Growth for small-businesses could be held back by service sector “exhaustion” and rising living costs in the region, according to a Wells Fargo & Co. survey of small business owners in Orange and Los Angeles counties released Wednesday.
“Southern California businesses we’ve surveyed say they believe that current business conditions are robust and the future looks just as good,” said Scott Anderson, senior economist with San Francisco-based Wells Fargo. “However, left unchecked, a rampant high cost of living will elevate labor costs, since employers must pay at least a living wage.”
Longer-term, comparatively high labor costs and poor housing affordability will work to discourage business expansions and relocations in Southern California, he said.
The survey data revealed growing signs that some “exhaustion” is setting in among companies in the service sector,by far the largest local employer in the two-county region.
Businesses in the financial services, healthcare and education sectors have substantially added to payrolls in recent years, but they are less optimistic about the future, he said.
“While their hiring outlook is still positive overall, service sector growth is now lagging behind the nation at large, despite continuing population growth in the region,” Anderson said.
OC service businesses, in particular, were the least likely to report demand and pricing, Anderson said.
The survey’s conclusions were drawn from 400 small-business respondents who generated annual revenue between $5 million and $500 million each. OC companies accounted for 45% of total respondents.
