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Uncertainty, but growth

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Slow job growth. High oil prices. Softening consumer confidence. November ballot initiatives -- these and other issues are swirling around. There is no question that there is a lot of uncertainty out there. Yet, the numbers on the Los Angeles area economy have been slowly improving.

International trade activity is too strong, with ships backed up at the twin ports and the media fretting about whether retailers will have enough merchandise on their shelves at Christmas.

Film and TV location production days are running at record levels, while the weakening of the dollar is helping narrow the production cost gap with Canada.

Travel and tourism is doing well as measured by hotel occupancies, and better yet foreign tourists are returning to the area. A sidebar here is the labor problem at nine local hotels.

New homebuilding in Los Angeles County is running ahead of last year's level, while industrial vacancy rates in the county are bumping along at 2.5 percent. The latter number literally means that there is very little space available, yet companies are still looking to expand despite the perceived bad business environment in California.

What's the outlook for the rest of 2004 and into 2005?

Obviously, the results of the election will have to be analyzed, especially for the initiatives. On Jan. 1, 2005, apparel import quotas will end, and there is concern about the impact on the local rag trade. Some people are expecting a hammer blow, but cooler heads say this event will have more of an impact on off-shore producers than the local industry.

March will bring the mayor's election in the city of Los Angeles. The field is crowded, and we will probably go to a run-off.

May of 2005 will bring a major event, the next round of the BRAC (base realignment and closure) process, and there is fear the Los Angeles Air Force Base will be on the list. The loss of this facility (along with the Aerospace Corp., which is closely aligned with LAAFB) would have major economic ramifications for the South Bay, the county and indeed all of Southern California, due to the huge volume of government contracts this facility handles.

In mid-2005, the state of California will be looking at its 2005-06 budget, and there will be another sizable deficit to cover. Local governments will be keeping a wary eye on Sacramento because of past tax grabs by the state. The business community will also have to watch out, as there are rumbles that there may be some tax increases proposed.

Mid-2005 will also bring contract negotiations between the film industry and the Screen Actors Guild and AFTRA. These talks could be contentious, even though other high profile entertainment unions have reached agreements with the industry.

Energy prices will continue to run at higher levels than forecast early next year, so any energy intensive industry in Southern California will have to factor this in to their planning.

But in the midst of all this, there will be growth. As measured by nonfarm employment, the county should create 61,000 nonfarm jobs in 2005. The aerospace industry will continue to add jobs, while tourism should have another good year. After all, it's the 50th anniversary of Disneyland.

New homebuilding should continue to run at high levels, despite a modest increase in interest rates. By our calculations, there is an unmet demand for 282,000 housing units in the county, and trying to catch up will be very difficult.

Forecasts for international trade call for another strong year in 2005, but hopefully we won't be facing the backlogs that plagued us during the second half of 2004.

However, congestion is a growing challenge to the Los Angeles area. How do we efficiently moving more people and more goods around? This will call for some innovative thinking on the part of both business and government.

In summary, we will close out 2004 with drama, and it could continue into 2005.

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