By AUGUST COLE
Northrop Grumman Corp. said Monday it plans to move its headquarters to the Washington, D.C., area from Los Angeles, marking the departure of the last major aerospace firm from the industry’s birthplace in Southern California.

The shift will put Northrop’s top executives near its biggest U.S. military and intelligence customers and the congressional holders of the military’s purse strings.

“We are a global security company and when you look at where our largest customer base is located, it’s in the Washington, D.C., region,” said Wesley Bush, Northrop’s chief executive and president. Mr. Bush took over as CEO on Jan. 1.

The company will relocate about 300 jobs, though it will still have more than 20,000 employees in the Los Angeles area, according to local officials.

Still, Northrop’s move underscores a broader struggle for Los Angeles: It is the nation’s second-largest city with 13 million people in its metropolitan area, but has suffered a growing exodus of corporations. In addition to defense and aerospace industries, there has been a steady erosion of its other iconic trade, the movie business, as states lure away film productions with rich tax incentives.

Other corporations based in Los Angeles have pulled up stakes recently. Hilton Hotels Corp. left Beverly Hills, Calif., last year for Washington, D.C. The area’s once-prominent mortgage-finance industry imploded during the housing bust, with companies such as Calabasas, Calif.-based Countrywide Financial Corp. sold to Bank of America Corp.

The largest public company still based in Los Angeles County is Walt Disney Co., with headquarters in Burbank. However, major Hollywood studios, such as Time Warner Inc.’s Warner Bros. and Viacom Inc.’s Paramount Pictures, are part of media conglomerates based elsewhere.

Northrop’s departure comes amid a backdrop of 12.6% unemployment in Los Angeles County in October, and widening budget shortfalls in both the city and state governments.

“It hurts whenever you lose a major multi-national corporation,” said Jack Kyser, founding economist of the Kyser Center for Economic Research at the Los Angeles Economic Development Corp. He said the employees who will remain around Los Angeles County “would benefit if Northrop Grumman could effectively compete to get government contracts and then bring the work back here.”

The aerospace industry blossomed in Southern California during and after World War II, turning the area into a locus of engineering talent. At the height of the Cold War, it was an economic engine, as thousands of workers designed and built the backbone of U.S. airpower and later satellites at sprawling hangars and production facilities throughout the region.

As U.S. defense spending began to decline in the 1990s, it dented everything from housing prices to stock portfolios. At the same time, the Defense Department was urging a consolidation. Both led to a wave of mergers that uprooted corporate headquarters from one side of the country to the other. When Lockheed, of Calabasas, Calif., and Martin Marietta merged in 1995, the resulting Lockheed Martin Corp. was based in Bethesda, Md., where Martin Marietta had its headquarters.

Efforts to convert the aerospace industry’s vast infrastructure have been mixed. Investors sought to turn a 78-acre Boeing Co. facility in Long Beach into a film-production hub. But that effort fell apart last year over financing issues. Some saw that failure as a sign that the twin pillars of the local economy, entertainment and aerospace embodied by billionaire Howard Hughes and his massive Spruce Goose seaplane, were crumbling.

Of course, the ultimate economic impact of these kinds of departures is unclear. Elsewhere, fewer corporate headquarters have led to a loss of corporate charitable giving to local institutions.

“When you start losing major corporate operations like this, they are the place where decisions are made about donating to causes in the city, whether it’s the philharmonic or other things in the community, you lose that,” said John Husing, founder of Economics & Politics Inc., a Redlands, Calif., economic strategy firm.

“This is symptomatic of a lot of what we think of as the demise of California as a great state.”

Write to August Cole at august.cole@wsj.com

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