Clouds Gather As Strong Local Economy Heads Towards Fourth Quarter

Published : Monday, September 2, 2019 | 10:06 AM

People who both think about, and drive, Pasadena’s economy see a local situation reflecting national indicators of strong growth tempered by concerns over the nation’s trade war with China and looming recessionary clouds.

“I would expect retailers to be very cautious this holiday season,” said Pasadena Chamber of Commerce President and CEO Paul Little. “No one can anticipate the impacts the trade war with China, and other trade disagreements may have on the cost of products.”

Unknown, he added, is whether increased talk of recession in the near future will impact consumer spending.

Steven Edward Marcus, executive director, Cushman and Wakefield, deemed the local economy to be growing and robust.

“It all begins with capital,” stated Marcus, “and we see lots of money coming into the city. We have investors from San Francisco and New York buying our buildings.”

By way of example, he highlighted the $100 million being spent developing a project at Parsons and acquisition of the old Avon plant in East Pasadena.

“Home Depot paid a record price for the land,” he explained. “They paid twice what they thought it was worth, and are putting up a new store that’ll pump a ton of retail sales tax dollars into the City of Pasadena.”

Pasadena, and environs, were perhaps the hardest hit by the recession of 2008, he said.

“We are repairing the economy,” Marcus enthused. “We replaced all those jobs, finally, and we’re replacing them with higher earning positions. First they were replaced with service jobs, and now we have Disney and Netflix and Hulu and Spotify — I could go on — hiring thousands of people.”

Michael Alexander, founding President of TEAPAC, the largest Tea Party organization in Southern California and Managing Principal, private Trust Management Group was less sanguine.

“The real question is whether we’re doing as well as we ought to be doing,” he said in an interview. “And the answer to that is no.”

The greatest impediment to economic growth in California, he said, is excessive regulation, followed by excessive taxation, which can be seen at both the state level and local levels.

“And that includes the City of Pasadena and the County of Los Angeles where it is very difficult to comply,” said Alexander.

Local businessman and accountant Ishmael Trone confesses to being very wary of recessionary forecasts.

“If the recession actually does take place,” he said, “then we’re looking at local businesses having a slow growth rate, which could cause our local economies to start slipping backwards and get weaker over the next couple of years.”

In his own business dealings, Trone said, the tariff war raging between the United States and China is palpable in the large percentage increases in the costs of, for instance, of building materials.

“The tariffs on China have suppliers increasing their prices 25 percent to 30 percent, which is really going to hurt consumers out there,” he informed.

The psychology of recession has already begun to take hold, according to Trone.

“You can see it right now in the real estate market, even though the interest rate was reduced recently, sales are starting to slow down,” he observed. “Investors are starting to get leery, and there’s talk of it slowing down too.”

In April, the Los Angeles Economic Development Corporation (LAEDC) published an economic forecast and regional overview for the San Gabriel Valley which predicted local progress mirroring that at the national level, with similar caveats expressed by local stakeholders.

“Although challenges remain, including the regional housing crisis and rising international trade risks, the fundamentals look quite strong for the region,” the report said.

In 2018, San Gabriel Valley employment increased beyond the pre-recession peak in 2008, to an estimated 697,000 payroll jobs.

With a “full-employment economy” in evidence there isn’t too much “up” for job growth to go and, as such, it should remain “modest,” according to LAEDC.

In 2018, wage and salary payrolls were up 3.7 percent over the prior year. Total nonfarm payroll is projected to increase in 2019, “on the back of tightening labor market driving real wage growth.”

Taxable sales in the valley have regained the ground lost during the recession and the San Gabriel Valley housing market has improved but obstacles remain.

“Median prices for existing homes continue to rise in response to limited supply and increased demand, but after years of price increases and anemic real wage growth, affordability continues to be an issue for many would-be home buyers,” according to the report.

It is anticipated that mortgage rates will increase incrementally, as inflation ticks upward, making home loans more restrictive for those with limited household economies.

“New home construction has been even slower to recover but rising median prices and a lack of inventory are finally providing builders with the incentive to initiate new development projects,” LAECD noted.

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