78.5 F
San Fernando
Thursday, Aug 11, 2022
-Advertisement-

Outlook

JASON BOOTH Staff Reporter With economic turmoil in Asia and growing signs that the overall U.S. economy is beginning to slow, local economists expect things to slow down in Los Angeles during the second half of 1998. Five of the region’s most prominent economic research centers all project that L.A.-area employment growth will level off a far cry from the first six months of the year when new jobs were created at a faster pace than at any time since the late ’80s. “We moved into 1998 with tremendous momentum,” said Jack Kyser, chief economist for the Economic Development Corp. of L.A. County. “But what we are seeing now is more impact from Asia. And if Asia doesn’t step on the economy, the Fed will step in and raise rates.” On average, the five organizations project the number of non-farming jobs in L.A. County to increase 2.43 percent in 1998, up slightly from 2.21 percent growth in 1997. But the average growth rate for the second half of the year is 2.3 percent, well below the 2.7 percent pace set in the first half. Furthermore, economists said that the steady slowing of L.A.’s growth rate will continue into 1999. Much of that projected slowing will come because of a weakened Asian economy that will reduce demand for L.A. products, such as entertainment, engineering and electronics. “What we are seeing are changes in growth estimates that account for the negative effect of Southeast Asia,” said Esmael Adibi, director of economic research at Chapman University. “We started the year exceedingly strong, but I don’t think it is sustainable in terms of job creation.” Economists point out that the economies of Orange and San Diego counties, which came out of the recession earlier than Los Angeles, already are starting to slow. Sectors with the greatest exposure to Asian trade, such as technology, wholesale trade and transportation, are expected to see the most pronounced slowdown. Not everyone sees the development as entirely negative. Amid a tightening labor market and rising home prices, some economists earlier this year were expressing concerns about increased inflationary pressure. If job growth does slow, the threat of inflation would be reduced. “There was the threat of things getting out of hand in terms of growth, which could have pushed up inflation and interest rates,” said Anil Puri, director of the Institute for Economic Studies at Cal State Fullerton. “In terms of macro-economics, a slowdown could be a good thing.” Asia remains the wild card heading into the second half of the year. Joe Magaddino, chairman of the economics department at Cal State Long Beach, is more confident than many of his colleagues that the L.A. economy can ride out the crisis with few ill effects. He believes that after years of recession, L.A.’s economy is now more dynamic and resilient. As a result, most local companies are successfully adjusting to the problems in Asia. In particular, exporters are shifting their business to Europe and Latin America. “L.A. experienced a very prolonged recession and lagged the rest of the country in the recovery, so there is still some slack,” he said. “So we are looking for L.A. to close out the year very strongly.” Magaddino forecasts that non-farm employment growth will increase steadily over the next three quarters, peaking at 3.13 percent year-on-year growth in the first quarter of 1999. He projects that the average growth rate for all of 1998 will be 2.85 percent, up from 2.21 percent in 1997. Even the economists who project diminished job growth are not expecting widespread layoffs. “I do see a slowdown in Los Angeles, but I don’t see a major downturn,” said Ross DeVol, senior research associate at the Milken Institute in Santa Monica. “Los Angeles lagged the rest of the nation for so long that there is still a lot of pent-up demand here.” DeVol projects that job growth will slow to about 2.4 percent in the third quarter and 2.1 percent in the fourth quarter, down from growth of around 2.7 percent in the first half. While the Asian crisis is not likely to slow L.A.’s growth until later this year or early next, the local seaports are already feeling the effects. In April, the volume of inbound cargo through the Port of L.A. rose more than 20 percent, to its third-highest level ever, as local importers took advantage of the U.S. dollar’s enhanced buying power in Asia. Meanwhile, the volume of outbound cargo through the Port of L.A. dropped by 8 percent, as Asian buyers could no longer afford to buy as much U.S. product. It was a similar story at the Port of Long Beach, where imports rose nearly 18 percent in April from the same month a year earlier, while exports dropped more than 6 percent. Tourism is another important sector that appears vulnerable. Given the plummeting currencies in some countries, the number of Asian visitors to L.A. is expected to decline somewhat in 1998. However, new L.A. attractions like the Getty Center, Long Beach’s Aquarium of the Pacific and the new Tomorrowland at Disneyland are attracting tourists from the United States, as well as from Europe and Latin America.

Previous articleListory
Next articleSmallbiz
-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-