Q2 2012 Los Angeles, California Commercial Real Estate Economy

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Q2 2012 Los Angeles, California Commercial Real Estate Economy

“Los Angeles County lagged its neighbor counties in recovery from the Great Recession over the past two years, but it finally gathered momentum in 2012,” reported the Los Angeles County Economic Development Corporation (LAEDC) in its 2012-2013 Mid-Year economic forecast. “The monthly unemployment rate fell by two percentage points in less than a year from the cyclical peak of 13.2% in July 2011 to 11.2% in May 2012. The overall rate of job growth picked up slightly during the second few months of this year, while a number of industries experienced an uptick in activity and more robust job growth.” Los Angeles is certainly the economic driver of California, and dominates the southern portion of the state with its huge economy as well as its sheer size. However, as the city struggles to regain its footing, the rest of the state has catching up to do. “California struggles to recover lost jobs,” the Los Angeles Business Journal reported July 11th. Using seasonally adjusted figures, this source reports that “nine states and the District of Columbia have recovered all of the jobs they lost during the recession, but 41 other states, including the Golden State, still haven’t bounced back.”

The latest Current Employment Survey (CES) data from the BLS show a small gain, but a gain nonetheless, for seasonally unadjusted non-farm employment. Data from May 2011 to May 2012 show a gain of 42,400 payroll jobs (1.1%) in Los Angeles County. As noted in earlier Reis Observer coverage, the self-employed are a large portion of the LA workforce and CES data does not include them. According to household-based data from the BLS, which includes these non-employees, the employment gains are much smaller, with the number of employed residents of Los Angeles County rising by just 24,300 (0.6%) in the year to May 2012, implying that perhaps many of these former free lancers may have finally been taken on as employees. Not many cities can boast of an economy that runs from aerospace to motion pictures, but LA can. According to the LAEDC, “the aerospace and technology sector includes manufacturing and service industries in aerospace, information technology, electronics, and biomedical technology,” and these industries accounted for 4.7% of non-farm jobs in Los Angeles County in 2011.

Meanwhile, “activity in the entertainment industry continues to improve,” the LAEDC reports. From May 2011 to May 2012, according to CES data, payroll employment increased by 5,100 (2.7%) in the Information Sector, led by a gain of 5,200 (4.3%) in the Motion Picture and Sound Recording industry. It should be noted, however, that FilmL.A—which coordinates permits for filmed entertainment shot in the area, announced in early July that “overall on-location production slipped slightly last quarter compared to the same period last year.” Even a blip in the entertainment industry can have serious effects in a city like LA.

The Financial Activities sector added 4,900 jobs (2.3%) year-over-year as of May, and Professional and Business Services employment increased by 18,300 (3.4%). The latter includes an increase of 10,300 (12.3%) in the Employment Services industry, which includes temporary workers. Manufacturing continues to lose ground. This sector lost another 5,800 jobs (1.6%) and Transportation and Warehousing was barely positive with 600 (0.4) jobs gained. Wholesale Trade saw a similarly anemic performance, gaining 400 jobs (0.2%) through May 2012. There was welcome news in the Construction sector, however, as 3,100 jobs (3.0%) jobs were added year-over-year in May. Public works have been active, as The Source reported in April that the Los Angeles County Metropolitan Transportation Authority certified “the Final Environmental Impact Statement/Report (EIS/EIR) for the $1.37- billion Regional Connector Transit Corridor Project that will connect three light rail lines through downtown Los Angeles.” According to Curbed LA, once completed, the Connector will allow people “to train travel across the County without transfers,” one of the city’s long –sought goals On the consumer front, CES data shows an increase of 10,900 jobs (2.8%) year-over-year in May in Leisure and Hospitality, and 4,600 (1.2%) in Retail Trade. Within the latter sector the Food and Beverage Store industry added 3,200 jobs (3.7%) and the big-box General Merchandise Stores industry added 2,200 jobs (3.4%). All in all, total Private Employment increased by 50,600 jobs (1.6%).