The South Bay’s economy is bursting at the seams with full employment and a labor market that’s tighter than Los Angeles County as a whole, according to a new local economic report released Thursday by Cal State Dominguez Hills.
Business at the Port of Los Angeles, in the South Bay’s southern Harbor Area, is doing better than ever as the U.S. economy enters into its ninth year of expansion and both imports and exports are on the rise, the report said. Workers in the local transportation and warehousing industry made 12.5 percent more last year than the prior year, and that continues to trend upward.
Strong aerospace, technology, and energy sectors also paint a lucrative portrait of the South Bay’s future, according to the 2017-18 South Bay Economic Forecast and Industry Outlook developed for the university by independent research firm Beacon Economics.
The report found that there were nearly 555,000 workers employed in the South Bay last year, up more than 1 percent from the prior year. Six of the region’s 16 cities had less than 3 percent unemployment, while Carson and Inglewood had the highest rate of jobless residents, at 6.9 percent.
“Employment in the South Bay has reached a record high. Many industries are adding to their ranks and wages are climbing. The Ports of Los Angeles and Long Beach are poised for a record year in container activity and the broader transportation and logistics sector is humming with activity,” the report states. “At the same time, real estate markets continue to advance with higher home prices in the midst of tight supplies.”
But health care, education and retail sectors are facing big challenges as birth rates continue to decline, consumers increasingly switch to online shopping, and health-care policies waiver at the federal level.
The report was presented in a morning conference at the Carson university, titled “A Region in Transition: Changes and Trends in Consumer Behavior.”
The legalization of medical marijuana and soon-to-be implemented permitting processes for recreational marijuana promise large influxes of new revenue. The economic promise of the marijuana industry is so high that a mature plant was displayed next to the podium throughout the conference.
Additionally, the report said technological sectors are booming with high-wage jobs.
Wages increased overall in 2016, with an average South Bay employee making $62,200 – more than an average resident in Los Angeles County.
“With local labor markets at or close to full employment, and little anticipated growth in the South Bay housing base, greater worker bargaining power is expected to push wages higher,” the report states. “Payrolls are forecast to increase at robust pace.”
But employers are running up against a wall of unqualified job candidates, making them unable to hire even when they have open positions, the report states.
“The economy, at 4 percent employment, is at full employment,” said Robert Kleinhenz, executive director of research for Beacon Economics. “The number of people entering the labor force and the skills they have just aren’t matching up with the job openings. We have record high job openings. It’s not just the technology jobs that are wanting – it’s even hard to find people to fill entry level positions.”
The dearth of qualified candidates, combined with high housing costs in the area, suggest the local economy will only see modest growth, the report states.
While the U.S. labor market is projected to grow at a rate of 2 percent in 2018, the report found that growth in the region will be restricted to just over 1 percent because of housing costs and hiring limitations.
“Home ownership rates are at the lowest rates in decades and rents are escalating,” Kleinhenz said. “We’re just not building enough. It’s really about supply. We just need to increase the supply of homes to accommodate population growth.”
But, despite the limitations, the South Bay’s economy is strong and on a modest upswing, the report says. Aerospace and manufacturing industries grew 16.7 percent from 2015 to 2016.
Six oil refineries in the cities of Torrance, El Segundo and Carson and the community of Wilmington, along with associated pipeline and shipping operations, employ three energy-sector workers for every one in the rest of the county.
All together, the natural-resources energy industry employs just 4,000 people in the South Bay. But those workers are making some of the area’s highest wages – an average of $132,900 a year.
The historic aerospace and defense industry locally is booming, and workers in the sector made an average of $125,040 in 2016.
The average salary of jobs in the nonaerospace manufacturing industry increased to $95,500 last year, largely because of technological advances and the resulting need for high-skilled workers. Those specialized technology workers drew an average wage of $179,200.
The South Bay’s entertainment and media market is believed to be on the cusp of a boom, as the National Football League stadium in Inglewood is under construction to house the Los Angeles Rams and Chargers in 2021.
The 2028 Olympic Games also should bring up to $11.2 billion to Los Angeles County, according to Beacon Economics.
“This year, we don’t have nearly as many sectors of the economy adding jobs on a consistent basis,” Kleinhenz said. “Regional growth over the next 10 to 15 years will come from business services, transportation and logistics, and aerospace manufacturing. They have a home here in the South Bay, but are key to growing Los Angeles County’s economy.”
Industries in transition
Health care, education and retail industries are facing difficult challenges.
More than 800 health-care establishments left the South Bay last year due to industrywide consolidation. Still, more than 1,100 health-care jobs were added in the South Bay – mostly at hospitals.
“Rapid coverage expansion and the aging population have been primary drivers of the health-care sector growth since the introduction of the Affordable Care Act,” the report states. “Drawn-out political infighting and uncertainty are causing many insurers to raise rates.”
The rate of employment in educational services also is declining as fewer students enroll in schools because of lower birth rates.
The retail industry, the report states, has been undermined by online shopping, which is growing rapidly. As a result, sales have declined for three years in a row. And that trend continued in the first few months of 2017.
“Technology has greatly benefited consumers, but it comes at a cost as efficiency gains can put people out of work,” the report states. “Self-checkout stands at grocery stores, for example, have had an impact on employment in the region.”
But, in their place, new companies are opening up to cater to changing consumer trends.
“Today’s consumer wants a different experience. We want the experience to be easy from start to finish,” said Christine Cooper, an economist with CoStar Group. “Online retail keeps growing. In 2000, it was about 1 percent and now is 11 percent. The trend is increasing at a higher rate. Consumers want personalized products that are highly customized.”
Source: Daily Breeze