California Apparel News

The California economy, already sluggish before being dragged down even further by the recent West Coast port closures, lower-than-normal tourism and the crash of the tech sector, will continue to struggle through 2003, according to Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. (LAEDC).

It is still too soon to estimate the full impact that the port closures will have on the economy, according to Kyser. The ports were closed for two weeks when contract negotiations broke down between the International Longshore and Warehouse Union and the Pacific Maritime Association (PMA), which represents shipping lines.

President Bush stepped in on Oct. 8 to reopen the 29 ports using the Taft-Hartley Act, which gives the negotiators an 80-day “cooling off” period. Now, shipments are being received at the ports again, but there is a considerable backlog of goods waiting to be received and still more goods arriving daily. Plus, there is industry concern that retailers will begin canceling orders for late merchandise that was stuck at one of the ports.

“The PMA is watching the productivity at the ports, and they are still digging out from the logjam,” said Kyser. “Until traffic is moving normally, we won’t know what the costs were, such as how many shipments will be refused by retailers.”

North vs. South

Factors affecting the California economy also differ by region, Kyser said.

A recent LAEDC report found that Southern California’s economy is already in recovery, while Northern California’s economy continues to suffer. According to the report, Southern California is expected to add 22,900 jobs this year, bringing the total to 133,500. Northern California is expected to shed 80,500 jobs this year, recovering about half of those next year.

“In Northern California, you are still looking at significant yearto- year job losses,” Kyser said. “There’s no sign of a turnaround in the tech area and tourism is still struggling. It’s going to be pretty bleak.”

The difficulties in the tech sector are also wearing on the economic growth in Orange County, which has remained relatively strong throughout the recession.

“We are watching Orange County because it’s normally a hot growth area and sails through slowdowns at a moderate pace,” Kyser said. “However, the tech sector crash is taking a toll on Orange County. It’s a delayed reaction, with all kinds of announcements of layoffs and cutbacks over the last 12 months.”

The Kohl’s Factor

Moving forward, Kyser predicts that the California market will continue to be “challenging.”

Kyser said holiday retail sales in the state will be weaker than in the rest of the nation, despite a National Retail Federation forecast that holiday retail sales nationwide will be up by 4 percent over last year.

And local retailers are bracing for the arrival of Menomonee Falls, Wis.-based specialty department store chain Kohl’s Corp., which will open 30 stores in Southern California next year.

For the consumer, the Kohl’s impact will be good, according to Kyser.

“I think for the consumer, it’s going to have a huge impact, because the other retailers will have to respond,” he said. “You’ll have a blizzard of sales to try to keep the customer base in the face of competition from Kohl’s. The last time a major retailer came in, it was Nordstrom, but they tiptoed in, as opposed to Kohl’s, who is stomping into the market with 30 stores.”

Kyser said economic recovery could last through this holiday season and into the greater part of next year.

“It may be Christmas of 2003 before people can sigh and see the worst as past,” he said. “By Christmas of 2003, we will have had a few months of the Kohl’s experience in Southern California.”