Prices Rising Faster Than Income, UCI Study Says : First Time in Five Years That County Families Have Taken Such a Beating
Orange County residents have seen increases in household income outpaced by inflation so far this year--the first time since the current economic recovery began five years ago that local finances have flagged, according to an economic survey released Thursday.
The economic data, gathered as part of UC Irvine’s 1987 Orange County Annual Survey, also showed that local consumer confidence has eroded in the last year--another indication of a weakening local economy, survey director Mark Baldassare said.
“Our confidence went down this year in large part because, in a real sense, our income has gone down,” Baldassare said. “I think we’re going to see lower levels of consumerism in Orange County this year, based on the combination of these factors.”
The full UCI survey is scheduled for release later this year.
The economic data issued Thursday dealt Orange County’s economic outlook its second blow in as many days. A survey released Wednesday by a worldwide wage and benefits consulting firm predicted that 1988 will be the fifth straight year in which average raises for Orange County workers will decline.
The two studies--taken together--indicate that one of the nation’s healthiest local economies is starting to join the mainstream and that, for many of the county’s normally optimistic residents, the glow is gone.
“We’ve said (in the past) our economy in Orange County is sort of removed or not affected by the national trends,” Baldassare said. “But we’re becoming more like the rest of the nation, seeing stagnant economic growth.”
The median household income in Orange County rose to $42,000 in the 12 months ended Sept. 30--up just $1,000, or 2.4%, from the year-earlier period, the survey said. At the same time, the Consumer Price Index rose 4%.
In 1982-86, the county’s median income rose an average of 9% per year, more than twice the average annual increase of 4% in consumer prices. Inflation traditionally has not grown as fast as Orange County income, Baldassare said, “but now that has changed.”
The annual survey polled 1,010 adult residents by telephone from Sept. 7 to Sept. 20. The 1987 survey is the fifth conducted by the Center for Survey Research, a division of the UCI Public Policy Research Organization.
Orange County’s score on an index of consumers’ economic confidence dropped 5 points, to 104 in 1987 from 109 in 1986, indicating that local residents feel more financially strapped this year than last.
In 1986, just 3% of the survey’s respondents said they expected to be worse off financially in the next year. But in this year’s survey, 12% said they are actually worse off than they were in 1986.
In addition, just 78% of those surveyed this year said 1987 is a good time to make major purchases, while 83% surveyed last year believed the economic climate in 1986 was right for serious spending.
The results of the UCI survey came as no surprise to Orange County economy watchers, who concurred on the main reason for 1987’s subdued outlook.
“It’s a long-run problem people are ignoring in the county simply because employment growth is high,” said James Doti, dean of the Chapman College School of Business and acting president of the private school. “But it’s part-time, lower-paying and lower-skilled jobs that are being created, not full-time, higher-paying, skilled jobs.”
The UCI economic survey had one bright spot: Orange County residents remain optimistic about the future.
In 1986, just 64% of those responding said they saw “good times ahead for U.S. next year.” This year, that number rose to 67%, and 63% of the respondents said they expect to be “financially better off next year than now,” contrasted with just 58% in 1986.
But that ray of economic optimism could dim if the trends shown in the annual survey continue.
“If there’s a sustained period of erosion in real income, people are going to find that the money is not there to do the things they normally do,” said Thomas W. Johnson, management department chairman at Cal State Fullerton.
