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CSULB Economists Mostly Positive In Forecast Of Regional Economy

Published: June 1, 2012

The news was mostly positive from CSULB economists as they presented the 18th annual Southern California Regional Economic Forecast on May 10, but the message was somewhat muted as the pace of future employment growth is expected to remain relatively modest for the next year or so.

More than 200 area business and civic leaders were on hand at the Hyatt Regency Hotel Long Beach for the 2012-13 forecast, and if they came away with one phrase that best described the five-county region’s economy right now, it would probably be “moving in the right direction.”

“Last year, we thought a recovery had begun, but we weren’t really seeing it in the annual data yet. This year, we definitely see that in 2011 there was growth,” said Lisa Grobar, director of CSULB’s Economic Forecast Project. “It was not particularly robust growth, but it was positive, and that’s a big improvement from where we had been.”

Indeed, for the first time since 2007, the Southern California region posted positive annual job growth as 2011 showed a clear start to the region’s economic recovery. In fact, all five counties in the region—Los Angeles, Orange, Riverside, San Bernardino and Ventura—saw positive job growth last year.

However, the 0.6 percent increase in employment for 2011 was well below the historical average. The CSULB economists predict a more robust growth rate of 1.5 percent for 2012 with continued growth expected for 2013 at 1.7 percent and 2014 at 1.9 percent.

“So, looking at the big picture, I think the big news for the region as a whole is that we returned to positive growth last year and things are actually picking up pretty substantially this year,” Grobar pointed out. “Additionally, it looks like we are approaching a more healthy pace of job formation for the first time in a number of years.”

The message was pretty much the same for the forecast’s national economic outlook, which was presented by Joe Magaddino, founding director of CSULB’s Office of Economic Research and emeritus professor of economics.

“I think the central theme of this year’s forecast is that the economic recovery is still a work in progress,” Magaddino noted. “Certainly, it is not the kind of robust recovery that one would hope for given the depth of the recession we experienced.

“So, I think what we are looking at is real modest growth both this year and next year. We should see some steady, but certainly not spectacular, gains in employment on a monthly basis,” he added. “The unemployment rate will come down, but it is not going to come down real quickly.”

Among the region’s five counties, it was Orange County leading the way out of the recession with a 1.1 percent gain in employment last year. Los Angeles and Ventura counties both grew at a pace similar to the region at 0.6 and 0.5 percent, respectively, while the Inland Empire lagged just a bit with employment growth of just 0.3 percent.

“There are some differences among the counties. Orange County has been leading the region out of the recession and is going to be the fastest-growing county again. So that is particularly good news for them,” Grobar explained. “Although Riverside and San Bernardino counties have really been struggling during this recession, they are actually coming back as well. They are seeing pretty solid growth in a number of sectors, and while they still have to catch up, they are closing the gap.”

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The forecast calls for Orange County to increase employment at a 1.9 percent rate in 2012, jumping to 2.7 in 2012 and 3 percent in 2014. Riverside/San Bernardino won’t be too far behind with an expected growth rate of 1.2 percent in 2012, 1.9 percent in 2013 and 2.7 percent in 2014.

Los Angeles, the region’s largest county, is looking at a 1.6 percent increase in employment for 2012, but the economists are seeing a small dip in 2013 and 2014 with growth rates of 1.4 and 1.3 percent, respectively. Meanwhile, Ventura County will lag the rest of the region with an increase of only 0.2 percent this year followed by 1 percent in 2013 and 1.2 percent in 2014.

As for the types of jobs that are on the rise, most sectors will post gains in 2012, including a number of sectors with job growth in excess of 2 percent. Leading the way is the leisure and hospitality services sector, which is expected to add jobs at a 3.1 percent pace this year after posting a 2.1 percent gain in 2011. Other leading sectors are the professional and business services with a forecasted 2.9 percent growth rate this year, and the retail trade sector, which is predicted to grow at a 2.3 percent pace this year.

“The strong growth in professional business services is something we were really hoping for because there are a lot of high-wage jobs there,” said Grobar, who noted the sector’s job growth includes areas such as accounting, management consulting and computer systems design. “The other real positive is getting an uptick in retail employment, which has really lagged. This sector is expected to get a cyclical job boost this year as consumer spending continues to recover.”

That recovery in consumer spending is also a factor in the impressive employment increases in the leisure and hospitality sector, which shows the growing demand in the restaurant, hotel and amusement sector jobs.

The only negative news in the forecast had to do with government employment, which tends to lag the general economy because the current-year budget is affected by tax revenues based on the prior year’s income growth. As a result, the forecasters are predicting job losses in federal, state and local government employment. However, the rate of those losses will diminish this year, and the sector should stabilize in 2013.

“We’re not firing on all cylinders yet. We’re getting growth and we’re getting some nice job gains in a bunch of different sectors, but government employment is one that always lags,” Grobar pointed out. “So, it will be a drag on the region’s economy, especially this year, and it will be kind of noticeable as one of the few sectors that is seeing a bit of contraction. Still, it’s not enough to completely derail an economic recovery for the region.”

Those interested can find more information on the 2012-13 Regional Economic Forecast presentation at

–Rick Gloady