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California and the West

Southland economy is expected to slow

Housing will be a drag on growth, and trade and entertainment pose risks, a forecast says.

February 21, 2007|Lisa Girion | Times Staff Writer

The ongoing housing slump and anticipated labor problems in the entertainment industry cloud Southern California's economic horizon, according to a forecast to be released today.

Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., described the nonprofit business support group's two-year forecast for the region as "Goldilock-ish" -- not too hot and not too cold. Six of the region's industries, including aerospace, biomedicine and tourism, have good growth prospects, the report says.

Economic growth in Southern California will be "slightly slower but still solid" this year, the report said.

"However, there will still be a drag from the housing market," and two of the region's signature industries, entertainment and international trade, "could encounter some rough going," Kyser said.

The forecast identifies film and television production as the most notable of the industries at risk. This stems from upcoming contract negotiations with three key labor unions: the Writers Guild of America in October and both the Screen Actors Guild and the Directors Guild of America in June 2008.

"The risk of a strike, real or de facto, is high," Kyser said, "and this would not be good news for areas of Los Angeles County with exposure to the business."

The forecast also noted that the entertainment industry faced challenges from the outsourcing of production to cheaper venues abroad, as well as the proliferation of content distribution options.

International trade also faces risks because a federal law expected to take effect this year will require that all transportation workers have certain credentials. But 20% to 30% of the area's truck drivers are believed to be undocumented, Kyser said. That could create bottlenecks at the ports because truck drivers are in short supply overall.

The report sees employment in construction and real estate declining in 2007 even as the overall housing industry stabilizes. Still, Kyser said, "don't expect a return to the go-go price increase days."

A 10-year forecast for the region issued last week by the Center for Continuing Study of the California Economy in Palo Alto identified several of the same industries as vibrant growth engines, including trade, professional services and tourism.

But, like the Los Angeles County Economic Development Corp.'s report, the center expressed concern that growth would be hampered by quality-of-life problems that have plagued the region for years, including traffic congestion, poor-performing schools and a shortage of affordable housing.

"The challenges facing Southern California and the state remain substantial," said Stephen Levy, the center's director.

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