Economic Updates

Weekly Report – August 17, 2015

What the latest United States Unemployment Figures Tell Us About Jobs in the U.S. and Los Angeles County 

• The U.S. Labor Department reported the average number of Americans seeking unemployment benefits hit a 15-year low last month.
• Applications for jobless benefits rose 5,000 to a seasonally adjusted 274,000 last week. But the less volatile four-week average dropped 1,750 to 266,250, its lowest level since April 15, 2000.
• The bigger story includes a significant drop in unemployment, an increase in full-time hires and a decline in worker productivity in recent years, which typically comes late in an economic expansion, signaling the need for more hiring.
• The share of U.S. employees working part time has declined to 18.3 percent and is approaching the long-run average of 18 percent.
• S. employers added 215,000 jobs in July and the nation’s unemployment rate remained at a seven-year low of 5.3 percent.
• The U.S. economy has generated 5.6 million jobs in the past two years, but the steady job gains and falling unemployment rate have yet to fuel a meaningful boost in wages. Average hourly pay increased just 2.1 percent in July to $24.99 from $24.47 a year earlier. That was well below the 3.5 percent to 4 percent gains that have historically occurred in healthy economies.
• A recent report for June from the state Employment Development Department showed that Los Angeles County added 106,500 jobs over the year at a rate of 2.5 percent, while the county’s jobless rate dipped to 7.4 percent. What remains most important is growing more quality jobs in the region, something that the region continues to lack.

Port of Los Angeles and Port of Long Beach

The port of Long Beach set a record volume for July, moving the most containers in its 104-year history, while at the same time, the amount of container imports at the port of Los Angeles fell 3.5 percent. The amount of loaded import containers at Long Beach shot up 16.2 percent this last July, while loaded exports were up 15.9 percent year over year. This is partial good news – since the West Coast ports’ slowdowns earlier this year, the ports’ customers have remained leery of the port’s ability to not impede the flow of trade. For now West Coast ports remain a top destination for shippers because it is the most efficient and economical way to transport cargo from Asia. The decline in the port of Los Angeles’ traffic should be of concern. Long Beach Port Chief Executive Jon Slangerup attributed his record-setting volumes to a resurgence in confidence of shippers and the collaborative efforts of the ports of Long Beach and Los Angeles to address delays and his port’s investing $4.5 billion over the next five years in operational and infrastructure improvements to further increase capacity. The inbound container volume at the ports generally has been an important indicator of retail industry confidence in the back-to-school and coming holiday sales season. But labor strife at West Coast ports over the past year muddied the picture for the port business as many big importers shifted their goods to Gulf Coast and East Coast ports. Combined, the two ports of Los Angeles and Lon Beach, saw an increase of just 3% year-over-year in loaded imports and exports. Meanwhile, ports on the East Coast including New York-New Jersey, Savannah, Ga., and Norfolk, Va., have reported record cargo volume in recent months. Last week’s L.A. Coalition weekly may provide some of the answers to L.A.’s decline and the need to change their ways, especially in light of the ongoing Trans-Pacific Partnership discussion in Washington, D.C.

The Trans-Pacific Partnership

The Trans-Pacific Partnership (TPP) offers tremendous opportunities for U.S. exporters.  TPP members comprise a population of roughly 800 million and these dynamic economies generate nearly 40 percent of global GDP. The United States already has strong trade and investment ties to this region; we exported $697.8 billion in goods to all TPP markets in 2013, or about 44 percent of total U.S. exports, and are seeking through TPP to further deepen our economic relations.

California Depends on World Markets

California’s export shipments of goods in 2013 totaled $168.1 billion.  California exported $71 billion annually in goods to all TPP markets (2011-2013 average). During this period, 43 percent of California’s total goods exports went to the TPP region. The top three product categories exported to TPP-member economies in 2013 were computers and electronic products, transportation equipment, and machinery manufactures.

Goods Exports Support Jobs for California Workers:  Jobs supported by California’s goods exports were about 787,000 in 2011 (latest available data) according to a USTR estimate based on U.S. Department of Commerce data.  In 2011 (latest available data), one-quarter (25.2 percent) of all manufacturing workers in California depended on exports for their jobs. Additional jobs also are supported by California’s exports of services, although there are no available data on this.

