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CERRITOS – While the United States economy continues to recover slowly, Los Angeles County’s rate of growth should potentially return to pre-recession levels by the end of next year.
However, take it with a grain of salt, says economist Robert Kleinhenz.
“Like a patient, you check the vital signs — the heartbeat, pulse, blood pressure. The labor market is recovering slow, but we do have a pulse,” said Kleinhenz. “The recovery is moving painfully slow so I predict it will be another couple of years before we reach normal employment.”
Kleinhenz, the chief economist of the Kyser Center for Economic Research, delivered his federal, state, and local economic forecast during a Cerritos Chamber of Commerce luncheon last Thursday at the Cerritos Library.
With members of the business and education community present, Kleinhenz discussed the lingering effects of the Great Recession while projecting possible avenues of growth over the next 15 months.
“The consumer sector is on the mend — consumers are not backward-looking, although they may have hung on to a car longer than they wanted to,” he said with a grin. “But the business sector will follow…we see good, positive signs, but we’re not quite back to normal yet.”
While the nation’s gross domestic product typically grows at a three percent average annually, Kleinhenz said GDP is only growing at 1.8 percent this year and is expected to grow at 2.4 percent in 2014.
“As a result of sequestration and the recovering economy, more people are paying taxes and our debt is coming down. But the cuts are creating more of a drag on the economy,” said Kleinhenz who also warned of effects from the government shutdown. “You may think we can get by, but it will have an adverse impact if it goes on for too long.”
As for California’s economy, it could take even longer for unemployment to return to normal levels. While the state’s economy did outpace the nation’s economy for nearly two years, Kleinhenz said California’s job numbers are now lockstep with the U.S. unemployment rate.
“California has a much higher exposure to international trade,” Kleinhenz said. “Our two-way trade is 30 percent of our total output, but it still might be further into the decade before we see jobs at their 2006 peak.”
As for Los Angeles, Kleinhenz ensures that the region is growing economically, but it may not be enough to absorb those currently unemployed and the new jobseekers entering the labor force every year.
According to his research, while high wage jobs are increasing, middle wage jobs have steadily disappeared since the recession.
“We’ve cratered out — we have an ample number of jobs for lower wage workers, but middle skill workers have lost jobs,” he said. “Employers are having a hard time filling these jobs — and they’re not growing fast enough.”
Scientific and technical services, educational and financial activities, and leisure and hospitality are experiencing the greatest amount of growth this year, Kleinhenz said.
“That means people are going out to restaurants and no longer hunkering down, waiting for the next disaster,” Kleinhenz said. “Manufacturing is up. In fact, Los Angeles has the largest amount of manufacturing jobs, more than New York or New Jersey — the value of output from manufacturing has already outpaced pre-recession peaks.”
Kleinhenz continued: “As far as home prices go, a number of people are still underwater…there are supply restraints, a severe shortage of homes. But supply will ease and this time next year, you’ll see higher levels of sales.”
Prior to joining the Los Angeles County Economic Development Corporation, Kleinhenz, who has a master’s degree and doctorate in Economics from USC, served as deputy chief economist at the California Association of REALTORSÂ© and taught economics for over 15 years, most recently at California State University, Fullerton.
Kleinhenz, who conducts regular research on local and national economics, remains hopeful that the U.S. economy will fully rebound — but just not as fast as we’d like.
“We’re making our way forward…but we won’t get back to pre-recession peaks — six percent unemployment and three percent growth in GDP — before late 2014 or early 2015,” he said. “It’s just taking a lot longer.”
Published: Oct. 10, 2013 – Volume 12 – Issue 26