LA’s Economy Shows Resilience Despite Challenges
Despite continued struggles with high living costs and rising housing prices, Los Angeles County is poised for economic growth, according to a recent study. While some sectors face headwinds, others are predicted to flourish, creating a somewhat optimistic outlook for the coming years.
Mixed Growth Projected for Los Angeles
The study, released Thursday by the Southern California Association of Governments, anticipates a steady but decelerating rate of growth in Los Angeles County’s gross product over the next three years. Projected growth is 3.3% in 2024, slowing to 2.1% in 2025 and further to 1.3% in 2026. Non-farm employment is projected to drop by 1.2% in 2024 before rebounding with a 0.6% increase in 2025 and stabilizing in 2026.
Ain’t No Recession, But Obstacles Remain
“As the largest county economy in the United States, Los Angeles County remains a critical economic hub for California, driven by its dynamic industries, including entertainment, technology, international trade and tourism,” the report stated. “The risk of recession,” said SCAG executive director Kome Ajise, “is sharply lower than it was a year ago. Consumers continue to drive the state and regional economies with their spending, and business investment in equipment and software is sharply higher. This should extend into 2025 as interest rates soften.”
Despite the overall positive forecast, the county continues to grapple with persistent challenges. The high cost of living and rising housing prices pose significant hurdles for residents, contributing to economic inequality.
Industry Ups and Downs
Several industries are expected to propel the Los Angeles economy forward. Healthcare, education, professional services, and technology-related sectors are highlighted as areas with strong growth potential. Manufacturing appears poised for a modest recovery, with job growth projected at 2.3% in 2025 and 2% in 2026.
However, other sectors face a more uncertain future. The leisure and hospitality industries, heavily impacted by the COVID-19 pandemic, are expected to decline by 4% in 2024 before potentially staging a recovery in subsequent years. Transportation and warehousing face pressures from automation, changes in regulations, and intense competition from East Coast ports.
Addressing Inequality is Key
While Los Angeles County has made progress, with median household income reaching $89,007 in 2023 (an 18.1% increase since 2003), the benefits of this growth haven’t been equitable. Rising inflation has eroded the purchasing power of low- and middle-income households.
The individual poverty rate, although slightly decreasing to 13.7% in 2023, remains the second highest in the Southern California Association of Governments region. This underscores the urgent need for policies and initiatives aimed at promoting inclusivity and addressing the disparities that persist within the county.
Investments and Innovation: A Path Forward
Despite ongoing challenges, optimism for the future is fueled by planned investments and a focus on innovation. Both public and private sectors are expected to play a crucial role in stimulating economic activity. Specifically, advances in renewable energy, technology, and infrastructure are anticipated to drive growth and create new opportunities for residents.
Which sectors are expected to drive growth in LA’s economy?
## LA’s Economy: Cautious Optimism Despite Challenges
Today we’re joined by Alex Reed, an economist specializing in the Southern California region, to discuss a new study on the future of LA’s economy. The Southern California Association of Governments recently released a report predicting steady but slowing growth for Los Angeles County over the next three years. Alex Reed, what are your key takeaways from this report?
Alex Reed: Thanks for having me. The report paints a picture of cautious optimism. While Los Angeles County is expected to continue growing, the pace is anticipating to slow down. We see projected GDP growth of 3.3% in 2024, decreasing to 2.1% in 2025 and further to 1.3% in 2026. This deceleration isn’t necessarily a cause for alarm, particularly considering the global economic environment, but it does signal a need for careful planning and targeted investments.
**That’s interesting. The report also mentions a predicted dip in non-farm employment for 2024, followed by a rebound. Could you elaborate on that?**
Alex Reed: That’s right. The study projects a 1.2% decrease in non-farm employment for 2024, which could reflect adjustments in certain sectors. However, it’s expected to bounce back with a 0.6% increase in 2025 and then stabilize in 2026. This fluctuation likely reflects shifts in demand and the ongoing evolution of the labor market.
**The report highlights LA’s diverse economy. Are there any specific sectors expected to perform particularly well or face challenges?**
Alex Reed: Absolutely. LA’s economic strength lies in its diverse industries. The report emphasizes the continued importance of entertainment, technology, international trade, and tourism. These sectors are expected to drive growth. However, we must acknowledge the ongoing challenges posed by the high cost of living and housing affordability. These factors can impact workforce attraction and retention, which are crucial for sustained economic growth.
**So, despite the positive outlook, it’s not all smooth sailing for LA’s economy?**
Alex Reed: Precisely. While the overall outlook is favorable, those challenges need to be addressed. Finding solutions to affordability concerns will be vital for ensuring inclusive and sustainable economic growth for all Angelenos.
**Alex Reed, thank you for providing such valuable insights into the future of LA’s economy.**
** Alex Reed: My pleasure. It’s an important conversation to have.**
