As the national economy begins to emerge from one of the largest downturns since the Great Depression, a new economic forecast released Wednesday indicates guarded optimism about the near future of Los Angeles County’s still-struggling economy.

The Kyser Center for Economic Research’s annual Economic Forecast and Industry Outlook anticipates improvement in many sectors of L.A.’s economy, but a resurgence that might still frustrate those looking for faster recovery in 2012.

“We’re seeing slow improvement, but it’s painfully slow,” said Robert Kleinhenz, the center’s chief economist.

In 2012, the forecast expects overall growth of 1.9 percent in United States real gross domestic product, the final value of all goods and services produced nationally. The economy of Los Angeles and that of California are deeply tied to the overall health of the U.S. economy, as Los Angeles is the largest stand-alone county in the country. All three are growing, but, as a county, Los Angeles continues to lag somewhat behind.

“Los Angeles’ [economy] seems to be moving more slowly at this time than both the state and national economies are moving,” Kleinhenz said.

A 0.7 percent decrease in unemployment in Los Angeles County, highlighted by a combined 9,300 estimated jobs added by the health care and leisure and hospitality sectors, is expected in 2012.

Both sectors, Kleinhenz explained, serve to stimulate the local economy from within.

“Health care is a local-serving segment of the economy ... and leisure and hospitality partly serves the local sector,” Kleinhenz said. “[The two] are going to be among the brighter spots in 2012.”

Job creation in those sectors, however, will be offset by a predicted loss of more than 3,200 government-related jobs as the state and county continue to grapple with budgetary concerns.

The growth of California’s small businesses will also be vital to any recovery the state makes, as the state will look to Main Street to provide the groundwork for internal growth.

“In particular, [California is] dependent on small businesses,” Kevin Klowden, director of the California Center, said at Wednesday’s presentation of the report. “We have been hit harder than anyone else.”

The Kaufman Index rates the Los Angeles-Long Beach-Santa Ana area as the top location for small businesses in the country, but the Small Business and Entrepreneurship Council has rated the climate for small business survival in California as the worst in the United States.

A stringent regulatory system for small businesses is among the reasons why survival is so difficult in California, according to Edward Leamer, a professor of economics at UCLA, who describes the system as “very anti-business.”

A sharp increase in county-issued housing permits was among the more encouraging indicators as the forecast predicted a 26.2 percent increase from 2011 to 2012.

Some traditional Los Angeles-based sectors, including entertainment, will continue to lead the way for the county’s recovery, according Christine Cooper, vice president of the Economic and Policy Analysis Group.

“Entertainment is our strongest industry cluster,” Cooper said. “The very value of this industry is demonstrated by how many states are trying to steal it from [California].”

Cooper implored the pieces for a stronger Los Angeles economy are moving, they just need the correct direction to stimulate the county’s rebound.
“We have all the right resources ... to realize economic growth,” Cooper said. “We just have to realize a microeconomic model for that growth.”

The report notes the increase in total containers handled in 2011 by the Port of Los Angeles, up 1.4 percent over 2010. The increase is misleading, however, as Hyundai switched from the Port of Long Beach to the Port of Los Angeles in 2011 and the combined total containers handled by the two main hubs of international trade in Southern California dropped from 141 million containers to 140 million.

The ports’ growth is tied to the success of the economies of the Asian countries that provide trade volume to the ports. Growth in those countries is expected to outstrip those of Europe and North America and four of the Los Angeles Custom District’s five top Asian trading partners are expected to grow more than 3 percent.

“Asia’s importance is growing,” Sung Won Sohn, a professor of economics at Cal State University Channel Islands said. “If you want more action California, go west.”

 

Reach Staff Contributor Asher Feldman here.