Manufacturing in Los Angeles: A Test Case in Why Increasing Concentration Isn’t Always a Positive

What comes to mind when you think of Los Angeles’ big industries? Motion pictures and other entertainment sectors, yes. Real estate and corporate headquarters, too. But probably not manufacturing.

No other sector, however, contributes more to the Los Angeles metro area’s gross regional product – the final market value of all goods and services in a region – than manufacturing. It accounted for 11% of L.A.’s GRP in 2012, narrowly beating out the real estate and rental and leasing sector (10%).

Manufacturing is also the fourth-largest major industry sector in Los Angeles by employment, with nearly 535,000 jobs. But the manufacturing labor market has taken a beating in L.A. — and the downward spiral began years before the Great Recession. In 2001, in fact, manufacturing was the largest sector in L.A., accounting for more than 800,000 jobs, many of which were centered in two sub-industries: computer/electronic products and apparel.

The Apparel Manufacturing Story

Apparel manufacturing is a particularly interesting case study for L.A. manufacturing as a whole. Nearly 10% of all manufacturing jobs in the Los Angeles metro — a little over 52,000 —  are in this subsector. And 40% of workers in apparel manufacturing are sewing machine operators whose overall median earnings in L.A. are $9.48 per hour.

Jobs in apparel manufacturing have declined 43% in Los Angeles since 2001, a reduction of some 40,000 jobs. But nationally, the industry has fared worse; it’s lost 63% of its workforce since 2001. This explains why the concentration of apparel manufacturing jobs in L.A., as measured by location quotient, is actually increasing, despite the heavy local cutbacks.

L.A. has 7.8 times the national average of these jobs, after having 4.9 times the national average in 2001. Looking at it another way, a third of all apparel manufacturing jobs in America are in the Los Angeles metro (and 89% of these jobs in California are in L.A.).

Why has L.A.’s concentration increased so much? Because location quotient compares the industry’s share of regional employment with its share of national employment. In this case, apparel manufacturing is dwindling as a share of all jobs nationally and in L.A. But the rate of decline hasn’t been as sharp in Los Angeles as it has been in the nation.

In many cases, a high concentration like apparel manufacturing’s in L.A. signals that it’s a key local industry. And to be sure, apparel manufacturing still has a large presence and helps bring money into the region. Further, there are sub-industries inside apparel manufacturing that are adding jobs. But this is an example of why increasing concentration isn’t always a positive.

Many firms have moved apparel manufacturing operations overseas, and the jobs that have remained in the U.S. are mostly unappealing: low-wage, low-skill, with little career potential. In L.A., the average earnings per job in apparel manufacturing is $44,859 — a figure that includes workers at all levels, from management to the production floor. That annual salary is only slightly higher than the national average ($43,947).

Compare the above numbers to industries with increasing employment and increasingconcentration. The following are some of the real emerging industries in L.A., and most pay well, too:

And while it’s hard to label entertainment industries in L.A. as “emerging,” there are a stream of related industries that fit the criteria of high growth and increasing specialization. Most notably, teleproduction and other postproduction services (11.5 times more concentrated than nation; 19% growth), motion picture and video production (10.3 times more concentrated; 31% growth, though it’s declined 2008), and agents and managers for artists, athletes, entertainers, and other public figures (7 times more concentrated; 59% growth) fit that mold.

Other Manufacturing Sectors in L.A.

We’ve focused on apparel manufacturing, and briefly touched on surgical and medical instrument manufacturing. The performance of other detailed manufacturing industries is also worth noting. In all, 352 of the 472 manufacturing subsectors classified by the U.S. Census Bureau have lost jobs since 2001 in Los Angeles. The two most notable declines have come aircraft manufacturing (-16,502 jobs, a 50% loss) and search, detection, navigation, guidance, aeronautical, and nautical system and instrument manufacturing (-15,664 jobs, a 42% loss). Both used to be major industries in L.A., and both have bled high-paying jobs.

But there are growth areas in L.A.’s manufacturing scene. The following table shows 17 detailed industries that have added at least 500 jobs since 2001 in L.A., topped by surgical and medical instrument manufacturing:

Notice the second industry on the list — women’s and girls’ cut and sew blouse and shirt manufacturing. It’s part of the declining apparel manufacturing sector, but it’s one of the rare growth subsectors that we mentioned above. And also of note is guided missile and space vehicle manufacturing, which has made an 86% jump in jobs since 2010 and pays big wages. This industry would no doubt also fall in the emerging category, given it’s increasing concentration and employment.

Joshua Wright is an editor at EMSI, an Idaho-based economics firm that provides data and analysis to workforce boards, economic development agencies, higher education institutions, and the private sector. He manages the EMSI blog and is a freelance journalist. Contact him here.