Los Angeles County:

2021 is a Key Economic Year for Lower-Income Households

Although Los Angeles County’s recovery will gain notable traction in 2021 for lower-income workers, it may take until 2024 for certain industry employment levels to reach where they stood before the COVID-19 pandemic threw local households into an economic tailspin.

That’s according to the most recent forecast and trends presented by the Los Angeles County Economic Development Corporation and the Los Angeles Business Journal. These experts’ opinions spotlight intriguing viewpoints and projections so your credit union can plan appropriately.

Los Angeles County Economic Development Corporation
Presented on Feb. 17 during the “2021 Economic Forecast”:

Los Angeles County’s economic recovery will trail the state and nation in 2021 before speeding up in early 2022. Local GDP (gross domestic product) in the county will hit 2.8 percent in 2021 and 4.2 percent in 2022 as social distancing measures and business restrictions coming out of late 2020 continue to impact the first half of 2021 (lost economic opportunity due to the COVID-19 pandemic).

Payroll employment growth at companies across Los Angeles County in 2021 and 2022 will reach a combined total of 280,000 jobs created, which is still -53,000 less than needed to fill the jobs hole. The county’s economy lost -333,000 jobs in 2020. Coming out of 2019, the county’s unemployment rate (due to an abundance of job demand by employers) hovered around historically record lows of between 3.5 to 4.5 percent and continued drawing new workers into the labor force (pool of candidates willing and able to work). Today, there are still an abundance of job postings. But for context, even though the forecasted jobs hole will technically be -53,000 jobs going into late 2022, it’s actually more than this due to lost economic opportunity costs (jobs created and individuals theoretically entering the labor force if no pandemic recession had ever happened).

Los Angeles County’s unemployment rate (currently 10.7 percent) will slowly decline to 9.3 percent by late 2021 and 8.1 percent by late 2022. When it reaches that 8.1 percent, it will have not seen that level since September 2014 when the economy starting to gain steam coming out of the post-era of the 2007 – 2009 Great Recession. This forecasted decline is due to two reasons: first, the local job market will increase employment at a slow pace comparatively to other regions across the state and nation; and secondly, as more jobs come online, the labor force (pool of candidates willing and able to work) will expand as more individuals decide to come back into the workforce from the sidelines (a phenomenon taking place from 2016 – 2019 as the local unemployment rate kept inching down to historiclaly low records).

In 2021 and 2022, the combined total payroll employment growth forecast for Los Angeles County (broken down by industry) is as follows: 76,100 jobs (leisure/hospitality); 59,300 (trade/transportation and utilities); 37,400 (education and health services); 36,000 (information technology); 22,600 (professional and business services); 18,400 (manufacturing); 9,300 (construction and natural resources/mining); 8,300 (“other” services); 6,500 (financial activities); and 6,000 (local/state and federal government). Approximately 74 percent of these jobs (nearly 207,000) will be added to the economy in 2021, with the remaining 73,000 added in 2022. The leisure/hospitality industry is obviously the first out of the gate (with 27 percent of total jobs created over the next two years) due to the economic sinkhole in this sector comparatively to all other sectors. For context, the local leisure/hospitality sector made up 40 percent of total jobs lost in all sectors in 2020, or -132,300 jobs (and the second worst was trade/transportation and utilities at 14 percent, or -46,800 jobs).

However, worker “realignment” into open job positions across Los Angeles County is proving difficult. Some businesses are slowly going out of business but haven’t yet done so, and still others have implemented mass worker furloughs while promising to possibly open in the near future. Meanwhile, for certain workers, their skills could transfer to different jobs — but regular federal unemployment financial assistance, extra emergency assistance, and above-and-beyond congressional stimulus aid has made it easier to wait out the current situation going into mid-2021. Also, some workers can go back to work from an employment perspective but they cannot do so due to child-schooling in their household, which is also playing into the labor market situation.

