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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