Influences on Labor in the Post-Pandemic Era – California and Los Angeles County

Pam Sornson, JD

July 18, 2023

Even in light of the economic, social, and political upheavals of the past few years, there remains in California an optimism that this moment presents more opportunity than oppression. Foreign investment levels are rising after a dip during the pandemic. Federal and state investments promise both more jobs and an improved infrastructure. Unemployment figures show that the State has reached its pre-pandemic level, and the overall employment picture continues to improve. In Los Angeles County, data suggests there is also reason to believe better days are ahead.

California’s Economic Future

An underpinning foundation of the State’s future growth is the recent investment by both its government and the federal government in California-based projects. The ‘feds’ have noted the State’s unique economic attributes and opportunities and are helping to revamp those in anticipation of future development expectations. The 2021 federal ‘Bipartisan Infrastructure Deal’ (aka the Infrastructure Investment and Jobs Act (IIJA)) aims at (finally) rebuilding the country’s crumbling transportation and utility frameworks after decades of neglect.

The State’s transportation network gains the most federal support:

Its bridges, roads, and railway projects will see a cash injection from the feds of almost $5B ($4.938B).

Ports and waterways will receive another $10M, which will offer some response to the pandemic-driven crowding at both the Los Angeles and Long Beach ports. These adjacent shipping destinations combine to form the 10th largest port system in the world.

Support for ‘active‘ (human-powered – walking, cycling, etc.) and public transportation services will amount to almost two billion dollars ($1.962B).

The conversion to electric vehicles will grow with the support of $57M federal dollars aimed at an infrastructure for electric cars, ferries, and buses.

Responders to the environmental challenges that were prevalent throughout the state (drought, wildfires, and floods ravaged many communities) will share $228M in federal aid to alleviate those problems and build back solutions.

Public safety also nets a gain of $331M, aimed at improving drivers’ safety on California’s many highways and roads. So far, the IIJA accounts for more than $3.25B in recent investments, which, in turn, is responsible for creating over 42,300 jobs.

The ‘Build Back Better Regional Challenge‘ awarded California $67.1M in 2022 to assist disinvested communities with rebuilding efforts. As an aspect of the ‘American Rescue Plan,’ the grant was part of the $195M the State received to “catalyze new markets and technologies [that drive] shared prosperity … [and] unleash state and local innovation … .”

California itself is investing heavily in its own future. It allocated $54B over ten years into its transportation network through Senate Bill 1, the ‘Road Repair and Accountability Act‘ of 2017. Fiscal year 22-’23 will see a road-building budget of $1.6B from this source and another $8B for improvements in its logistics and product transportation sector.

LA County’s Economic Future

As home to almost ten million people, Los Angeles County’s population is bigger than that of 95 countries. Its ~4,000 square miles support a multitude of industries and nearly 300,000 businesses. Accordingly, its economic future is more about its specific metrics than it is about its connection with other states.

That distinction explains some of the anomalies that show up in LA County’s current economic analysis.

On the Downside:

Unlike the rest of the state, the County still struggles with an employment gap of about 25,000 vanished jobs, primarily in the hospitality, leisure, manufacturing, and wholesale trade industries. Other sectors, in contrast, are doing well after the pandemic; the education, health services, and professional & business services sectors have experienced ‘robust’ growth in the past year.

Tourism remains down, too. LAX data indicates that international and domestic traveler numbers remain at ~75% of pre-pandemic levels. Fewer travelers from China are just one influence that continues to suppress this industry.

Also weighing on county leadership is the exodus of Californians to other states. The California Department of Finance reports that approximately 300,000 people have left the state since 2019 and that the City of Los Angeles has been home to more than half of them.

One reason for that departure is that LA County has the highest number of impoverished households in the nation and the worst income inequality in Southern California. Consequently, inflation, job losses (for any reason), and industrial advances that leave these populations behind all add additional barriers to finding their ‘new’ future.

Other trends in LA County are also notable because of how they impact the region’s capacity to fully recover from the pandemic and its consequences.

Housing affordability has caused serious pain for thousands of county residents who can’t afford a single-family home’s now-typical ~$975K price tag.

The shift to remote work is also impeding economic progress, especially in urban areas that usually host several thousand people on a daily basis (‘daytime occupancy’). These mostly-business districts were also home to restaurants, hotels, and other ancillary agencies, many of which closed for lack of business during and after the pandemic.

Compounding the daily occupancy issue is the correlated real estate vacancy rate. In LA County, vacancy rates for office space are approaching 16%, up from ~10% in Q1 2020.

Taking into consideration all the economic and industrial elements that drive the development of a regional ‘domestic product’ calculation, LA County is expected to experience a slight economic contraction over the next two years as these circumstances continue to drag on efforts toward growth.

On the Upside

Despite continuing low employment numbers in some industries, job hiring numbers are growing beyond pre-pandemic levels in others. Organizations doing business in natural resources, mining, construction, business services, information, education, and health services have surpassed the employment levels they established in 2019. Many of these sectors – education and health services, in particular – will continue to see growth in the future. As well, transportation and infrastructure projects in and around Los Angeles County are receiving $368 million in federal funding in Fiscal Year 2022/23 to support $1.7 billion in public development projects, which will add to the County’s overall employment rate.

Incoming funding support gives State and County leadership teams tools and resources to build novel and comprehensive solutions to the challenges that have arisen in the past three years. At the same time, governments are working closely with regional and local agencies to incorporate resources that address emerging future demands, such as technology connections and training. The conversation about California’s ‘future of work’ continues to expand as more perspectives come to the table and more organizations join the endeavor.