Over the past two years, the Los Angeles economy has steadily lost momentum. This observation is based on the fact that, after hitting a peak of +2.1% year over year in June 2006, the rate of job creation in the City of Angels has steadily slowed due to weaker growth of employment in construction, financial services, information services and trade and transportation services.

In the wake of the implosion of one of the hottest housing markets in the country and given that California's exposure to sub-prime mortgage foreclosure risk is very high, it is not surprising that construction employment in Los Angeles has fallen by 10,700 jobs over the past twelve months. This has accounted for approximately two-thirds of the 15,100-job drop in total employment.

In addition, persistent problems in the entertainment industry stemming from the strike by the Writer's Guild and the suspension of studio productions pending a contract settlement with the Screen Actors Guild have taken an estimated $2.5 billion out of the metro area's economy, contributing to a 6,200-job decline in employment in information services.

Looking ahead, the prospects for the Los Angeles economy are likely to continue to be challenged into 2009 by the effect of persisting tightness in credit conditions in the wake of the collapse of the sub-prime mortgage market and by uncertainty regarding the timing of a resumption of studio productions following a Screen Actors Guild contract agreement.

Midway through 2009, the effect of an easing of credit conditions and of a resumption in studio production should help to stabilize housing demand and contribute to a strengthening of consumer spending. In the meantime, the L.A. economy should continue to benefit from strong growth of exports, ongoing spending on a number of major projects, including major upgrades to LAX airport, the extension of the Gold Line to East Los Angeles and sustained growth of international tourism.