Economic disparity will weaken LA County’s economy if recession occurs

Los Angeles County remains the leading economic engine for Southern California, but housing affordability and a growing wealth gap present significant long-term challenges against the headwinds of global economic uncertainty, according to a new economic report.

The report, released Thursday by the Southern California Association of Governments (SCAG) as part of its 13thAnnual Southern California Economic Summit, shows LA County having restored 91% of the 784,000 jobs lost during the early months of the COVID-19 pandemic, while growth in its economic output, as measured in per capita gross domestic product (GDP), continues to outpace the region as a whole. At the same time, the county’s poverty rate has climbed to 14.2%, and the 18.5% poverty rate for residents under 18 is the highest in the region.

“LA County’s strong post-COVID recovery is at risk of a slowdown over the next five years,” said Shannon Sedgwick, an Economist from the Los Angeles Economic Development Corporation. “The deep socioeconomic inequities spotlighted by the pandemic remain, and are now seen in the form of lower income households disproportionately feeling the effects of inflation.”

Sedgwick is part of a new Economic Roundtable convened by the SCAG – which hosted the Summit in downtown Los Angeles – to provide both a snapshot of the region now as well as a preview of economic opportunities and challenges ahead. Their research was compiled in a report that offered caution on turbulence ahead from global forces, but also promise that Southern California is better positioned than other regions to withstand it.

Among the factors that could moderate the impacts of a possible recession across the six-county SCAG region:

• Continued growth in core industries such as information, logistics and tourism
• Measurable increases in labor productivity in 2022
• New development and construction in infrastructure and housing, both public and private
• Household debt and real estate values that are less likely to decline than elsewhere

“With improvements in the global inflation picture, combined with continuing 2022’s positive momentum, the region’s economy raises hopes that the much-anticipated global recession of 2023 will not severely impact Southern California,” said Dr. Gigi Moreno, Senior Economist at SCAG.

However, threats do remain. In Los Angeles County, a deepening wealth gap is among the biggest challenges, exacerbating the impact of inflation and high interest rates on the county as a whole.

“If a national recession occurs, it will slow Los Angeles County’s local economy,” Sedgwick said, noting that real GDP growth in the county is expected to slow to 2.9 percent in 2022 and 1.3 percent next year.

Click here for the complete Southern California Economic Update.