Business Update with Mark Lacter

The best and the worst of Los Angeles' economy

When talk turns to the economy, it's clear that LA brings out the best and the worst.

Steve Julian: Business analyst Mark Lacter, where do you see the best of it here?

Mark Lacter: You see the best of the economy, Steve, with all kinds of startup activity - much of it tech-related - and you also see the large number of auto sales, the improved housing market, and the record number of people visiting Southern California - all indications of a growing economy.  But then, you have the other L.A. economy, with large numbers of families struggling to make ends meet, and seeing very little sign of recovery.  You know, the government has been releasing income data covering the last few years, and what you see is that the disparity between the richest 1 percent and the other 99 percent is at its widest point since the 1920s.  You especially see that kind of bifurcated economy in Southern California, which has some of the wealthiest people in the country, and also some of the poorest.

Julian: Now, the split between rich and poor has been happening for a good long time, hasn't it?

Lacter: Yes, but L.A. is in a special class because there are so many immigrants with limited job skills - in fact, a new study by the UCLA Anderson Forecast says it's a much higher percentage than immigrants living in Miami, San Francisco, and New York.  What's interesting is that 20 years ago the job skills among immigrants were significantly higher in L.A.  Limited job skills mean there's very little opportunity to move up the income ladder.  That factors into buying homes, sending your kids to college - really becoming part of the middle class.

Julian: I imagine that's particularly true for factory work…

Lacter: Yes, some of the same jobs that newly-arrived immigrants in previous generations would gravitate to.  Today, many of those jobs are gone, and they're being replaced by positions that require greater skill that's borne out of greater education.  And that, of course, is another problem: a sizable percentage of recently-arrived immigrants never finished high school, much less college, and that makes it even less likely that they'll be able to move up.

Julian: Related, or unrelated, to the recession?

Lacter: Actually, L.A. had serious income inequality in December of 2006, before the recession, when the county's unemployment rate was just 4.3 percent - a stunningly low rate when you consider that as of July, the jobless rate was almost 10 percent.  This points out that the division of haves and have-nots can happen even when the economy is doing well.

Julian: And it seems the last C-17 to be built for Air Force is a reminder of wage gap.

Lacter: That's right - it'll be up to foreign customers to keep the program in Long Beach alive.  Boeing currently has an order from India for 10 of the cargo planes, which will keep the line moving through the third quarter of next year.  Frankly, the only reason the C-17 has lasted this long is heavy political pressure by congressional lawmakers whose districts have an economic stake in the program.  At one time, as many as 16,000 people may have worked on the C-17 in Long Beach, but that number has fallen sharply over the years.

Julian: Still, this is the last airplane manufacturing plant in Southern California.

Lacter: And that, of course, speaks volumes about the state of the aerospace business, which had been one of the main economic drivers back in the days leading up to World War II.  Aerospace continued to be very important until the end of the Cold War, when you had a huge industry consolidation that resulted in the loss of tens of thousands of local jobs throughout the 1990s.  There's still quite a bit of aerospace activity locally that involves missiles, satellites, and electronics - both for the major defense contractors like Boeing and Northrop, and for smaller contractors and sub-subcontractors that still get a piece of the military pie.

Julian: But most of them require high skill levels…

Lacter: Yes, and that gets us back to the folks who are stuck in low-paying jobs with little prospect for moving up.  This is what the L.A. economy is all about, the good and the bad.

Mark Lacter writes for Los Angeles Magazine and pens the business blog at LA Observed.com.


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