The Southern California economy is showing signs of improving, as payroll jobs increase and housing markets slowly heal. We emphasize the slowly in the previous sentence because the region remains plagued by high but improving foreclosure rates, especially in inland areas. Also, job growth in the Southern California area is on par with the national average, lagging behind Northern California. The unemployment rates for the Los Angeles, Riverside and San Diego metro areas are all above the U.S. average, with the large Los Angeles metro area showing the most slack at 9.8 percent in September, compared with the U.S. average of 7.8 percent. Entertainment accounts for a big chunk of the SoCal economy. According to the Los Angeles Economic Development Corporation, the entertainment industry generated $47 billion in output in Los Angeles County in 2011. However, another recent study says that the movie and television industry is down 16,000 jobs in the area since 2004 as production has migrated to other areas.
A heavy reliance on government spending from the local, state and federal levels leaves Southern California exposed to ongoing unresolved fiscal issues. Fortunately, improving labor markets are helping state tax revenues. October state tax revenues exceeded expectations, reducing the state’s budget gap to 2.1 percent, and putting a balanced budget within reach. However, the state is very exposed to the federal budget’s “Fiscal Cliff,” which has the potential to derail state budget progress.
House prices in Southern California were particularly hard hit by the Great Recession, but are now showing signs of firming up. The Case-Shiller house price index for Los Angeles was up 2.2 percent from a year ago as of August, just ahead of the Case-Shiller 20-City composite index, which gained 2.0 percent for the year.
Click here for the complete 2012Q4 Southern California Regional Economic Update: SouthernCA 2012Q4