Job creation could reach level not seen since dot-com boom.

Tourism, construction, commercial aerospace manufacturing and business services are expected to lead the most robust year for job creation in Los Angeles since the end of the dot-com boom, according to the semi-annual forecast issued last week by the Los Angeles Economic Development Corp.

Overall, the LAEDC predicts 38,000 jobs will be added to L.A. County non-farm payrolls in 2006, a 0.9 percent increase from 2005. About 9,500 of those jobs are expected to originate in the red-hot tourism sector, another 6,500 in construction and 5,800 in business services.

"We're seeing steady growth, though it could be better," said Jack Kyser, LAEDC chief economist. He said turmoil in the retail and entertainment industries as well as an anti-business environment in Sacramento are keeping the lid on what could be a spectacular jobs picture. "The economy is growing in spite of the policies in Sacramento," Kyser said.

L.A.'s strongest sectors are tourism and construction. On the tourism front, a rebound in the international tourism market, the 50th anniversary of Disneyland and the King Tutankhamun exhibit at the Los Angeles County Museum of Art all contributed to a record year of 24.9 million visitors in 2005, pushing hotel occupancy rates to a healthy 78 percent.

For this year, the re-opening of the Getty Villa in Malibu and continued strength in the international tourism market are expected to generate 26 million visitors spending more than $13 billion in L.A. County.

The only major threat looming this year for the sector is labor strife. Already a massive union organizing effort is under way around the 7,000-plus hotel rooms near Los Angeles International Airport; later this year, labor contracts at a number of downtown L.A. hotels will expire.

Over the longer term, industry officials say the county is still unusually vulnerable to a drop in tourists because most of the hotel rooms are skewed towards budget travelers.

"L.A. needs to create more higher-end hotel rooms and market them like crazy," said Michael Collins, executive vice president of L.A. Inc., formerly known as the L.A. Convention and Visitors Bureau.

Big projects

As for construction, the long-expected slowdown in residential real estate will be more than offset by the unusual number of massive commercial and public works projects now underway or expected to start later this year.

Among these projects: billions of dollars in school and community college construction projects, billions more in hospital retrofits and expansions, the $868 million Eastside light rail extension already in construction and the $680 million Exposition light rail project expected to get started later this year. Also, the $2.5 billion L.A. Live project next to the Staples Center--which will include a Convention Center hotel--broke ground late last year.

And these are just the projects already on the books. Others might be brought forward if Gov. Arnold Schwarzenegger is able to pass his Strategic Growth Plan of $68 billion in bonds for infrastructure projects throughout the state over the next decade. A billion dollars or more of this could flow into L.A. County this year.

While this is great news for construction firms, there's one major caveat: high materials and construction costs could force the scaling back, or even the postponement, of some of these projects. "It's something we're watching closely," Kyser said.

Meanwhile, the huge amount of capital flowing into L.A.-area private equity firms is keeping the local business and professional management service sector thriving. All those billion-dollar deals making recent headlines require financial consultants, lawyers and accountants. And engineering consulting firms have so much work with all the major projects in the pipeline that they can't hire qualified engineers fast enough.

In addition, ad agencies and media firms will be busy this fall as another expensive election season cranks into full gear: Schwarzenegget and his Democratic challenger will spend tens of millions of dollars in advertising on local radio and television stations.

On the down side is manufacturing, as it has been for years. Global pressures and high labor, energy and workers' compensation costs have hammered local manufacturers, which have shed 135,000 jobs since 2000 and 340,000 jobs since 1990. Last year, though, a boost in defense spending kept down the job loss total to 8,000 jobs, for a drop of less than 2 percent.

Cuts to some defense programs are expected to hamper the defense sector this year, but a hot commercial aerospace market should offset those losses, the LAEDC forecast said. "The orders are just pouring in for Airbus and Boeing," Kyser said. "This is good news for Boeing employees and all the local suppliers."

Indeed, only 3,500 jobs are expected to be lost in manufacturing in 2006, the first time the job loss rate has been less than 1 percent in eight years.

Further out, however, looms the potential shutdown of Boeing Co.'s C-17 cargo plane program, which would eliminate 6,500 jobs at Boeing's Long Beach assembly plant and thousands of other jobs at local suppliers.

The outlook is equally uncertain for the entertainment industry, according to the LAEDC forecast. While the forecast says 5,000 jobs should be added to the sector this year thanks to a continuing surge of cable television and commercial shoots, the growth could be much greater, Kyser said. Runaway production for motion pictures and a box-office slump are keeping a lid on growth.

"Other states are doing whatever it takes to lure these jobs away from us and we need to get into that game, too," Kyser said. He called film tax credit legislation now pending in Sacramento "crucial" to keeping the local motion picture industry healthy.

HOWARD FINE Staff Reporter

Building Activity

Big construction projects are boosting the L.A. economy

Project                                      Value (in   Completion
                                             billions)   date

Los Angeles Unified School District         $18.8       Ongoing
facilities (new and renovated)
LA Live (retail/hotel complex)               2.5         2008
Los Angeles Community College District       2.2         Ongoing
UCLA Medical Center                          1.7         Ongoing
'Port of Long Beach expansion                1.4         Ongoing
'LAX (Bradley Terminal, south runway)        1.3         Ongoing
', Kaiser Permanente hospital replacements   1.3         2007-08
Port of Los Angeles expansion                1.1         Ongoing
Grand Avenue project                         1.0         Ongoing
Gold Line Eastside Extension                 0.9         2009
County/USC Hospital replacement              0.8         2007
Exposition light rail (to Culver City)       0.7         2010
State Route 47 port access                   0.4         NA

Sources: Los Angeles County Economic Development Corp.;
Business Journal research