What's in store for the Southern California economy in 2021

Don Simkovich

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Silicon Beach, the nickname for the Los Angeles beach neighborhoods of Venice and Playa Del Rey, bring to mind trendy coffee shops and younger tech workers pulling in nice salaries. San Diego’s health and tech sectors seem immune to economic downturns, but inland counties reveal a different story with some of the highest unemployment rates in the United States.

What’s really happening with the Southern California economy?

Expect Covid-19 to continue having a negative impact on the regional and state economies early in 2021, according to a recent report from UCLA’s Anderson School. But a stronger economy is expected to emerge in the spring.

About 1.9 million non-farm jobs have been lost in the state since late 2019 and the economic sectors hit hardest include leisure and hospitality, retail and education.

The Anderson school report that was released in December 2020 projects that technology, residential construction and logistics will be the leaders in California’s economic recovery. A rosy projection is made: look for California’s post-pandemic economy to grow faster than the United States as a whole.

That's hard to believe in the present moment.

In Los Angeles County, more than 140,000 small businesses have applied for economic relief, as reported by the Institute for Sustainable Development and its program Together LA in partnership with the Los Angeles Economic Development Corporation (LAEDC).

The county’s unemployment reached a peak of 21.1% in May 2020, a staggering number compared to the 3.9% unemployment rate a year earlier in May 2019 as reported by the state’s Economic Development Department.

Other counties faced similar spikes in job loss and unemployment:

May 2019 unemployment compared to May 2020

Orange County 2.4% climbing to 11.9% in May 2020

San Diego County 2.8% rising to 15%

San Bernardino 3.3% reaching 13.4%

Riverside 3.6% heading up to 15.3%

Kern 7.2% reaching 18.6%

Ventura County from 3% to 14%

Imperial County 16.4% peaking at 28%

Jobs and unemployment stabilized in November 2020 (the latest figures as of this writing)

Los Angeles County 10.6%

Orange County 6.4%

San Bernardino 8%

San Diego 6.6%

Riverside 7.8%

Ventura 6.3%

Kern 9.4%

Imperial 16.4%

The food service industry has been hit especially hard. The California Restaurant Association (CRA) notes that before the pandemic there were 1.4 million Californians working in the restaurant industry. From March 2020 to the end of summer, over 900,000 had been furloughed or lost their jobs.

The CRA estimates that 60% of the state’s restaurants are owned by people of color and half of the establishments were either fully owned or partly owned by women.

Small businesses can get ready to apply beginning February 2, 2021 for financial help through the California Small Business COVID-19 Relief Grant Program. The grants range in size from $5,000 to $25,000. There will be two rounds of grants issued under this program, each funded with $237.5 million.

Applications are available at Care Relief Grant.com. It’s necessary to apply through partner organizations organized by counties.

Will the vaccine improve economic conditions?

The vaccine is rolling out at sites like Dodger Stadium and Disneyland to health care workers, staff in skilled nursing facilities and the elderly. But one economic consultant is wondering if this will help businesses reach conditions that Southern California and the state experienced before March 2020.

“There is an emerging narrative that after receiving both vaccine doses, we will still need to wear masks and social distance. What?,” asks Mark Schniepp of California Forecast.com.

He quotes public officials who have stated that, “We don’t know whether a vaccine prevents asymptomatic infections and if there’s still the possibility that a vaccinated person could transmit the virus without knowing it. Because there’s still a chance that you could be a silent carrier even after getting vaccinated, wearing a mask, practicing social distancing, and handwashing all remain important.”

Schniepp suspects economic growth will be slower than most predict. “If this is true and mask and distancing policies are still widely enforced, it’s probable that restrictions on businesses will also remain largely in place even after much of the population is vaccinated.

I’m just guessing but in view of the very cautious approach we have observed in California since July regarding limited business openings, a continuation of a regime of restrictions for much of calendar 2021 would not be surprising.”

For those who are projecting an upswing, why might tech lead to a rebound?

The LAEDC refers to Los Angeles County as “the creative capital of the nation. As an example, many high-tech businesses are growing where there is a confluence between aerospace and entertainment, gaming and animation, content development and distribution, arts and content.”

Sectors are in clusters while tech itself supports a variety of industries. From software development in finance, to programming in gaming and other uses technology is resilient.

During the first months of the pandemic when businesses were furloughing workers, tech companies were hiring as noted by Dot.LA.

Some free resources for business owners and solo entrepreneurs needing to recover and reinvent are accessible through LAEDC in the form of free webinars. Topics include building an online store and growing online sales, smart business recovery strategies and finding new business in procurement.

The business climate has certainly become more challenging to thrive in Los Angeles and surrounding counties, but opportunities still exist. Here are some tips to follow:

  • Keep your current customers satisfied and stay in touch with either occasional phone calls or newsletters—either electronic or physical mailings.
  • Use a multi-channel approach for marketing like social media, direct mail and connecting with local chambers of commerce. Think of this approach like columns that support a building. The more channels you can organize efficiently then the stronger your marketing supports are.
  • Laser target your customers and see ways that you can innovate.
  • Look at strategies that companies have used to historically stay in business and thrive in tough times.
  • Keep positive relationships with your local banker in case you need a loan or need financing to see you through the next quarter or two. Re-structure loans and show how you’re working to stay in business and retain or expand market share.

Remember that you’re serving people so do what you can to help others succeed. Build up your people, whether that’s your employees or potential customers, and they’ll see you and your company as a leader. The resulting good will can lead to profitability and the ability to sustain an operation.

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I interview entrepreneurs, and dig into the news around Southern California, giving a voice to business owners, artists and more. I also co-write the thriller novel series Tom Stone Detective Stories.

Pasadena, CA
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