U.S., California in 'Nontraditional Recession'

The economic outlook should improve in the second half of 2003—provided the conflict in Iraq is resolved quickly.

That was the word from Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., who spoke at the California Fashion Association membership meeting on Jan. 30 at the Jonathan Club in downtown Los Angeles.

About 70 people turned out for the event, which featured comments from Kyser and Mitch Cohen, senior vice president and western regional manager of CIT Commercial Services. Lonnie Kane, co-owner of Vernon, Calif.-based manufacturer Karen Kane, opened and closed the meeting.

The U.S. economy is still in the throes of a “nontraditional recession” that is impacted by several factors, Kyser said. Business is still affected by the economic impact of Sept. 11, corporate scandals, the stock market bubble, the technology and telecom crash, and uncertainty in the Middle East, he said, adding that the 2004 presidential race has also gotten off to an early start.

There is plenty of uncertainty on a local level, as well. The state’s budget is in deficit, insurance costs are up (particularly for workmen’s comp), Californians’ personal incomes have “plummeted,” retail sales are down statewide and especially in the Bay Area, and employment is down statewide, Kyser said.

“California, in terms of jobs, has not been as badly affected as the rest of the country,” he said. “But the numbers will be revised in February, and we probably did worse than we thought.”

Still, there were some bright spots in Kyser’s forecast, including the entry of Menomonee Falls, Wis.- based retailer Kohl’s into Southern California. One member of the audience asked Kyser why, in light of the current economic conditions, would Kohl’s be interested in entering the California market.

“They probably sense a whole bunch of new opportunities here,” he said. —Alison A. Nieder