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San Fernando Valley’s Economy has Grown at Robust Rates, CSUN Report Says

(NORTHRIDGE, Calif., Oct. 27, 2006) -- The San Fernando Valley’s economy grew at robust rates during the last two years, according to a new study issued today by Cal State Northridge researchers.

The ninth annual San Fernando Valley Economic Report, issued by CSUN’s San Fernando Valley Economic Research Center at the Valley Industry and Commerce Association’s Business Forecast Conference, takes a comprehensive look at the area’s economy, taking into account its demographic make up and its impact on current employment and payroll conditions. This year’s report takes a special look at the Valley’s health care industry, particularly hospitals and long-term care facilities.

"The Valley’s health sector merits special attention—not only because of its place as the area’s third largest employer, but because it directly serves the well-being of Valley residents," said Northridge economics professor Daniel Blake, director of the center.

Overall, Blake said, the Valley’s economy grew at healthy rates during the past two years, producing roughly 2 percent more jobs each year. "The outlook is for Valley job growth to moderate to sustainable rates of around 1.5 percent a year," he said.

Blake said the San Fernando Valley, long considered a "bedroom suburb of Los Angeles," has emerged as a "fully ‘balanced community’ with an integrated economic base that employs a workforce roughly equal to the number of its employed residents."

More than 1.8 million people live in the San Fernando Valley, an area bounded roughly by the Santa Susana Mountains to the north and west, the Santa Monica Mountains to the south and the San Gabriel Mountains to the east. The report noted the Valley’s population continues to grow, but at a slower rate, about 1 percent a year. In the past, the area’s average growth was about 1.2 percent annually. Regardless of the slower rate, that growth translated into 16,400 more people in the Valley at the beginning of 2006 than were here a year earlier.

In the area of employment and payroll, the report indicates that the Valley’s "job creation machine" cranked out 1.9 percent more jobs in 2005, surpassing Los Angeles County in job growth.

"The Valley’s payroll climbed 5.2 percent, but inflation’s bite left less than 1 percent in real payroll growth," the report said. "Average earnings rose 3.2 percent, but inflation took that wage increase and then some."

The number of information industry jobs continued to grow in the area, as did most other industries, but the number of manufacturing jobs continued to decline.

San Fernando Valley unemployment insurance claims bottomed out in December 2005 and returned to normal seasonal patterns in 2006. The report said the Valley’s overall job growth took a "big bite" out of the unemployment figures, with seasonally adjusted unemployment claims currently below the lowest level recorded during the Valley’s 1995-2000 economic recovery.

Entertainment industry jobs rolls expanded by 2.2 percent in 2005, according to the report, while payrolls shot up by 5.4 percent, boosting the average worker’s annual earnings to $80,300. The entertainment industry supplied more than one out of seven of the Valley’s private-sector jobs, and $1 out of every $4 of the private-sector payroll in 2005.

The broadly defined retail/trade sector is the largest employer in the San Fernando Valley, and its growth slowed to less than the area’s average for the first time in three years, the report said. While retail sales grew by almost $1 billion in 2005, all but about $200 million was eaten by inflation. Calabasas has the area’s highest per capita retail sales, followed by San Fernando with the City of Los Angeles portion of the Valley accounting for the lowest sales.

Job losses continued in the manufacturing sector, though at a slower rate. Nominal wages rose 2.2 percent in 2005, but high inflation reversed the gain and pushed real wages down by 2.1 percent. Manufacturing’s payroll held steady in nominal terms in 2005, but fell 4.2 percent in real terms. Relative to 1991, real wages were up by 8 percent, but real payroll was down by one-third.

Small business loan activity continued to grow in the San Fernando Valley, with loans to businesses with less than $1 million in gross revenues growing at an "impressive" 34 percent in 2005, the report said.

In the report’s special health care section, researchers noted that the health care sector is the Valley’s third largest employer with more than 80,000 jobs, and those jobs are growing at a 5.4 percent annual rate from 2001 to 2005.

The Valley lost one hospital and a few hospital beds in 2005. The occupancy rate for the remaining beds moderated slightly last year. However, collective operating costs for hospitals exceed operating revenues for the fifth consecutive year, "possibly jeopardizing the availability of hospital services at a time when the population is aging," Blake said.

The number of long-term care facilities dropped in 2004, as did the number of beds, the report said. The occupancy rate on the remaining beds rose and the sector returned to profitability in 2004 as collective operating revenues exceeded operating costs.

The reported noted that roughly two-thirds of long-term care patients are female, and most long-term care patients have relatively short stays. Skilled nursing services account for 90 percent of patient care.