Daily Breeze (print edition): Region's jobs outlook is bleak for housing, finance and manufacturing

This morning I walked two big dogs by the north Redondo Beach post office and as I stopped to mail some letters (bailout protest letters to Senators Feinstein and Boxer, by the way) I found these headlines screaming at me from a newspaper machine:

THE NATION 4.4% Projected rise in inflation in 2008, the highest since 1990. 1.7% Projected rise in gross domestic product, the lowest since 2002.

LOS ANGELES COUNTY 0.1% Projected job growth for 2008, the lowest since 2003. 6.2% Projected unemployment for 2008, the highest since 2004.

ECONOMY IN DECLINE

Let's see what bubblelicious things the paper has to say.

According to this July 16 headline story by Muhammed El-Hassan, Jack Kyser, a local economist at the Los Angeles Economic Development Corporation, says of our local economy that "it is severely stressed." But he claims that Los Angeles County is doing better than our sister counties of Orange, Riverside, San Bernadino, and Ventura which "are all in recession."

Los Angeles County is expected to gain 8,500 new jobs in health services. The government is expected to add 6,000 jobs (perhaps to beat down those unruly customers standing in line at failed banks); science and technical jobs will add 5,000. But the housing market will cut loose of 10,000 jobs; finance and insurance will lose 5,000 jobs; manufacturing will lose 5,000 jobs. Aerospace will lose only a very small number of jobs - due to problems in the airlines industry related to high fuel prices. The increasing government focus on satellite technology will otherwise boost local aerospace.

I am a little skeptical of the job creation numbers for the simple reason that, even though housing prices are back down to roughly 2004, they remain sky high. And I'm certainly glad that satellite technology will contribute more to the area. With the clothing boutiques; aromatherapy shops; fortune tellers; yoga studios, and what-not in the area I really was starting to wonder just what this local economy does.

International trade has taken hits. Container traffic is expected to drop by 4.5% at the Los Angeles and Long Beach ports. Employment in the motion picture and television industry is expected to drop 3.8%, largely due to the writers strike. Hmm, that's quite a switch from what was happening just a few years ago. A rebound in this field is expected.

Anyway, Jack Kyser says things will be pretty bad until 2010. (And I think he's a bit of an optimist.)

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A related Associated Press article by Alex Viega, also on the front page of the Daily Breeze (and online, although probably temporarily) details the plight of a Torrance resident named Doug Gylfe who, despite a 23% drop in Torrance home prices, still can't afford a home. In 90505, where Gylfe lives, the median price of a home in 2006 was $830,000. It is now $636,000 and it is still unaffordable.

The article argues that any attempt to rescue the market merely props up prices and continues to make unaffordability an issue. Edward Leamer at UCLA chips in and says, "The folks who sat on the sidelines, they should feel legitimately annoyed that the more speculative folks who bought homes they couldn't afford are going to be bailed out by the federal government. And these other folks who acted responsibly and didn't get in over their head and decided they didn't want to buy the home, they are not getting any benefit."

The article discusses some of the initiatives that Congress is considering. And it reminds us that the traditional benchmark is that housing costs should not exceed 28% of a household's gross monthly income.

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I find it interesting that an old guideline is now being trotted out. It's part of a contraction trend back to more conservative valuations and measurements.

Remember how I was saying in an earlier post that a particular housing industry watcher left herself some wiggle room when she stated:

"If the bottom falls out of the economy and we have significant job losses, then everything will come down: home prices, rents, everything. That could take quite a while to work through."

That particular industry observer may be happy in the not-to-distant future that she left herself an out.

Remember it wasn't so long ago that some of these observers were trying to tell us that Los Angeles and California won't slump because of the strong employment base. We shall see.

Stay tuned.