Amazon’s Bad Impact? Overblown

Charles Crumpley
Editor and Publisher of the San Fernando Valley Business Journal

I was taken aback when the local response seemed to be “Whew! We’re sure relieved Amazon decided not to open its second headquarters here.”

That reaction, as best I can tell from various reports, derived from the notion that the addition of 25,000 Amazon workers would worsen our already stifling traffic, pressure home prices higher and provide too big a jolt to our economy.

As an example of those exhaling with relief, take Christopher Thornberg of Beacon Economics. He told the Los Angeles Times his immediate reaction to Amazon’s decision to open two new headquarters on the East Coast and not here was “Thank God.” We already have record low unemployment, skyrocketing housing costs and horrendous traffic, he opined, and yet we wanted to drop thousands of “overpaid techies into the middle of this?”

Really? Do we want to turn our back on a slug of good jobs? I, for one, would have loved to see thousands of overpaid techies drop in.

Besides, the supposed bad impact on traffic, housing and jobs was way overblown. Let’s get back to that in a minute.

For the sake of argument, let’s assume that if Amazon had picked Los Angeles for one of its new headquarters, it would have picked Woodland Hills. After all, Woodland Hills has an urban-light vibe and it has gotten city approval to develop as a kind of downtown to the San Fernando Valley, so it’s already projected to be a high-density zone. And it has at least two prime sites: The almost-dead Westfield Promenade shopping mall with 34 acres, and the former Rocketdyne property with 47 acres a few blocks northeast of the Promenade. (The Rocketdyne property, cleared and ready for its next chapter, was promoted by City Councilman Bob Blumenfield last year as a potential spot for Amazon.)

The city of Los Angeles has been kind of dodgy about exactly what areas it was suggesting to Amazon, but the Fairplex in Pomona was widely cited as a top prospect. However, the allure of the immense 400-plus acres at the Fairplex was diminished once Amazon decided to split its second headquarters in two smaller pieces. And while the San Gabriel Valley is a perfectly fine place and everything, well, let’s put it this way: Do you see Jeff Bezos standing in front of his youth- and tech-oriented workforce and triumphantly declaring: “You’re moving to Pomona!”

So what impact would Amazon have had in Woodland Hills? I submit that it would have been noticeable but not overwhelming. Not near it. Why? Because when a company relocates, it typically hires about 70 percent of its employees locally. In other words, most of the “new” Amazon workers would be here anyway, presumably already driving here and already living here. That’s a fact often overlooked.

Let’s be conservative. Let’s say Amazon had moved to Woodland Hills but only hired 60 percent locally and imported the other 40 percent from headquarters in Seattle. Do the math, and you’ll see that means 15,000 locals employed and 10,000 Seattle workers imported to Woodland Hills.

What kind of impact would that have? To put it in perspective:

10,000 new cars represent about 25 minutes worth of traffic on the 101 Freeway at DeSoto Avenue, according to Caltrans figures.
10,000 homes purchased would almost exactly equal the unsold inventory of homes in Los Angeles County in September, according to Redfin. In other words, 10,000 homes listed for sale in September in Los Angeles were not sold and need buyers.
The 15,000 local workers who would have been hired represent only 15 percent of the 100,000 workers looking for a job in the city of Los Angeles in September, according to stats from the state’s Employment Development Department. What’s more, if Amazon magically could have hired those 15,000 from the ranks of the unemployed in September, L.A.’s unemployment rate would have dropped from 4.8 percent to 4.1 percent – equaling the state unemployment rate but still above the U.S. rate of 3.7 percent.

In short, the impacts would have been noticeable, sure. But not overwhelming. Los Angeles is big enough to absorb the additional people. And it would have been nice to get an influx of well-paid workers and all the social benefits they bring. Not to mention the secondary jobs from vendors, suppliers and the like.

Net, net, Amazon would have been a great addition to L.A. and particularly the Valley area. We should be bummed, not relieved.

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