Los Angeles Turns Supply-Chain Mess Into Biggest Covid Rebound

(Bloomberg Opinion) -- America's shortage of labor, products and services — provoked by Covid-19's disruption of the global economy — has a platinum lining in Los Angeles.

Obscured by unprecedented supply-chain bottlenecks, California's largest city and No. 2 in the U.S. after New York, has no peers unloading, processing and transporting the nation's imports from its two busiest ports. Being the supreme gateway for U.S. trade helps make the Southern California area of about 630 square miles (Los Angeles, Long Beach and Anaheim) the fastest-growing labor market among the five largest American metropolises during the past year and perennially No. 1 for factory workers, according to data compiled by Bloomberg.

The almost 65 container ships at anchor waiting to discharge cargoes also masks their direct and indirect benefits to corporate Los Angeles, including a variety of financial firms chasing business from China to South Korea. Some 474 publicly traded companies in the region were national laggards until 2020, when they rebounded to become the best performers in the stock market among their peers in the top five cities. At the same time, home prices provided the greatest risk-adjusted return — appreciation with the lowest volatility — despite the shakeout caused by the pandemic.

“There is an undeniable effect on the success of the [ports] and the success of the economy,” said Gene Seroka, executive director of the Port of Los Angeles, which has experienced 49% growth since 2020, the biggest increase in nine years based on data compiled by Bloomberg. Long Beach shipping expanding 29% during the same period means the two ports accounted for 37% of the U.S. market since the pandemic, more than double the share of the Port of New York and New Jersey, the closest competitor.

“We have the largest manufacturing employment base, about 390,000 individuals, based in Los Angeles County,” Seroka said in an interview last month at his office in San Pedro. “One in nine jobs in Southern California's five-county region emanate from this port, so whether you're an administrator like myself, a dock worker, a truck driver or a logistician, a warehouse manager and everything in between, there are about a million paychecks that come out every week dedicated on business done here at this port complex.”

Los Angeles Mayor Eric Garcetti, the former Navy Reserve lieutenant, Rhodes scholar and jazz pianist who is in the fourth year of his second term, follows shipping the same way he reads music. “Here, one out of nine jobs in the region, one out of 50 in the country — it's 2% — can be linked to the port,” he said last month during an interview in his City Hall office. “One of the most exciting things that I always do is I'll sit down with a member of Congress from Maine, Florida or Alaska and let them know how many jobs come through the Port of L.A. that they depend on.”

As a champion of public-private partnerships, Garcetti was able to raise $50 million in two weeks for the 2028 Olympics that will occur in the city, and he was more than a decade ahead of Green New Deal Democrats when he authored Los Angeles’ clean water bond and municipal green-building ordinances. Improved infrastructure may be his biggest legacy, with the record $14 billion spent to increase annual passenger airline traffic to more than 100 million, from 87.5 million in 2018. The $4.9 billion contract for Los Angeles International Airport, one of the few in the U.S. with nonstop daily flights to six continents, was the largest in the city's history and is maintained by the private sector.

When President Joe Biden announced this month that the Port of Los Angeles will follow Long Beach by operating 24 hours a day to relieve the backlog preventing timely delivery of goods to the U.S., he confirmed Los Angeles' essential part in running America’s economy. “The cargo that traverse this port reaches each and every one of our nation's 435 congressional districts,” Seroka said. “The port is a national treasure,” Garcetti added, “because investing in the Port of Los Angeles is investing in the U.S.A.”

Greater Los Angeles-based employment has increased 18.6% since the end of May 2020, almost double California's 9.9% increase and exceeding New York’s 15.2%; Chicago’s 12%; Houston’s 11.1%; Philadelphia’s 16.2%; Phoenix’s 7.1%; San Antonio’s 14.5%; San Diego’s 12.5%; Dallas’ 14.6%; and San Jose’s 9.3%. Austin, which captivated headline writers as the destination of choice for such California chief executive officers as Tesla Inc.’s Elon Musk, remains an also-ran at 16.4%, according to data compiled by Bloomberg.

The 22 major publicly traded companies based in Los Angeles with at least a $1 billion market capitalization returned 33% this year through Sept. 20 and 59% for the 12 months ended on that date, handily beating their peers in New York, 27% and 56% respectively; Chicago, 16% and 33%; and Houston, 28% and 54%, according to data compiled by Bloomberg. The winners include B. Riley Financial Inc., up 168% the past 12 months; Korn Ferry, up 142%; and Preferred Bank, up 107%, data compiled by Bloomberg show.

“It often surprises people that Los Angeles County is the largest manufacturing county in the country in terms of value,” Tom O'Brien, executive director for international trade and transportation at California State University Long Beach, said in an interview via Zoom last month. “We have a manufacturing foundation that supports that relationship between the ports and the rest of the trade sector, and there's a lot of technology companies that are not specific to the trade sector but that rely on the trade sector for a large client base, whether it's the combination of cybersecurity, whether it's load-matching technology.”

What makes Los Angeles unique is that “it is clearly the fastest route from North Asia to the interior of the country to our population of any port or gateway in the United States,” said Seroka. That means “getting on a ship in Shanghai and running 13 days to L.A., getting on a train that's no less than three miles in length, running to Chicago, 100 times per day, is the best way to go.”

Garcetti, who may soon be shipping off to India as the next U.S. ambassador, said he realized after he was elected mayor in 2013 that the handwringing over companies giving up their Los Angeles headquarters wasn’t necessarily a sign of weakness. “I realized one daily transoceanic flight was worth more than a Fortune 500 company,” he said. “We had one of them twice a day before the pandemic. L.A. always has been a startup business kind of place, and L.A. is the third-largest metro economy in the world now. It will be the most important city to be in.”

After Sept. 20 is when oil prices starting shooting higher, disproportionately benefiting Houston-area companies.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Matthew A. Winkler is Co-founder of Bloomberg News (1990) and Editor-in-Chief Emeritus; Bloomberg Opinion Columnist since 2015; Co-founder of Bloomberg Business Journalism Diversity Program in 2017. During his 25 years as Editor-in-Chief, Bloomberg News was a three-time finalist and winner of the Pulitzer Prize for Explanatory Reporting and received numerous George Polk, Gerald Loeb, Overseas Press Club and Society of Professional Journalists and Editors (Sabew) awards.

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