Goods Exports Sustain Thousands of California Businesses:  A total of 75,012 companies exported goods from California locations in 2012 (latest available data).  Of those, 71,921 (95.9 percent) were small- and medium-sized enterprises, with fewer than 500 employees.

California Small and Medium-Sized Firms Will Benefit From Trans-Pacific Partnership FTA Provisions

Small- and medium-sized firms generated over two-fifths or 44.6 percent of California’s total exports of merchandise in 2012 (latest available data).  Small- and medium-sized firms benefit from the tariff-elimination provisions of free trade agreements, as well as many of the other commitments in the agreement.  Trade facilitation, for example, is vital to small- and medium-sized firms, as is enforcement of their intellectual property rights, streamlining of regulatory issues, and other commitments.

Note: The Asia Pacific Region is defined as APEC countries; TPP partner countries are Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam.

Sources: U.S. Department of Commerce; U.S. Trade Representative.

Public Transit

L.A. Metro receives $100 million in federal funds for regional connector transit project. This federal funding represents the second installment of funds disbursed for this project, consistent with the Full Funding Grant Agreement with the United States Department of Transportation, that committed a total of $669.9 million for this project. The Regional Connector has also received a commitment from the USDOT for a $160 million low interest Transportation Infrastructure Finance and Innovation Act loan.

L.A. Metro receives $100 million in federal funds for Westside Purple Line Extension (Section 1). This federal funding represents the second installment of U.S. Department of Transportation (USDOT) funds disbursed for this project, consistent with the Full Funding Grant Agreement that committed a total of $1.25 billion to section 1 of the Westside Purple Line Extension. The USDOT is currently considering documents related to our efforts to secure a second FFGA in the amount of $1.18 billion for section 2 of the Westside Purple Line Extension.

Impact: $14 billion being spent in the region and tens of thousands of jobs being created.

Trade & Commerce 

The future of the federal EB-5 Immigrant Investment Program is in doubt. Under the program, a foreigner and his or her immediate family are eligible for U.S. permanent residency if the individual invests $500,000 in a project in an area of high unemployment that generates at least 10 jobs. Participation offers a quick path to a green card, in less than a year for some applicants, which can take a decade to obtain through a U.S. employer or relative. Nationwide, the EB-5 program has yielded $2.6 billion of foreign direct investment in the U.S. since the program’s inception in 1992 and created over 41,000 US jobs. The program has been used extensively to fund public infrastructure project using municipal bonds in the United States and it has supported a wide range of California business and infrastructure projects that required funding to move forward during the state’s long economic downturn when other capital sources were unavailable. Congress must act to re-authorize the program by September 30th to avoid disruption.

Further Insights

• The program, launched in 1990 to spur job growth, had just 486 applications in 2006. Since then of the 10,000 EB-5 immigrant visas available each year, the U.S. Citizenship and Immigrations Services reserve 3,000 for EB-5 immigrants investing through regional centers.
• In 2010, 2,480 of the 10,000 available EB-5 visas were issued, down from 3,688 in 2009. In all, 10,928 foreigners applied to invest in the U.S. through the program in the fiscal year ended Sept. 30, up more than 70% from 6,346 a year earlier. Some critics say the program benefits richer areas instead of the intended rural and urban poor, and that it amounts to putting U.S. citizenship up for sale.
• Return on investment is secondary for many Chinese, who tend to focus on the opportunity to enroll their children in U.S. colleges that eventually can lead to jobs here, experts say, and choose to invest in large projects that are managed by others. Many children of Chinese investors are graduating students who anticipated staying in the U.S. after completion of college and now face a two-year wait. Many of them will have to leave and wait back home until they are eligible to immigrate.
• Many Brazilians have started their own small EB-5 projects, such as assisted-living facilities, day-care centers and restaurant chains. They want to control their investments.
• From the Gulf region, investors are often Indians who have built lucrative careers or businesses in Dubai but aren’t entitled to citizenship there. The program enables them to settle in the U.S. when they retire.
• China, the main driver of the program’s growth, represented about 80% of the entrepreneur petitions in 2014, and U.S. consultants continue to target that country.
• Because of the program’s popularity there, Chinese applicants for EB-5 visas now face a nearly two-year wait to obtain them and that wait is likely to grow.
• The backlog of investor applications that the U.S. is yet to process has reached nearly 13,700 for all nationalities, as the number of investors from other countries climbs quickly.