which also covers population growth, consumer spending, real estate and construction activity, will be presented Tuesday, May 25 at the second annual San Fernando Valley Economic Forecast conference at the Sheraton Universal Hotel. Copies of the report are included in the cost of the conference – $110 for those who register after May 14. Afterwards the report is available for purchase for $75. Also on the conference schedule are presentations by Mark Schniepp, director of the California Economic Forecast, who will provide a regional forecast for Los Angeles County and Blake, who is also a professor of economics at CSUN and will present the forecast results. The keynote address will be given by Gary Zimmerman, an economist with the Federal Reserve Bank of San Francisco who will provide a national outlook focusing on manufacturing and the high tech industries.

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