Economic Slippage Forecast in County Through End of ’86

Led by a sharp plunge in office construction and a stagnating national economy, Orange County’s once-booming economy slowed considerably in mid-1986 and will continue to slide for at least the remainder of the year, Chapman College’s Center for Economic Research reported Thursday.

“The downward forces have gained momentum,” said James Doti, dean of Chapman’s School of Business and Management. “Now the question is not whether the growth rate will fall, but only how fast.”

Although Doti has been forecasting a decline in Orange County’s economy for the last nine months, he said Thursday that events have more than confirmed his expectations. However, he steadfastly refused to predict another recession for either the nation or the county.

“I can only say that the possibility for a recession is greater than it was,” he said.

As a result of the weakness, Doti said he expects layoffs by county businesses to increase and the rate of job creations to slow dramatically.

Orange County job growth, which hit a torrid 9% pace in 1984, will drop to just 3.5% in the final months of the year, he predicted. For all of 1986, Doti projected that 45,000 new jobs will be created, about 60% of the level of two years ago.

Doti, who devised an elaborate econometric model to simulate the Orange County economy, said the economic barometer dropped in mid-1986 to its lowest point since mid-1983, when the county was recovering from back-to-back national recessions. He said he expects the indicator series to drop further for the rest of the year because of the weakening national economy and the continued effects of slower construction rates in both the commercial and residential sectors.

Doti said prospects of new federal tax legislation making real estate a less attractive investment--as well as a continuing glut of new office buildings--dragged down the rate of new commercial construction in the county during the first half of 1986.