Annual “real” per-capita income (adjusted for inflation) will decline -3.2 percent in 2021 in Los Angeles County before rebounding to a stunning 4.6 percent in 2022. This comes after an increase of 5.3 percent in 2020 due to congressional/government transfers of money to individuals through regular unemployment insurance benefits, extended and extra relief benefits, additional COVID-19 pandemic financial emergency assistance, and even direct-payment "stimulus" to all individuals/households. In conjunction, “real” personal income (adjusted after inflation) will fall -1.7 percent in 2021 before noticeably rebounding and rising 2.8 percent in 2022 as local economic growth kicks into higher gear in early 2022 (after rising 1.1 percent in 2020).

Housing permits pulled by homebuilders show a slight uptick in Los Angeles County for 2021 and 2022 — a good sign for the real estate market and residential construction workforce. New homes coming onto the market will reach 22,700 in 2021 and 22,400 in 2022 (after stooping to 19,600 in 2020). The annual average from 2016 to 2019 was about 21,400. While this will help the real estate market, it is by no means an amazingly positive direction that many pro-building experts have advocated for to ease the long-term buildup of high consumer demand in the region (also known as “lack of housing”). Additionally, the local median list-price of an existing home on the market will drop from $797,000 in 2020 to $792,000 in 2021 (but rise to $802,000 in 2022) as low mortgage rates are poised to maybe move higher, but not so much higher that it puts a huge damper on homebuyer demand.

Springtime 2020’s COVID-19 pandemic recession accelerated a long-term downward trend in manufacturing jobs across Los Angeles County. This trend was borne out over the past four years as -28,900 manufacturing positions were shed in the county from 2016 – 2019 (that’s before another -22,900 were cut in 2020 — for a grand total of -51,800 over the past five years). However, a combined 18,400 manufacturing jobs will come back from between now and late 2022, which feels relatively slim compared to recent jobs lost.

Quick facts about Los Angles County: 10.1 million residents; prime age of total population (those 25 – 54 years of age) is 43 percent; $709 billion in local GDP (gross domestic product); approximately $30,000 median income (not to be confused with the much higher household income of $68,100); 20 percent poverty rate; pre-pandemic unemployment rate of 4.4 percent (versus 10.7 percent in January 2021).

The disparate effects of the pandemic across Los Angeles County may increase preexisting economic inequalities. “However, the diversity and vibrancy of the people, cultural and historical amenities, entertainment options, and industry promises a rebound in economic growth,” the forecast report states. “Los Angeles County faces a number of difficulties that predate the COVID-19 pandemic, including housing accessibility and inequality. The effects of the pandemic have likely worsened both. A disproportionate share of low-income workers in Los Angeles County have lost jobs compared to high income workers.”

Not only was the initial employment shock felt most intensely by low-income workers in Los Angeles County, the jobs recovery has been slower for this cohort compared to high-income workers. “By mid-November 2020, low-income employment (less than $27,000 annually) was still down -26 percent compared to January levels, while high income employment (over $60,000 annually) was only down by less than -1 percent,” states the forecast report. “While longer-term impacts of increased inequalities between low- and high-income earners are certainly unpredictable right now, the sustained loss of income felt mainly by low-income workers may contribute to even worse housing accessibility in the future. A study from the UCLA Luskin Institute on Inequality and Democracy found that as of May 9 of 2020, about 449,000 unemployed people with no income occupied 365,000 units of rental housing in Los Angeles County.”

The extent of unemployment, economic displacement, and business failures across Los Angeles County will have ramifications beyond the end of the COVID-19 pandemic crisis. “While our current projections suggest we should still be feeling the impacts of this economic shock well into the future, Los Angeles County will hopefully see an abundance of activity once public gatherings are safe again,” the forecast report states. “The county is a hub for entertainment and live events, and households that have not been negatively impacted during the pandemic will likely have increased savings (reduced consumption) and pent-up demand for entertainment after nearly a year of quarantines and social distancing. Once herd immunity is reached at the national, state, and county level, Los Angeles is expected to once again be a vibrant center of food, culture, and economic activity.”

