Better Economy Seen in Late 2003

The Southern California economy should begin strengthening in the second half of 2003, but not enough to warrant a surge in hiring, according to a forecast to be released today.

Economists at Cal State Long Beach said employment in the five-county area will increase by an anemic 0.6% in 2003, well below its 10-year average of 1.4%, as employers keep a tight rein on their payrolls in the face of rising costs and uncertain demand.

The region’s manufacturing sector probably will continue to shed jobs, albeit at a slower pace than last year. Severe acute respiratory syndrome, or SARS, could put a damper on the recovery in tourism. Meanwhile, the state’s budget woes will impede growth in government, which has been a steady job generator in recent years.

But the news isn’t all bad.

“There are signs of improvement, particularly in the service sector,� said Lisa Grobar, director of the Cal State Long Beach Economic Forecast Project. “It’s just going to take a little more time.�

Grobar pointed to an uptick in hiring at temporary-help firms in recent months as a sign of good things to come. This industry is seen as a bellwether of the job market as temps are typically among the first workers to be let go during a downturn and among the first hired back when companies see orders improve.

Health care remains a strong industry, adding 20,500 jobs in the region last year. Low interest rates and a booming housing market are expected to spur additional job gains in financial services. And the Southland’s retail sector, which has held up fairly well during the downturn, should continue to create employment as well.

The Cal State Long Beach forecast also notes that:

* Los Angeles County lost more than 7% of its manufacturing jobs last year and probably won’t see any growth in that sector until 2004 at the earliest. Overall growth in nonfarm payroll employment is predicted to be a meager 0.2% this year.

* Orange County has seen its employment activity deteriorate more than any other county in the region during this downturn, as payrolls declined by 0.8% last year from a peak growth rate of 5.3% in 1998, due to heavy losses in high tech and manufacturing. Continued sluggishness in those sectors will limit the county’s job growth to 0.5% in 2003.

* The Inland Empire should continue to be the region’s job engine, with aggregate nonfarm payroll employment rising 2.5% this year in Riverside and San Bernardino counties.

* Ventura County figures to be the only county in the region to lose jobs this year. Payrolls are expected to decline by 0.3% as the county struggles with more losses in manufacturing and construction.