California Apparel News

The manufacturing industry in Los Angeles County is still treading water as it recuperates from the recession, but apparel factories and contractors have bucked the trend and boosted their payroll numbers by 6.5 percent this year.

“The apparel industry is definitely swimming upstream,” said Nancy Sidhu, chief economist for the Los Angeles County Economic Development Corp.

In May, there were 50,500 people working in apparel manufacturing, up from 47,400 people during the same month last year. In contrast, the county’s general manufacturing industry shed jobs, employing 373,300 workers in May, compared with 373,700 last year.

Local apparel manufacturers are seeing that China, the world’s top clothing producer, isn’t as affordable as it used to be. Quality and on-time delivery also have taken a hit, making local production more attractive.

Karen Kane, a womenswear line in Vernon, Calif., is doing 85 percent of its production in the Los Angeles area for its upcoming Fall and Holiday season. That’s up from about 50 percent a few years ago.

“The climate in China and overseas has changed in the last year or two,” said Michael Kane, a spokesperson for the family-owned company, which has been around for more than 25 years. “The price of doing business has gone dramatically up, and the quality of the goods received is not what it used to be.”

In the past, the clothing company only inspected 10 percent of its Chinese-made merchandise for quality control. Recently, that changed. “It got to the point where we were inspecting 100 percent of everything coming in, which adds manpower, time and cost,” Kane said.

Other apparel companies are switching to local manufacturing as consumers demand more “Made in the USA” products. “Clearly, there is a need and desire to make more merchandise in Los Angeles,” said Ilse Metchek, president of the California Fashion Association in Los Angeles. “It does not mean that mass manufacturing is going to come back, but there is a drive to make it here.”

Payroll blues

Unemployment has been one of the toughest problems to remedy in California and around the nation. California still has the second-highest unemployment rate in the nation, at 11.7 percent in May. That is second only to Nevada, which had a 12.1 percent unemployment rate in May.

Still, compare that with last year, when the state unemployment rate stood at 12.4 percent in May.

Nationwide, the unemployment rate rose to 9.2 percent in June.

“We are seeing the economy growing, but at the moment, it is not particularly fast,” said LAEDC economist Sidhu. “There was slow growth in the first quarter and even slower in the second quarter. But a fair amount of that second-quarter slowdown is tied to the problems in Japan, which will begin to reverse itself starting later in the third quarter.”

Japan is still recuperating from a devastating March 11 earthquake that churned up a massive tsunami whose waves devastated the northeast coastal area and severely damaged seaside nuclear reactors that produce a significant portion of the country’s electricity. Japan has had to gear down its industrial production.

More imports from Japan later this year should fuel business at the ports of Los Angeles and Long Beach, which had a banner year in 2010. Cargo-container traffic at both the ports, the largest port complex in the United States, saw a 20 percent jump in 2010. This year, traffic is predicted to rise more modestly, by 5.2 percent. “We are looking for increases in 2011 and 2012—but not 20 percent,” Sidhu said.

A free-trade agreement with South Korea, expected to be completed sometime this year, could enhance those figures even more. About 30 percent of all goods traded between South Korea and the United States pass through the area’s seaports and airports. South Korea is a major supplier to textiles to the United States.

Hitting the stores

Consumers have been slowly returning to the stores, but a cautious air surrounds the retail environment. When gasoline prices soared above $4 per gallon, shoppers pulled back until pump prices dipped below that $4 mark in early June.“The economy has improved and is going on the right track, but there are lots of head winds,” said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman University in Orange, Calif.

“For the apparel industry, the head winds are gas prices.”

As the country heads into the Back-to-School season, the International Council of Shopping Centers predicts revenues will be up a modest 3 percent to $39 billion, compared with a 5 percent gain last year. Shoes and family clothing sales should rise 3.5 percent while books will be up only 1.5 percent.

The modest growth in Back-to-School sales mirrors what is happening with the economy in California and across the nation. No one is going to go gang busters.

The UCLA Anderson Forecast foresees slow growth in California until the end of the year. UCLA Anderson Forecast senior economist Jerry Nickelsburg said real personal income should inch up 1.7 percent this year, 3.3 percent in 2012 and 3.8 percent in 2013. State unemployment figures will come down but won’t drop below double digits until the second quarter of 2013.

Southern California’s underlying problem continues to be the housing industry. The region’s median home price fell 8.2 percent in May from the same month last year. Nationwide, home values dropped 4.3 percent in the first quarter.

Going forward, economists expect a younger demographic to occupy more condominiums and apartments than houses. That translates into less employment in the housing industry because fewer workers are required to build multi-unit structures than houses.