KPCC's business analyst Mark Lacter explains California's employment front has been doing well lately.
Steve Julian: Mark, job growth in California continues to outpace the nation.
Mark Lacter: This might seem hard to believe, Steve, but for the month of June California was responsible for almost half of all the jobs gains in the U.S. - and it's the second straight month that's happened. Actually, job growth in the state has significantly outpaced that of the nation going back the last year.
Julian: With a high unemployment rate?
Lacter: Yes, the statewide figure is 10.7 percent. But remember that California is made up of different economies and the range is wide, a little under 8 percent in Orange County and about 12.5 percent in Riverside. The point is, the recovery is still chugging along, which is nothing short of miraculous considering the dysfunction that's going on in Washington - and yet very few people have been paying attention. If anything, the focus is on the large number of jobs that have not come back since the recession, and how many years it will be before California supposedly gets back to where it was. But it's the wrong way of looking at the economy because things are never going to be the way they were.
Julian: Not in five years?
Lacter: Not in five years, not in 25 years – and that reality is still not being accepted. Look, the recession has forever changed things. You see it in the way companies are hiring. You see it in the way consumers make purchases. And it's not just the restructuring of finances - it's the restructuring of how business works. Now, we don't really know how a lot of this is going to play out, and some things are obviously worrisome, starting with the 700,000 people in California who have been out of work for over a year. But here’s another reality: many of these folks will never return to the kind of work they used to do.
Julian: Is there anything that gilds the edges of this new reality, or new normal?
Lacter: Yes. Consumers are being a lot more careful about the amount of debt they pile up, and that's certainly a good thing. Businesses are learning to do more with less, and that ultimately will be a good thing. And the industries that do seem to be thriving in California - I'm thinking about information technology and entertainment - are generally high-paying, and they attract a high-skilled workforce - that's also good. But the bottom line is that the economy is simply not the same, and it’s time to deal with it.
Julian: One area that does seem to be looking up is real estate.
Lacter: That’s right - the number of homes that were foreclosed on in L.A. County during the second quarter fell almost 50 percent from a year earlier. Also, for the month of June, home sales in Southern California were up 7.5 percent compared with a year earlier, and the median home price is inching higher – largely because we’re seeing more sales out of the higher-priced communities near the coast. What's important to remember is the context of these facts and figures, especially when you compare them with 10 and 20 years ago. It's just not the same.
Julian: For example.
Lacter: Well, look at commercial real estate. The places that are most in demand include Santa Monica, West Hollywood, and Culver City. That makes sense because that's where a lot of tech companies and entertainment companies are located. Now, a more traditional office market like downtown L.A. has a higher vacancy rate, about 18 percent. But one reason there's excess space is that accounting firms and law firms are finding that they don't need to have huge offices for their people, that more folks are coming in just a few days a week and can do their jobs just as effectively by having a small cubicle.
Julian: So it's not a good time to be a commercial property owner.
Lacter: That's the downside, but it does save money for the tenants. It also reflects this kind of increased efficiency we've been talking about. The truth is there's very little about this economy that's black and white - there's a lot of gray, and much of it isn't altogether bad.
Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.