Southern California Business Owners Forecast Ongoing Economic Expansion
December 08 2005 - 12:02PM
PR Newswire (US)
Wells Fargo Economic Survey Indicates Future Growth May Be Held
Back by Service Sector 'Exhaustion' and Rising Labor Costs LOS
ANGELES, Dec. 8 /PRNewswire/ -- . Southern California's current
economic expansion is in little danger of reversing, despite high
labor and housing costs, and diminished national consumer
confidence, says Wells Fargo Senior Economist Dr. Scott Anderson,
who recently surveyed 400 Los Angeles and Orange County businesses
about their hiring plans, pricing trends and prospects for next
year. "Together, Los Angeles and Orange County have a tremendous
impact on our national economy," said Anderson. "Southern
California businesses we've surveyed say they believe that current
business conditions are robust and the future looks just as good.
However, left unchecked, a rampant high cost of living will elevate
labor costs, since employers must pay at least a living wage.
Longer-term, comparatively high labor costs and poor housing
affordability will work to discourage business expansions and
relocations in Southern California." Los Angeles and Orange County
businesses participating in the Wells Fargo survey conducted last
month have annual revenues between $5 million and $500 million.
Some Exhaustion Setting In The survey data revealed growing signs
that some exhaustion is setting in among companies in the services
sector -- by far the largest local employer. Anderson says the
services sector is showing definite signs of fatigue. Businesses
from financial services, health services, and education to
temporary-help firms have added substantially to payrolls in recent
years, but they are less optimistic about the future. While their
hiring outlook is still positive overall, service sector growth is
now lagging behind the nation at large, despite continuing
population growth in the region. Orange County service businesses,
in particular, were the least likely to report improved current and
future demand, and pricing. "The services sector has been an
important growth driver over the past several years," said
Anderson. "High labor costs, due in part to elevated cost-of-living
and high insurance and benefit costs, could be a long-term
impediment to faster economic growth in Southern California. Rather
than outperforming the state, economic growth in the Southland will
look more like the California average going forward." Economic
Strong Points In general, businesses voiced a strong outlook,
especially among construction and manufacturing firms. In
particular, aerospace manufacturing is experiencing a strong
revival. "Aerospace manufacturing hasn't seen this level of growth
in more than a decade," said Anderson. "Global airlines are dumping
aging fuel-guzzling planes for sleek new ones that are easy on fuel
costs. This means strong business growth for local-area economies."
Export container activity is surging in Southern California with
seven straight months of double-digit gains in export container
traffic for the combined Los Angeles and Long Beach ports.
Moreover, truck congestion has eased with the new 24-hour operation
schedule at the ports. Even if the U.S. dollar strengthens further,
richer and faster-growing export markets will be an important
offset to cooling domestic housing markets. While businesses named
labor costs as their biggest worry, with 20 percent ranking it
their number one concern, their overall outlook remained
overwhelmingly positive: -- 80 percent of Southern California
businesses reported improved or similar current business
conditions, while 87 percent saw improved or similar futu
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