L.A. is paying a steep price for Villaraigosa's focus on a real estate-based economy

Joel Kotkin reports:

Ever since his election in 2005, Mayor Antonio Villaraigosa has been portrayed as a political comer with a future that possibly included the governorship. As soon as he entered office, he launched an impressive succession of "bold" initiatives — among them, to make the Los Angeles Police Department a 10,000-cop force, to "green" the port of Los Angeles, to improve the academic scores of some of L.A. Unified's worst-performing schools. Until the real estate bubble burst, he oversaw a building boom downtown and elsewhere, casting himself as a visionary re-creating L.A. as a model of "elegant density."

But when it came to that part of the city's economy not connected to real estate, Villaraigosa might be compared to Emperor Nero. As the city has continued to lose thousands of middle-class jobs in aerospace, manufacturing and high-end business services since 2005, Villaraigosa has basically stood by and fiddled. From February 2007 to February 2008, the county suffered the biggest percentage of job losses — 0.7% — of the 10 largest metropolitan areas in the country, according to the U.S. Bureau of Labor Statistics' most recent report.

The combination of the housing meltdown and steady job losses in non-real estate sectors means that Los Angeles is now surpassed only by a handful of the bigger Rust Belt economic basket cases, like Detroit, for the title of worst big-city economy in the nation.

To be sure, the falloff in jobs cannot be solely laid at the feet of City Hall because there have been declines in other parts of Southern California. But the trend reveals the shortcomings of Villaraigosa's near-exclusive focus on real estate-related speculative growth and relative inattention to sectors more critical to the city's long-term economic growth.

The problem is that, as property values and real estate-related employment — most notably in the construction and mortgage sectors — have cratered, there is little, save for the tourism industry, to take up the economic slack. That fact has come home to roost in recent weeks as Villaraigosa searches for revenue to shore up the city's out-of-balance budget. And, unfortunately, the pain may be around for a while because once the current wave of building — which was financed before today's credit crunch — ends, there is little prospect of a pickup in construction in the immediate future.

All this makes the erosion of jobs outside real estate even more troubling. Since 2006, employment in L.A. County has dropped by about 2% in the manufacturing, financial services, retail and information sectors, the latter of which includes the entertainment industry. Meanwhile, business expansions in the county in 2007 fell 22.5%, according to an April report from the Los Angeles County Economic Development Corp., a nonprofit organization.

Another great one from Joel Kotkin.