California Apparel News

A new L.A. mayor and plenty of tourist attractions bode well for Southern California’s economy.

Things are starting to rev up for Southern California’s economy.

Many hope that Antonio Villaraigosa—the charismatic politician who defeated James Hahn in the May 17 Los Angeles mayoral election—will bring a jolt of energy to City Hall and shine more national attention on the country’s second-largest city.

“There are a lot of people who are hoping that Antonio will be more of an activist and salesperson for Los Angeles,” said Jack Kyser, chief economist of the Los Angeles County Economic Development Corp. (LAEDC).

Then there is the King Tut exhibition, which starts June 16 at the Los Angeles County Museum of Art. By the time it ends on Nov. 15, the exhibition—which has only two other U.S. stops, in Chicago and Fort Lauderdale, Fla.—is expected to pump $147 million into the local economy, according to LA Inc., the city’s convention and visitors bureau. Thousands of visitors will be coming to town, dining out, staying at hotels and shopping for clothes that have a unique California look. “With tickets going for as much as $30 a pop, the King Tut exhibit will [have] a tremendous economic impact on the city,” said Christopher Heywood, manager of corporate communications at LA Inc.

Also, a cheap dollar is attracting more foreign tourists to the area, particularly with the 50th anniversary of Disneyland in Anaheim, Calif.

In addition, the annual National Education Association Expo is coming to the Los Angeles Convention Center in July. That will draw about 15,000 people and take up about 39,000 hotel room nights, a nice boon for Los Angeles County’s hotel industry, which lately has seen occupancy rates average a healthy 76 percent.This year, LA Inc. expects Los Angeles to have about 25 million visitors dropping about $12.7 billion into local cash registers. That is up from the 24.3 million visitors who spent $12 billion last year.

Good news bulletins

Other tidbits of goods news include a slight decline in gasoline prices and reasonable interest rates. And no local military bases are closing despite the federal government’s announcement that 33 major domestic bases could be mothballed in the near future.

Los Angeles Air Force Base was one of the facilities spared. “Closing that base would have meant 49,000 jobs would have disappeared. And with them would have gone $2.4 billion a year in payroll,” Kyser said.

In addition, housing prices have continued to hold strong with no fizzle in sight. In April, the median price of all homes in Los Angeles County was $447,000, up 15.5 percent from a year earlier. In Orange County, the median price was $576,000, up 10.1 percent from a year earlier.

“We were thinking that housing prices would start to deflate at the end of last year, and things would start to come down, but they haven’t,” said economist Christopher Thornberg with the UCLA Anderson Forecast at the University of California, Los Angeles. Thornberg said he has been worried that the high rate of consumer debt will eventually harm the economy and push housing prices down. “Consumers continue to cruise,” he observed.

Strong retail

Indeed, consumers haven’t put any brakes on their spending yet. One reason is that the state unemployment rate declined to 5.7 percent in March, down from 7 percent during the same period one year ago. Los Angeles County’s unemployment rate in March 2005 was 5.6 percent, down from 6.8 percent in March 2004.

But jobs in apparel manufacturing have continued to shrink. At the end of the first quarter, there were 85,200 people employed statewide in apparel manufacturing, down 7.6 percent from one year earlier. For other industries, overall job growth rates this year should average about 1.2 percent over last year.

Those statistics bode well for apparel manufacturers and clothing retailers, who should be seeing fatter revenues.

“Our forecast for taxable sales in California is for 4.5 percent growth in 2005, compared to 2004,” said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University in Orange, Calif. “In the apparel group, we see growth at about 4.7 percent. And for specialty stores, we see 6.3 percent growth. All these numbers are better than last year.”

Those with an eye to the national forecast are equally optimistic. Kurt Barnard, president of Barnard’s Retail Consulting Group in New Jersey, said that apparel will do relatively well as long as the weather cooperates and rain doesn’t bring a chill to the rest of spring or summer.

“For the last year or two, consumers have postponed buying fashion,” he noted. “Now they are opening their closets and are tired of seeing the same old thing. Luxury is going to continue to be strong.”

Michael Niemira, chief economist for the International Council of Shopping Centers, noted that the average weekly salary has increased by $17 while gasoline expenditure is, on average, up only $5 a week per household. “That’s why we are not seeing a bigger impact on the economy because of gas,” he said.

But there are a few storm clouds lingering on the horizon. No one is sure how high interest rates will go this year. Housing prices seem relatively strong but could change with a gust of bad news blowing in about consumer debt. And gas prices could shoot up as quickly as they have edged downward.But overall, 2005 is shaping up to be a pretty good year. “The economy remains relatively strong, and the consumer continues to be a player,” Niemira said.