Presented by Beacon Economics
Welcome to The Regional Outlook, a forecast for five of California’s largest regional economies. Each quarter, find updated analysis that goes beyond the state and national level to present a snapshot of employment, home prices, consumer spending, personal income, and other leading economic indicators within key areas of the state. Visit your region of interest and subscribe for email delivery.
Negligible workforce growth over the last several months and an inability to add enough housing units to the market is taking its toll on the economy of Los Angeles County. Through the first few months of 2019, the County has added jobs at a slower rate than in 2018 and may have to draw workers more heavily from neighboring regions in order to sustain growth in payroll jobs. Meanwhile, not enough has been done to temper increases in home prices and rental costs in order to offset declining affordability in this perpetually expensive region.
LA Employment Slowing; Job Losses in Retail, Manufacturing Putting A Damper on Growth
From April 2018 to April 2019, total nonfarm employment in Los Angeles County grew by just 1.1% to reach nearly 4.6 million jobs. This represents a slower rate of growth than during the same period one year earlier (1.7% growth from April 2017 to April 2018), but the fastest year-over-year growth pace in the first four months of 2019. Compared to California and other regions, from April 2018 to April 2019, Los Angeles County added jobs at a slower rate than the state as a whole (1.6%), San Francisco (MD) (3.6%), the South Bay (2.6%), and the East Bay (1.8%).
Moreover, as of April 2019, the County’s unemployment rate only declined by 0.1 percentage points year-over-year to reach 4.6%. This is higher than the statewide unemployment rate of 4.3%, and also significantly higher than unemployment rates in neighboring Orange County (2.8%), San Diego County (3.2%), and the Inland Empire (4.1%), as well as in San Francisco (MD) (2.1%), the South Bay (2.5%), and the East Bay (3.0%).
By sector, the Construction industry in Los Angeles County experienced the largest employment gains in percentage terms at 5.7% growth, an addition of 8,200 jobs year-over-year as of April 2019. Following Construction, the Other Services (3.1%) and Logistics (2.9%) sectors rounded out the top three Los Angeles County industries in terms of year-over-year percentage growth as of April 2019. The largest growing sector in absolute terms was Healthcare, which added 17,800 jobs year-over-year.
A handful of industries in Los Angeles County also lost jobs. Consistent with the challenges faced by brick and mortar retail stores nationwide, the County’s Retail sector suffered a total employment loss of 7,800 lost workers, year-over-year as of April 2019, a decrease of 1.8%. The County’s Finance industry lost the most workers in percentage terms at 2.5%, while the Real Estate (-1.0% or -800 jobs) and Manufacturing (-0.7% or -2,300 jobs) sectors also saw losses.
Looking ahead, Beacon Economics is forecasting Los Angeles County’s unemployment rate to remain in a narrow range around its current reading through 2019. Total nonfarm employment in the region is expected to expand in percentage terms by 0.8% over this year, with little change in 2020.
Housing Prices Showing Signs of Deceleration
The median price of an existing single-family home in Los Angeles County has continued to increase, reaching $627,700 in the first quarter of 2019. This represents a 0.5% quarterly gain and a 2.1% annual gain (over the first quarter of 2018). Although still on an upward trajectory, price appreciation in the County has slowed markedly from last year’s 8.3% gain. Notably, in Southern California, only Riverside (2.7%) and San Bernardino (5.0%) Counties have experienced a faster rate of home price growth than Los Angeles County over the past year.
Meanwhile, home sales have declined across Southern California with sales in Los Angeles County falling 14.0%, year-over-year, less than in Orange County (-17.9%), but more than in Riverside (-12.9%) and San Bernardino (-9.5%) Counties.
From the first quarter of 2018 to the first quarter of 2019, the average apartment rent in Los Angeles County rose by 4.1% to reach $2,234/month. This represents a marginally slower pace of rent price growth than experienced one year earlier (4.4%). Compared to the other large rental markets in Southern California, Los Angeles is still the most expensive and its annual rate of rent price growth was exceeded only in the Inland Empire (4.4%). The County’s higher rents are a result of decades of underbuilding multi-family and apartment units. This is largely reflected in Los Angeles County’s lower vacancy rate (3.7%) as compared to nearby Orange County (4.0%), San Diego County (4.0%), and the Inland Empire (3.8%).
** Los Angeles County refers to the Los Angeles-Long Beach-Glendale Metropolitan Division.