Southern California and Port Negotiations

Increased congestion at the Ports of Los Angeles and Long Beach is disrupting normal supply chains. Companies importing goods have to make the decision between suspending manufacturing operations, diverting shipments to Gulf and East coast ports, or using more expensive airfreighting. Exporters are also feeling the pinch as delays prevent goods being sent to international markets. Businesses that deal with perishables are faced with product losses and cancelled orders. The Obama administration sent Labor Secretary Tom Perez to the Bay Area to help negotiate a deal between the Pacific Maritime Association and the International Longshore and Warehouse Union after vessel operations were suspended for all West Coast ports from February 14-16. Further deterioration in negotiations remains a major downside risk to area port activity this year.

Southern California homeowners are seeing some light at the end of the tunnel in terms of recovered home equity. Area home prices are expected to grow by another 6.3 percent in 2015. The gain in equity as well as sustained income growth may encourage more homeowners to put their homes on the market over the next two years. This will boost the supply of homes for the tight Southern California housing market.

The region’s labor markets continue to improve heading into 2015. Southern California added 171,000 nonfarm payrolls in the 12 months ending in December 2014. Though job gains were positive news, Southern California’s unemployment rate remained stubbornly high at 7.0 percent compared to the U.S. at 5.6 percent. We expect labor force participation to increase at a faster rate this year leading to a slower decline in the area’s unemployment rate. The slack in Southern California’s labor markets will keep area income growth at around 4.8 percent for 2015. This remains below the region’s average annual income growth of 5.6 percent between 1996 and 2006, and indicates that the region is still renormalizing to a pre-recession economy.

SoCalRegional_02_20_2015

Click here for the complete Southern California Regional Economic Update: SouthernCA2014_Q4.

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