If you’ve been to a lunch meeting, a cocktail reception or most any
gathering of business people in Los Angeles in the last few weeks,
you’ve probably talked about the economy.
Suddenly, it seems, everybody’s asking: Is the economy really recovering? Do you see a turnaround in your business?
The picture is jumbled partly because economic forecasts now are highly
politicized. Liberal organizations and individuals are trumpeting a
Great Recovery, while conservative ones are dismissing any alleged
comeback as too meek or as a temporary bounce. Those divergent stances
are understandable since the economy may play a big role in the
critical elections this fall.
But if you put aside the politics of it and just focus on the numbers,
you have to acknowledge this: There’s some good stuff stirring around
out there.
Just look at the latest national numbers. The March employment report
was bracing. Chain store sales for the year ending in March were up an
eye-popping 10 percent. Consumer confidence is rising. What’s more,
commodity prices are booming on the prospect of increased demand,
corporate profits are strengthening, and the major stock indexes are up
40 percent or 50 percent from a year ago.
Local numbers are improving, too. In February, we had 76,000 more
people employed in Los Angeles than the prior month. Container traffic
at the ports in February was way up from a year earlier. Hotel
occupancy in January was up 10 percent from the previous year. Prices
of local stocks, as measured by our LABJ Index, are up more than 50
percent in the last year.
Not all is rosy, of course. Commercial real estate continues to be a
nail-biter. Unemployment remains frightfully high. And small businesses
are suffering. In fact, the National Federation of Independent Business
last week reported that only 18 percent of entrepreneurs in March saw
the economy improving enough to help them, down from 26 percent in the
fall.
But recoveries always start out unevenly. Besides, unemployment is a
lagging indicator, since most businesses won’t add to their payrolls
until they’re convinced they can’t make it without another employee.
Likewise, unfortunately, many (certainly not all) small businesses lag
the overall economy; they won’t see much improvement until the recovery
is well under way.
I’m no economist, but if you add all this up, it takes no genius to
conclude that it appears that a solid and broad recovery is taking
root. And conservatives who trash it are in the stupid position of
rallying against an economic rally. It’s like whining that the rescue
party that’s finally come for us may not be dressed properly.
But liberals who trumpet the recovery as some kind of political
vindication are whistling past the graveyard. After all, their
financial mismanagement has created almost unimaginable public-sector
budget problems – in Washington, Sacramento and Los Angeles. Those may
well lead to much higher taxes, including higher electricity rates in
Los Angeles, since a part of your electricity bill is a tax bill in
thin disguise.
And taxes, if hiked enough, will kill or throttle back any economic
recovery. That makes this budding recovery unlike the early ’80s, when
lowered tax rates cleared the way for businesses to invest and take
risks with confidence.
And those taxes, if hiked high enough, will quickly transform what’s
shaping up to be a V-shaped recovery into a W-shaped one – one that
includes another recession.
Charles Crumpley is editor of the Business Journal. He can be reached at ccrumpley@labusinessjournal.