Economic Index Hints Recovery, But Jobs Missing

The index for January, the latest month for which figures are available, remained at 102, below the peak that it reached in October for a third consecutive month, but it was still up 10 points, or 11.4%, from the March 2009 cyclical low. The January reading also was up four points from the average for all of 2009.

Such numbers are not exactly cause for celebration, but they show an improving trend. Dana Johnson, chief economist at Comerica Bank, said in the bank's monthly news release regarding the index that, "Excluding employment, our index has shown broad-based improvement since last March."

That is mixed news for the office market, which is counting on job growth―perhaps even more than other property sectors are counting on it―as a source of demand. Economists and others who study the office market are virtually unanimous in their view that job growth is a key to recovery in the office markets throughout the US.

Says Johnson, "Although our index has stalled this winter after sharp gains last summer, it still appears to me that the California economy is in the early stages of a moderate recovery. If, as I expect, employment gains emerge in thenext few months, I will become much more confident that a sustained private-sector expansion is taking hold."

In the previous month's statement regarding the index, Johnson pointed out that, as it has done consistently over the course of the last year-and-a-half, employment contributed negatively to the California index. However, Johnson also noted that, "Given encouraging growth trends emerging nationally and globally, however, California should still be set for a sustained expansion that begins creating jobs in 2010."

The California Economic Activity Index equally weights nine, seasonally adjusted indicators of real economic activity in the manufacturing, tourism, travel and trade sectors, as well as job growth and consumer outlays. The index is benchmarked so that 2008 equals 100.

In addition to the California Economic Activity Index published by Comerica, another recently issued report that holds implications for the L.A. area is the Transwestern Outlook a quarterly report by Transwestern and its research affiliate, Delta Associates. The Transwestern study says that the LlA. Basin economy "will likely remain relatively weak in 2010, although the outlook is improving." Employment losses have begun to scale back and losses willcontinue to ease during the year, as activity in most sectors begins to turn around," the report says.

According to Transwestern's report, job losses in the Basin in 2009 totaled 443,400 on an average annual basis, and this year, job losses will likely moderate to a loss in the 150,000 range. "As economic growth picks up, we expect job growth in the L.A. Basin to reach close to 100,000 in 2011 and 120,000 in 2012," the Transwesterrn-Delta analysis says. "Growth likely will be driven by a return to health in the Basin's core industries, particularly in the professional services sector," the report states. "However, if the housing and consumer sectors regress, as government stimulus winds down, the economic recovery could take longer to develop."