The Los Angeles Economic Development Council (LAEDC) was founded in 1981 by the Los Angeles County Board of Supervisors to implement LA County's economic development program. The mission of the LAEDC is to attract, retain and grow businesses and jobs for the regions of LA County.

The LAEDC releases an economic forecast each year in February, and updates the forecast in July.  This morning, I attended the mid-year update breakfast at the Marriott in downtown L.A.  One of the "Cooperating Organizations" in staging the event was the San Gabriel Valley Economic Partnership, which the Chamber just joined.  It was through our association with the SGVEP that I was invited to attend.  The first part of the event was a Panel Session titled "Government Finance Issues", the second part was the "Economic Outlook" session. 

 

Sitting on the GFI Panel were Mayor Bob Foster of Long Beach, County Supervisor Don Knabe, and State Controller John Chiang.  Both Foster and Knabe maintained that their City/County had done what needed to be done, by preparing for an economic downturn, anticipating the need for money, making cuts and setting money aside.  They were both outspoken about their opinion that the problem is that Sacramento had not done the same, and now the State is cutting services, placing a higher burden on the Cities and Counties, at the very time that is taking money from the City and the County to cover its failure to prepare.  Foster noted that the State is using the same techniques to get out of trouble that got it into trouble, the very definition of insanity.  Added Knabe "We are very upset, we're not happy at all."  For his part, Controller Chiang agreed, noting that if the state had set aside money during peak years, they might have $11 billion dollars, turning a $15 billion dollar shortfall into a $4 billion dollar shortfall.  All stated that its time for systemic change in the way the State conducts its business.

 

The Panel for the Economic Outlook Session consisted of Jack Kyser, Founding Economist of the Kyser Center for Economic Research of the LAEDC, Dr. Nancy Sidhu, Chief Economist for the Kyser Center, and John Burns, Founder and CEO of John Burns Real Estate Consulting.  Each gave a presentation prior to joining together for the panel session, moderated by Frank Mottek, host of KNX Radio's Business Hour.

 

The presentations were, for the most part, grim.  "Retail sales detoriated sharply...Tourism is down across the state, and the manufacturing and transportation sectors have been hard hit.  Non-residential and public works construction also have declined sharply...During 2009, employment will fall by -4.6% in California" which translates to nearly 700,000 jobs.  An unemployment rate that will average 11.6% this year will remain high, averaging 12.6% next year.  New home construction, which peaked in 2004 with more than 212,000 units permitted will struggle in 2009, with just 37,000  units permitted.  Only two industry sectors will add jobs in 2009, health services and private education services, estimated to be a total increase of 30,000 new employees.  The bottom line?  The near term outlook for California's economy is bleak.  The state will see a real recovery and economic expansion, but not before 2011.

 

Was there anything positive that came out of the meeting?  Yes.  According to Dr. Sidhu, we are near the bottom.  Retail sales are down 6%, but flat, they aren't falling.  Light vehicle sales are flat, also not falling.  New home sales are low, but not falling.  So some things have leveled out.  But she added that there are mixed indicators, as business spending on equipment (excluding commercial aircraft) is still going down, and employment is continuing to fall with no sign of a bottom.  For what it's worth, all panelists (both sessions) at one point or another expressed optimism about the ability of Californians to innovate and to see this as an opportunity to restructure as we move forward. 

 

The bluntness with which Mayor Foster and Supervisor Knabe expressed their dissatisfaction with State government and the need for the State to take a proactive role in restructuring may be an indicator that local government is going to be more aggressive in pressuring the State to fix what is broken.  LAEDC president and CEO Bill Allen echoed (less bluntly) the sentiments of the local politicos, noting that we need to pay more attention to the state's role in not only the budget but its effect on our ability to rebound.  Allen told me after the session that he has been approached by State officials regarding a plan that the LAEDC has drafted to help fix the current problems and hopefully prevent a recurrence.  Perhaps this is a signal that Sacramento realizes they need to find a plan, and that they finally recognize the need to work with local agencies to improve the current business climate.

 

Another positive that came out of the breakfast is that I had an opportunity to speak with Bob Machuca, Regional Manager, San Gabriel Valley for the LAEDC and Director of Business Assistance for the SGVEP.  Machuca was very pleased to hear that the Sierra Madre City Council has just passed a more business friendly ordinance that permits dozens of business uses without the need for an often costly, time consuming Conditional Use Permit.  One of the roles of the LAEDC is to keep businesses in L.A. County, (their website states that since 1996, they have halped attract or retain more than 152,000 jobs for L.A. County, providing $7.5 billion in direct economic impact and $128 million in annual tax revenue to local government and education in the County).  Machuca stated that he is occasionally in contact with businesses looking for a small town location, and that Sierra Madre's proximity to downtown L.A. makes it an attractive location for such businesses.  I promised to provide him with contact information for people at the City that he can work with if he encounters a business for whom Sierra Madre would be a good fit.  Maybe nothing will come from it, but at least we are on the LAEDC radar as a possible destination for businesses looking to establish or re-locate in LA County.

 

Selected Powerpoint presentations from the breakfast and the complete 2009 Mid-year Update Economic forecast Report will be online by the 27th of July at www.LAEDC.org/forecast.  This forecast includes LA, Orange, Ventura, Riverside, San Bernardino and San Diego Counties, as well as State, National and International outlooks.  In the meantime, I have a hard copy at the Chamber office.