Like a ship cruising through tranquil seas, the Southern California economy generally faces smooth sailing this year. But rougher waters could be in store next year.
That's the view of the Los Angeles County Economic Development Corp. In its midyear economic forecast update, to be formally released today, the nonprofit business advocacy organization said the Southland economy would turn in a "solid performance" this year, despite the cooling of the region's once-sizzling housing market.
But growth next year will be slightly slower, reflecting higher interest rates and energy costs.
"The 'quiet boom' in the region's economy has peaked, but there will still be solid growth over the next 12 months," the LAEDC said. Its forecast calls for the five-county Southland economy to grow 3.7% this year and 3.3% next year, faster than the state and nation in both years, said Jack Kyser, LAEDC chief economist.
The organization's view reflects a consensus among analysts that the region's economy continues to benefit from its diversity across many industries and feeds off expansion in the national and global economies.
"With all the hubbub about housing, people have overlooked the broad-based strength in the state's economy," the report said.
International trade, tourism, business and professional services and technology will help fuel growth, the report said.
The region's economy also will benefit from a "soft landing" in residential real estate, the forecast said, as median prices generally are expected to level off but not tumble as long as mortgage rates remain relatively low and employment and population continue to grow.
Strong activity in nonresidential construction and public works projects will more than offset reduced activity in home building, Kyser said. In Los Angeles County, major construction activities include the Gold Line extensions to East Los Angeles and the LA Live and Grand Avenue projects in downtown Los Angeles, he said.
"There is a lot of money being spent around the region," Kyser said.
Among the worries: rising land costs and lack of available industrial land, runaway production in the entertainment business, and consolidation among supermarket and retail chains.
The Inland Empire will continue to boast the region's strongest pace of job creation, the forecast said, growing by 2.9%, or 34,700 jobs, this year and 2.2%, or 33,600 jobs, in 2007.
Los Angeles County's hiring will be at a slower pace (1.3% this year and 1.2% next year), but it will produce more jobs (52,800 this year and 47,800 next year) simply because it is bigger. Orange County employment this year is expected to grow 1.4%, or 20,300 jobs, easing to 1.1%, or 17,200 positions, in 2007.
(BEGIN TEXT OF INFOBOX)
The Inland Empire is projected to have the Southland's fastest pace of job growth this year, although Los Angeles will produce the most net new jobs.
Counties: Riverside-San Bernardino
Job growth in percent: 2.9%
Job growth in number of jobs (Thousands): 34.7
Job growth in percent: 1.8%
Job growth in number of jobs (Thousands): 5.3
Counties: San Diego
Job growth in percent: 1.7%
Job growth in number of jobs (Thousands): 21.9
Job growth in percent: 1.4%
Job growth in number of jobs (Thousands): 20.3
Counties: Los Angeles
Job growth in percent: 1.3%
Job growth in number of jobs (Thousands): 52.8
Source: Los Angeles County Economic Development Corp.
Los Angeles Times