Health Care, Sales Tax Propositions Defeated in Polls
Southern California’s apparel industry reacts to Nov. 2 election results
The Southern California apparel industry went on a heady roller-coaster ride, twisting and turning with the results of the Nov. 2 government elections and with economic news heralding new jobs, an interest-rate hike and a departing U.S. Commerce Secretary.
On Election Day, Californians passed Proposition 64, which would limit a person’s right to sue on the basis of unfair competition, and rejected Proposition 72, which would have required medium- to large-sized companies to offer healthcare to employees and dependents. Simultaneously, Los Angeles County voters dismissed a ballot measure to increase their sales tax by half a point to 8.75 percent. The re-election of President Bush will bode well for free trade.
“If you’re in business in California, Christmas came on Election Day,” said Lonnie Kane, president of Vernon, Calif.–based Karen Kane Inc. Another boost came when the government reported that 337,000 new jobs were created in October, outpacing forecasters’ expectations and showing the biggest monthly increase in employment since March.
Yet, tempering the good news was the combination of rising interest rates and a falling dollar. The Federal Reserve, as expected, raised short-term rates on Nov. 10 by a quarter point to 2 percent. With a weaker dollar, imports become more expensive but exports get cheaper. A ballooning national debt also hangs ominously over businesses.
“The economic situation is going to be very volatile,” said Jack Kyser, chief economist at the Los Angeles County Economic Development Corp. He said the apparel industry questions what kind of Holiday it will have. Plus, judging by Bush’s re-election, “the nation is swinging back to what you would say is a conservative mood,” Kyser said. “Is this going to impact what people will want from apparel?”
Following the resignation of Commerce Secretary Don Evans on Nov. 9, Kyser said we will have to wait and see whom Bush will select as a replacement. It also is not clear whether Labor Secretary Elaine L. Chao will leave her post.
Ilse Metchek, executive director of the California Fashion Association, said she thinks Chao will stay. One move Metchek said she hopes the Bush administration will push is more access to international markets on behalf of California apparel. On the other hand, Metchek objects to a sales tax increase in Los Angeles. Even though a county tax ballot failed, Mayor James K. Hahn wants the city to seek voter approval for a sales tax increase to fund more police officers, the Los Angeles Times recently reported. The tax measure could appear on the ballot as early as March. “The rise in sales tax [in Los Angeles] will just mean an increase [in business] for Beverly Hills, Santa Monica and any other incorporated city,” Metchek said.
A constant in the apparel industry is the migration of manufacturing jobs overseas. “We’re an endangered species,” said Joe Rodriguez, executive director of the Garment Contractors Association of Southern California. He said that there were 160,000 apparel manufacturing workers in California in 1999, compared with 65,000 today.
Jeff Silver, operating chief at Jerry Leigh Inc., a Van Nuys, Calif.–based licensee for The Walt Disney Co. and other companies, said he does not expect the trend of overseas manufacturing to reverse itself in the near future. In addition to manufacturing jobs, he said other jobs such as pre-production will move to China, whereas sales and better design will remain in the United States. He said he thinks Bush will support the expiration of World Trade Organization apparel and textile quotas in 2005. Accordingly, he said Jerry Leigh is following plans it implemented five years ago to increase its manufacturing presence outside of the United States, including in Central America and China.
The employment numbers are a critical issue for Kimi Lee, executive director of the Garment Worker Center, based in Los Angeles. She said she is worried that the Bush administration will spend money on the military in Iraq instead of on social services. She said she expects designers, sample makers and other people who handle just-in-time fashion will stay in Los Angeles.
“The industry won’t disappear,” she said. “We’re worried about working with the industry that is going to stay here and seeing how we can make sure workers are protected.”