You can view the entire forecast report. Make sure to click here to read the economic forecast for Los Angeles County, California, and the United States — “2021 Economic Forecast: A Tale of Two Recoveries.”

You can also view the archived video-forecast presentations. Please click here and scroll down to view “Forecasting During a Pandemic,” “The Labor Market Will Take More Time to Recover,” and breakout discussions as well (“Policies for an Equitable Recovery,” “Equity in Exports: Supporting Minority Owned Businesses,” and “Upskilling and Reskilling L.A. County's Workforce”).

View the economic resiliency report. Be sure to click here to view “Pathways to Economic Resiliency Outlines Economic Recovery Recommendations” (or view the summary here). 

Los Angeles Business Journal
Released the week of Feb. 1 during the “2021 Economic Forecast and Trends Conference”:

View the entire event. Be sure to click here to see the archived video and hear from virtual roundtable discussions from local experts in the health care, tax law, commercial real estate, financial operations, and engineering industries.

Read the economic supplement. Make sure to click here to read about local topics on the economy, environmental/social and corporate governance, the future of IPOs (initial public offerings), tax changes for 2021, rebuilding social infrastructure, the economic response to COVID-19, California's small business relief grant program, and Canada being a “green partner” in the Los Angeles area's economic recovery.

Take a glimpse at where the region’s economy came from in 2020 and how that will shape 2021. Be sure to click here to read “U.S. and Greater Los Angeles Economy's 2020 Review and Outlook for 2021.”

Indeed Hiring Lab’s Los Angeles Regional Trends (Indeed.com)
Released on Feb. 2 (“The Impact of Coronavirus on U.S. Job Postings”):

Job postings (advertisements for jobs) have rebounded more slowly in metros where a higher share of jobs can be accomplished from home. In high work-from-home metros, postings in retail, restaurant, and personal-services jobs have suffered. Collectively, postings in these metros across the United States are still -13 percent below the pre-pandemic baseline (recovery is slow). On the flipside, metros across the nation with a higher share of in-person service jobs (leisure, hospitality, food accommodation, etc.) are seeing (collectively) their job postings recently hit their pre-pandemic levels since their economies are more dependent on them (and other reasons too).

The COVID-19 pandemic recession from 2020 has especially been a “big-city recession,” especially for regions like the greater Los Angeles area. Taken altogether, job postings (advertisements for jobs) remain below baseline in larger metropolitan regions (approximately -10 percent below February 2020 for areas with 2 to 5 million residents or more). Los Angeles County has approximately 10.1 million residents, and the greater five-county region boasts about 20 million altogether. However, job postings are above baseline in medium-size regions (5 percent above pre-pandemic level for areas with 500,000 to 2 million residents) and small areas (9 percent above pre-pandemic level for areas with less than 500,000 residents).

You can view more: make sure to click here to view more trends from this Indeed Hiring Lab report.

Caltrans’ County-Level Economic Forecast
Released in December 2020 by Caltrans (the California Department of Transportation):

You can view Caltrans’ economic, demographic, housing, population, job, inflation, and industry breakdown forecasts for each county. Click on the following to view local trends and projections from 2021 – 2025: Los Angeles County. Or you can click here to view any county in California.

Los Angeles Regional Small Business Activity
Updated routinely by Homebase, a provider of real-time digital tools for small businesses:

Small business activity across the greater Los Angeles region was down at varying amounts compared to pre-COVID levels as of mid-December 2020. Activity was down -28 to -32 percent depending on the measurement analyzed. In contrast, the region was down between -59 to -73 percent in April 2020 before starting to recover. Measurements include the volume of hours worked by employees, the number of businesses open, and the number of employees actually working. You can click here to learn more and pick your region.

Los Angeles County: Demographics, Labor, Education & Economic Resources

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