Local Economy Shows Signs of Recovery

By Mark McGuigan
Staff Writer

July 31 – As the nation’s economy claws its way back from the brink of recession, Santa Monica posted its best first quarter ever outside the anomaly that was the Internet boom, according to City officials.

Citywide, taxable sales increased 0.8 percent -- $4.19 million -- for the first quarter of the year, buoyed in large part by an auto industry that accounted for almost 25 percent of taxable sales in the city, as well as a spike in sales around the Third Street Promenade.

Despite a lack of Internet millionaires snapping up big-ticket items, auto dealers still account for over half the entries on the City’s list of "Top 25 Producers." The auto industry drove the local economy forward with a 7.8 percent increase in sales and a 9.3 percent increase in leasing over the same period last year.

“We all say it can’t continue (strong automotive performance) but it keeps continuing,” said Gwen Pentecost, senior administrative analyst for the Economic Development Division.

If the new figures represent a shift toward some semblance of normality, predicting whether consumers are reverting to more normal spending patterns compared to the same period last year -- a time directly following the terrorist attacks of 9/11 -- likely remains a black art.

“The first quarter is always strange,” said Pentecost. “Human beings have an infinite variety of ways of approaching problems and we’re trying to predict trends.”

Although initial receipts from January through March showed a 10.5 percent gain, a number of “aberrations and weird anomalies” greatly skewed the overall results, Pentecost said. The removal of double payments -- two payments made by the same company in the same quarter -- presented a more truthful picture of the state of the City’s economy, she said.

“The first quarter is notoriously unreliable for predicting how the rest of the year is going to go,” Pentecost said, citing weather conditions and the closure of some retail outlets as some of the reasons why the numbers can be deceptive.

One slight shift in the current trend is a reduction in fast food spending, down 3.5 percent for the first quarter of the year. Fast food is a common recourse when times are tough and may well indicate a loosening of wallets, experts said.

A 21 percent increase in hotel sales revenues over the same period last year indicates a renewed willingness of visitors to travel after the tourism market bottomed out in the aftermath of 9/11.

“The biggest impact has been the return of tourists to downtown,” said Kathleen Rawson, executive director of Bayside District Corporation. “We’re happy to see a lot of people walking around the district with shopping bags and having fun.”

Consumer spending in the Downtown area of Santa Monica showed a 16 percent increase over the same period last year, an upturn that can also be attributed to “lots of new businesses in the district,” according to Rawson.

“We didn’t know what to anticipate. The economy is flat, the world is in chaos so there was no way to gauge what we were going to do,” she said. “But people are buying, people are spending -- commerce is happening Downtown.”

But if the spring in the step of Santa Monica’s economy is slowly returning, total recovery is being hamstrung by a “comparatively jobless” technology sector.

The implosion of the tech industry at the turn of the Millennium resulted in a precipitous drop in revenue that has yet to be restored.

“With the technology crash we lost 5,000 jobs which we haven’t gotten back,” said Pentecost. “But we’re working on that. People in offices buy supplies, personal things, lunches.”

“Comparing 75,000 (workers) with 70,000 means less taxable sales,” said Pentecost.