California Apparel News

If the storm is over, where’s the sunshine?

Economists across the country are rallying around to deliver the good news that the third quarter of this year will produce positive growth, sending us down the path to better times.

But that doesn’t mean much if you don’t have a job or fear you might be joining your friends in the unemployment line.

The cause for concern is that California’s 12.2 percent unemployment rate is expected to inch up to 13 percent by next year, with the current national 9.8 percent unemployment figure topping 10 percent. In the Inland Empire, which encompasses San Bernardino and Riverside counties, the unemployment rate is already at 14.5 percent and could grow worse.

The shriveling job market didn’t spare the California apparel industry. In August 2008, state apparel manufacturers employed 72,800 workers. A year later, that plummeted nearly 12 percent to 64,300.

“As we move into the year, we’ll see continued job losses but not nearly as bad as we have seen,” said Jack Kyser, an economist with the Los Angeles County Economic Development Corp. “We say we have hit bottom and that we are sort of moving sideways right now.”

Hitting bottom this year has been seen in apparel imports into the United States. According to the Department of Commerce, retailers and manufacturers brought in nearly 10 percent fewer apparel and textile products during the year ending July 2009, translating into leaner store inventories. Retail import volume in 2009 is expected to be the lowest since 2003, according to economist Paul Bingham of IHS Global Insight. He believes ports will see only 12.5 million cargo containers cross their docks this year, a 17.7 percent drop from 2008.

How retailers and manufacturers fare next year depends on shoppers, which is being explored by Britt Beemer, founder and chief executive of America’s Research Group in Charleston, S.C. He regularly conducts surveys with consumer groups across the country to find out what shapes their buying habits. Preoccupation with jobs is high up on their list, he said.

“In our surveys, 41 percent of people say they are concerned about their job, and another 51 percent said they have to work another five to seven years to recover what they lost in the stock market,” he said. “So I don’t see anything improving [in retail] next year.”

At the rate things are going, Beemer doesn’t see a turnaround in the retail situation until at least next Labor Day. But he is thinking about changing that prediction to after March 2011 if job growth doesn’t improve very rapidly.

Job growth may stall, but economists say that next year, the nation’s gross domestic product will ratchet up at least 2.4 percent.

The positive tea leaves

Next year, the Los Angeles County Economic Development Corp. expects more local, state and federal funds to roll out for infrastructure projects.Case in point is Measure R, approved by Los Angeles County voters last year to provide up to $40 billion for street improvements and mass-transportation projects. That money started becoming available on July 1.

“Measure R money is funding the extension of the Gold Line into East Los Angeles and the Exposition light rail project through Culver City to Santa Monica. And another extension of the Gold Line north from Sierra Madre into the San Gabriel Valley is being considered,” said LAEDC’s Kyser.

More infrastructure projects mean more jobs.

Another bright spot is the stabilization of housing prices. The A. Gary Anderson Center for Economic Research at Chapman University in Orange, Calif., predicts that the median price of a house in California will rise by 0.8 percent in California next year and 1.6 percent in Orange County. “We are seeing a little bit of an increase in median home prices in the low- and below-median area, which saw the brunt of the decline,” said Esmael Adibi, the Anderson Center’s director. “But on the high end of housing, those guys still have to cut their prices.”

Yet the elephant in the room in real estate is commercial property. Office vacancies are running quite high, while tight industrial space is opening up.

In the second quarter of 2009, office vacancies in Los Angeles County rose to 14.8 percent, compared with 10.7 percent last year.

In the industrial market, vacancies in distribution centers and warehouses increased to 3.1 percent in the second quarter, compared with 1.8 percent last year. In the central part of the county—which includes the downtown area, Vernon and Commerce—industrial vacancies averaged around 2.5 percent.

“If anybody is looking to relocate, now is the time to do it,” Kyser said. “There is a lot of good, quality space with a lot of motivated landlords.”