California Apparel News

Despite considerable challenges such as the workers’ compensation crisis, minimum-wage hikes and rising property taxes, the majority of Los Angeles businesses are remaining in the area, and some are even growing.

Still, the current economic environment and the rising costs of doing business in Los Angeles prompted the Los Angeles County Economic Development Corp. (LAEDC) and the National Center for Business and Economic Research (NCBER) to conduct a survey to get an accurate read on how Los Angeles County companies perform business practices and are affected by local economic issues.

The two organizations designed the survey to forecast the number of companies that are at risk of leaving the area. The survey, which targeted 25,000 businesses that have 25 or more employees, is the first in a series of upcoming surveys aimed at “taking the economic pulse” of the county’s business sectors.

Survey categories included: the impact ofcompany growth, profit and revenues, plans for relocation and expansion, human resources, import/export by industry and size, barriers to expansion by industry and region, availability of capital or credit, local transportation systems, availability of suitable facilities, availability of qualified labor, and the impact of taxes and regulations.

According to the survey, nearly 24 percent of all businesses in Los Angeles County plan to expand their operations during the next 12 months, 8 percent plan to relocate, 5 percent plan to downsize, and 1 percent plan to shutter their operations.

Although the numbers represent a small portion of all the businesses in Los Angeles County, the implications on employment in the area are much larger, according to Jack Kyser, chief economist for the LAEDC. “What it presents is 8 percent of the firms, and [when] you apply that to the size of the business base, that represents about 100,000 jobs—that’s huge,” he noted.

For the apparel sector, the report sheds only a bit of light. Only 9.4 percent of the apparel manufacturers invited to participate in the survey responded, according to Kyser.

But like all manufacturing in Los Angeles County, the apparel industry has been hard hit by regulatory and operating-cost issues.

About 20 percent of the county’s manufacturing and wholesale trade businesses were not profitable last year, and those sectors do not project job growth in the coming year, according to the survey.

“It’s pressures such as operational costs, workers’ compensation, employers’ contribution to unemployment, mandated health care and offshore competition that are making the apparel sector’s outlook so bleak,” Kyser said.

There are several pieces of legislation pending in California, including bills that would require employers to provide health-care insurance for their workers and several bills that would inflate the cost of workers’ compensation. Still a design center

California Fashion Association Executtive Director Ilse Metchek said the region continues to grow as an apparel design center.

“There will always be start-ups, but will the big ones get bigger?” Metchek questioned. “Will there be additional purchases of California companies, and will they be left in the state? I don’t know. But there will always be start-ups because the design schools are full.”

Moving forward, the LAEDC and NCBER will focus on getting more responses from the region’s apparel sectors, Kyser said. The two sectors that the California Chamber of Commerce and government agencies most often request information about are the apparel manufacturing and entertainment industries, he said, adding that future surveys will continue to see shifts in sentiments and attitudes.Keeping track of the numbers

Currently, no state agencies are keeping track of the number of apparel companies leaving the state, Kyser said.

Such information could be valuable to the California Chamber of Commerce, which could supply facts to industry leaders, educators and lawmakers.

“Given the economic climate in the state and the current 300,000-plus manufacturing job loss, now more than ever the state needs to track exactly where these companies, facilities and jobs are going,” said Gino DiCaro, spokesman for the California Manufacturers and Technology Association. “We need to know which jobs are vaporizing, which are going to other states, which jobs are going offshore, and, furthermore, we need to know why.”Creating business in the region

Now the LAEDC is looking for ways to keep businesses in the area.

The organization’s business assistance program offers free consulting services to roughly 300 businesses each year. The agency employs seven regional managers who assist companies interested in taking advantage of tax-break incentives and other programs that can alleviate costs.

Trade Match is a 2-year-old program sponsored by the LAEDC in conjunction with the World Trade Center Association in Long Beach, Calif. For a service fee of $500, the program matches foreign companies with five contacts in the Los Angeles County sector of their choice.

According to the LAEDC’s survey, about 32 percent of the companies in the wholesale sector plan to export product overseas next year. The number of wholesale businesses that plan to import is greater, with about 45 percent planning to import from offshore.

The LAEDC plans to release the results of the next phase of the survey in December, Kyser said.