The Southern California economy has shown sporadic growth over the past year, sitting at the juncture of several positive and negative economic trends. Good news comes from LAX where air passenger traffic in June was up two percent from a year ago, near its pre-recession peak. The increased traffic came as several international carriers added flights over the last year. According to the Los Angeles County Economic Development Corporation, LAX added nearly $40 billion to the Southern California economy in 2011, supporting more than 294,000 jobs region-wide. Likewise, cargo traffic was up 5.5 percent at the Port of Los Angeles in July over the previous year. However, the Port of Long Beach reported a drop in cargo traffic. This year the Port of Los Angeles has consistently outgained the Port of Long Beach, due, in part, to the ability of the Port of Los Angeles to handle bigger ships.
A heavy reliance on government spending from the local, state and federal levels leaves Southern California exposed to more budget tightening. Statewide government employment is still falling, now down 155,000 jobs since peaking in June 2008. State tax revenues have been a source of frustration this year, weak again in July, falling 10 percent below expectations. This increases the likelihood of additional state-level fiscal tightening, which could be compounded by federal-level tightening next year. The poor performance of Facebook stock has added to the state’s budget woes.
House prices in Southern California were particularly hard hit by the Great Recession. Since peaking in 2006Q3, the FHFA Los Angeles house price index is down about 31 percent. Housing starts, particularly on multifamily projects have recently been on the upswing, boosted by declining vacancy rates and improving rents. Year-over-year price gains are expected by early 2013.
Click here for the complete 2012Q3 Southern California Regional Economic Update: SouthernCA2012Q3.