Explaining Southern California's economy

Problems for Southland ports as Chinese exports decline

(FILES) A cargo ship stands on Long Beac

Joe Klamar/AFP/Getty Images

A cargo ship at Long Beach harbor. The Port of Long beach is the leading trade gateway between the US and Asia — but its business may be affected by a slowdown in Chinese exports.

Exports from China may be contributing to a major-league trade imbalance between the U.S. and the Middle Kingdom, but they are certainly welcome at the ports of Los Angeles and Long Beach, where goods stream into the Southland day and night.

Some of that seaborne traffic, which supports a major warehousing industry in the Inland Empire, as KPCC's Steven Cuevas has reported, not to mention a regional trucking business, could be slackening in the future. This is from the New York Times:

Data released Friday showed that the growth in overseas shipments from China had ground to a near halt in July, with exports up just 1 percent from the same month a year earlier, far below expectations and well beneath the 11.3 percent in June.

The slowing of China's economy has been on the minds of economists for a while now. But it may soon be on the minds of Southland residents and workers who depend of trade — deficit or no deficit — for their livelihoods.

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CSU Fullerton midyear economic forecast predicts 'growth in the shade'

CSU-Fullerton-Forecast-MDB

Matthew DeBord/KPCC

CSU Fullerton economics professor Mira Farka presents the midyear forecast. It's halftime in America, people!

Anil Puri and Mira Farka of Cal State Fullerton presented their midyear outlook and forecast in Irvine today. This is a follow-up to the major forecast they presented last October. What's the bottom line? Cautious optimism, in the wake of an economic catastrophe for California:

Despite encouraging developments, we expect the recovery to proceed at a moderate pace — a notch below the U.S. long-run potential growth and well below the historical rates of previous post-war recoveries. Our "no boom, but less gloom" outlook is shaped by our belief that while the U.S. is finally experiencing a real cyclical recovery, structural challenges and external shocks will nonetheless restrain the strength and the pace of the expansion.

This pretty well reflects the economic consensus right now (and continues a theme for Puri and Farka, who last year asked "Where's my boom?"). It's not "exciting," as Puri put it, but it is realistic. You could call it excessively conservative — Will we really only average GDP in the 2-2.5 percent band nationally, as institutions such as the Federal Reserve and the International Monetary Fund have argued? — or just sensible. There are what economists call "headwinds" out there, from the "mild recession" in Europe (according to the CSU forecast) to a volatile global oil market. 

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Why is the recovery jobless? Skills, baby. Skills.

Fighting to Stay Positive

Mae Ryan/KPCC

Victoria Long has been unemployed for two and a half years and her job search continues. She spends her time in an employment recruiting office as she searches for work.

First, the good news: there are jobs available in America! Now, the bad news: there aren't enough people with the right skills to take them. This is from Bloomberg Businessweek:

The number of positions waiting to be filled this year has climbed to levels last seen in 2008, when the jobless rate was around 6 percent. The housing bust and ensuing financial crisis put people out of work whose skills may not correspond with those needed by the health-care providers and engineering firms where jobs go wanting.

[...]

A dearth of skilled applicants may prevent the unemployment rate from declining further and could crimp consumer spending, which accounts for about 70 percent of the economy. Companies also may remain reluctant to expand their workforces as the threat from Europe’s debt crisis and political gridlock in the U.S. weighs on the economic outlook.

Over the three months ended in October, the average number of positions waiting to be filled climbed to 3.26 million, the most in three years, according to Labor Department data released yesterday in Washington. The jobless rate, which averaged 5.8 percent that year, was at 9 percent in October. It fell to 8.6 percent last month, in part reflecting a drop in the size of the labor force, the agency’s data showed earlier this month.

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China: Where's the innovation?

hina-economy-property,FOCUS

Mark Ralston/AFP/Getty Images

A Chinese flag hangs next to a new development under construction on the busy Nanjing Road shopping street in Shanghai, China.

It's not a trivial question. This is Douglas Hervey, from the Harvard Business Review blog:

In the United States, disruptive innovation has harmed a few but benefited many. In China, top-down capitalism has benefited a few but harmed many. An absence of disruptive innovation and entrepreneurship is suffocating China's future growth potential. The future of that growth potential will depend in large part on whether China suppresses or unleashes its would-be disruptive entrepreneurs.

Hervey says that the Chinese are facing a "middle income trap — losing their competitive edge in labor-intensive industries and not yet gaining new sources of growth from innovation." So does this mean that China won't become the economic powerhouse we might once have expected?

It depends on how much faith you place in innovation. And here's why you should place a lot in it: because innovation really has no upper limit. More traditional contributors to GDP do. When an economy extracts as much growth as it can from some established process, it starts to outsource that process to a region where labor costs are cheaper. Or it fires up the innovation engine to make the process better — or replace the product in question with something better.

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California economy: When is a recovery not a recovery?

The UCLA Anderson Forecast, covering the fourth quarter of 2011 and looking forward through the fourth quarter of 2013, came out yesterday. KPCC's Brian Watt provided a report on air, and now I've had a chance to dig into at least some of the forecast. I'll start with the California section, presented by Anderson Forecast economist Jerry Nickelsburg. 

You'll remember that in the previous Anderson Forecast, Nickelsburg explained that California has broken into two distinctive economic regions: a recovering coast and a stagnating inland zone. Here's how I put it in the post I wrote back in September:

Since the financial crisis, two California economies have emerged. On the coast, there's growth. Inland, there's near-stagnation. You can easily see this expressed in the Los Angeles region's unemployment numbers. LA is bad, at at 12.7 percent. But Riverside and San Bernadino counties are far worse, at 15.1 and 14.3, respectively.

The industries that are creating jobs in California are also disproportionately located on the coast. Inland, the blast wave of the the housing bust is still being felt, with industries like construction shedding jobs.

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