California Apparel News

The number of people without jobs will climb in California and Los Angeles County through 2010 as the economy takes its time getting back on its feet.

The apparel and retail industries, which have been hard hit as consumers keep a close watch on their wallets, will also continue to shed jobs, according to a mid-year economic report written by the Kyser Center for Economic Research, part of the Los Angeles County Economic Development Corp. The report predicts that California should hit bottom by the end of 2009, but any recovery in 2010 will be moderate and slow.

“Job losses will continue in construction, manufacturing, retailing, leisure and hospitality services,” said Jack Kyser, founding economist of the Kyser Center for Economic Research, which unveiled its “2009–2010 Mid-Year Economic Forecast & Industry Outlook” report on July 22.Apparel and retail

Employment will continue to decline in the apparel and textile manufacturing sectors in Los Angeles County. The apparel and textile industry currently employs about 85,800 people in Los Angeles County, an 8.4 percent drop from 2008. By 2010, only 80,200 people are expected to be working in the industry, a 7 percent drop from this year.

However, the wholesale sector, which employs many of the salespeople in the California Market Center and other showroom buildings, should hold steady and even inch up slightly this year to 21,100 people, compared with 20,800 last year, according to the LAEDC.

“It is going to be tough going, and then you have the unknown about CIT,” Kyser said, referring to the precarious financial situation of CIT Corp., the largest factor for the apparel and retail sector, which nearly declared bankruptcy recently.

Retailers will also have a rough road to travel for the rest of this year. Retailing began to slow down in late 2007 with the collapse of the housing market.

Taxable retail sales in 2009 are expected to drop 9 percent in Los Angeles County and 12 percent in Orange County.

Several retailers—such as Mervyns, Gottschalks and Eddie Bauer—have filed for Chapter 11 bankruptcy or closed. There are estimates that in 2009, approximately 10 percent of retailers across the country will restructure, file for bankruptcy protection or liquidate.

“You are going to continue to see a lot of stores shut down, a lot of the independents,” Kyser said. “You still have retail-space landlords who don’t get that it is tough out there. Smaller chains will either downsize or completely shut down because you have way too much retail capacity.” More job loss

While the unemployment rate in California will average 11.6 percent this year, it will inch up to 12.6 percent next year as companies remain reluctant to hire workers until they are confident the economic recovery is not a temporary event.

Los Angeles County will see its ranks of the unemployed grow as manufacturing, retailing, construction, and administration and support services see job losses that will contribute to an average 11.7 percent unemployment rate this year and 12.8 percent next year.

“Businesses have been through a lot,” Kyser said. “There is a lot of uncertainty out there. You have the issue of the state budget and what is going to happen to that, and you have state employees taking three unpaid furlough days a month, which cuts into people’s spending power. Employers are also watching health-care reform at the national level and environmental issues at the state level.”

International trade, which saw a steep decline this year, will see only a modest recovery in 2010, according to the LAEDC. Container traffic during the first half of this year was down 15.7 percent at the Port of Los Angeles and 27.4 percent at the Port of Long Beach.

Tourism, which saw rigorous growth that sparked a flurry of new hotels in town, is seeing anemic visitor numbers, which will continue to slide this year. The LAEDC report noted that business travel is down, with firms either cancelling functions or sending fewer people to trade shows. International travel is also down, as the economies of other countries are struggling. Consequently, hotels have suffered. During the first five months of 2009, the hotel occupancy rate in Los Angeles County was 66.2 percent, compared with 76.3 percent for the same period last year.

New-home construction will dip again this year, according to the report. In 2009, only 6,495 new units will get started, a 75 percent decline from the 2006 peak of 26,348 units. The county also has an oversupply of condos and apartments.

“In certain areas—like Long Beach, Pasadena and downtown Los Angeles—you have way too much supply,” Kyser said. “What you have in downtown Los Angeles is a five-year to a 10-year supply.”

On the plus side, job growth will be seen in health-care services, which generates jobs year after year, as well as rising employment at private schools. With federal stimulus money coming in, jobs should be added for public and private construction projects.