California Apparel News

The word on the retail street is that after a good holiday season, consumers in 2011 are back in the stores. They will continue to be frugal but pepper their purchases with a few frivolous items.

That means mid-tier stores such as Kohl’s and JCPenney should be seeing healthy gains of about 3 percent to 4 percent in same-store sales. Luxury brands and upscale stores won’t be as buoyant as in 2010, but they still will experience moderate growth.

Same-store sales during the November and December holiday season were up 3.6 percent, the best year-over-year growth since 2006.

“I definitely think what we saw at the end of last year was encouraging, but it was a case of gophers coming out of their holes,” said Nancy Sidhu, chief economist at the Los Angeles County Economic Development Corp. “We are beginning to see changes in the ways consumers are using credit. There are increases now where there have been months of declines.”

The opportunity for more shopping sprees is being helped by the Obama administration passing a payroll tax-cut program that went into effect Jan. 14, decreasing payroll taxes by 2 percent. The average worker will see about $700 more in his or her bank account this year.

“Things are looking up,” said Christopher Thornberg, one of the founders of Beacon Economics in California. “2011 will be a good year, and the recovery is fully here.”

When the final numbers are tabulated for 2010, financial gurus expect the country’s gross domestic product, or GDP, to grow by about 3 percent. GDP growth in 2011 will see a slight bump to about 3.3 percent, which is decent but below normal after a deep recession. In the past, post-recession GDP has grown by as much as 6 percent to 7 percent.

And California has lagged behind the rest of the nation in its recovery. The state’s 12.4 percent unemployment rate in November was among the highest in the nation. That isn’t expected to change until the end of 2011. “We are not seeing the kind of growth we should have because the housing industry in California has taken the oomph out of the recovery,” said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University in Orange, Calif. “Builders are competing with the resale market with such huge inventories and prices that are still not stabilizing.”

Recent data on December home sales show that prices in Southern California’s market fell in just about every county over the previous year and the median price of $290,000 barely budged, increasing a mere 0.3 percent from December 2009.

Jerry Nickelsburg, UCLA Anderson Forecast senior economist, said the housing market will remain in the doldrums for at least the next six months. “It will be coming back some in the second half of 2011, but it is really more of a 2012–2014 story,” he observed. “We need to get some employment growth first.”Jobs are key

California payroll employment peaked in July 2007 at 15.2 million jobs and showed rapid declines in 2008 and 2009. By December 2009, payroll employment hit a trough at 13.8 million jobs.

With so many people out of work, it will take at least 1.4 million new jobs to get California back to pre-recession days and then add jobs for all the new people who have entered the job market in the last 2frac12; years, Nickelsburg said.

The recovery in the job market began in early 2010 and has continued to grow very slowly. Since January 2010, California has added 47,900 jobs.

The two strongest sectors poised for growth are healthcare and professional and business services, which includes lawyers, accountants, computer programmers and managers. The high-tech sector is also expected to see some improvement, followed by retail, leisure and hospitality.

Two California counties already making strong gains in job growth are Orange County, which has seen tourism and financial services added to their payrolls, and Santa Clara County, which is home to many Internet and high-tech companies around San Jose.

Apparel manufacturing probably won’t be growing even though just-in-time deliveries are on the upswing. That sector has seen employment decline steadily for the last decade. In 2010, it was estimated that there were 58,000 people employed in California apparel factories. That is down from 61,400 the previous year.

“For apparel and apparel retail, we will be seeing quick delivery, and that favors domestic production,” said the LAEDC’s Sidhu. “But there is an issue with production costs. With cotton prices rising, the product price has to go up, and that doesn’t auger well for domestic production.”