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Industry Cluster Analysis for Local Economic Development in Los Angeles

Economic development priorities for the City of Los Angeles is headed by the Mayor and Community Development Agency

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Economic development studies help business and community leaders gain better insight into the City of Los Angeles’ economy.

These studies assist the Community Development Department in aligning limited resources to encourage business expansion/retention and new business attraction in the City’s most challenged census tracts.

Information Economy

In today’s post-industrial paradigm, firms cluster around similar or related firms in and around places that, not only support their particular workforce profiles, but also increase competitive advantages.

Employees, on the other hand, choose locations based on lifestyle...and firms follow the workforce.

Competitive advantage has become increasingly fluid. Workforce mobility also affects company mobility as the workforce moves to meet its lifestyle needs.

The City of Los Angeles offers direct financing for larger construction and rehab projects that will benefit low income communities or provide good jobs for local residents. Funding is usually below market interest rates.


Clusters are analyzed using three tools:
  • the location quotient
  • shift-share analysis
  • value chain analysis
Each tool reveals different aspects of the cluster. A baseline economic development framework is used to enhance the competitive advantages of the City and stimulate business attraction, business retention and workforce development for the knowledge-based economy.

This baseline strategic framework examines the local economy during specific periods. The following results cover 1994 to 2001 and 2005 in order to provide both a short- and long-term snapshot, and compare the City of Los Angeles’ economy to California and the nation as a whole during this same period.

The study identified 8 industry clusters within Los Angeles that stood out for their total numbers of persons employed, the rate of employment growth, the average wages, and competitive advantages based on being located within Los Angeles. The top clusters during this Turn of the century period included:

1. Biomedical / Biotechnology
2. Entertainment and Creative Services
3. Healthcare
4. International Trade and Logistics
5. Manufacturing Value Chain
6. Professional, Business and Financial Services
7. Retail Trade
8. Tourism
Distinct sub-economies make up the City’s economic base. Products and services are place-based due to the funding eligibility criteria, so clusters are analyzed by locations. As a result the strategy, the City was divided into eight distinct geographical planning areas.

  • Central City
  • Downtown Core
  • Eastside
  • Harbor
  • Los Angeles International Airport (LAX)
  • San Fernando Valley (SFV)
  • South Los Angeles (SLA)
  • Westside

The Mayor develops a vision for Los Angeles’ future economic prosperity and long-term fiscal competitiveness in the 21st Century economy.

To support this vision, the CDD has established six major goals based on the findings from the industry cluster analysis that would enable the City to strengthen and enhance its competitive advantages in industries that drive the core industry clusters.

Those six major goals are:

  1. Increasing employment in the core industries;
  2. Creating higher average-wage job opportunities;
  3. Targeting growth industries within the core industry clusters;
  4. Creating stronger private and public economic partnerships;
  5. Developing targeted educational and job training programs for key industries;
  6. Leveraging Los Angeles’ world-class distribution facilities.

Mayor’s Citywide Economic Development

Policy and Strategy and is by no means an all-inclusive strategy for the City. The Mayor’s economic development plan includes:
  • Increase the number and quality of jobs;
  • Position the City as a hub for international trade flow; and
  • Prepare residents for quality jobs through workforce development and training.

Edited by Carolyn Allen
| los angeles | economics | employment |


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