Weak Trade and Dollar to Slow County Growth, Economist Says

The foreign trade deficit and devalued dollar will be major factors causing slower growth in both the California and Orange County economies for the next few years, the chief economist for Security Pacific National Bank said Thursday.

The state’s economy should grow 3.2% this year, down from last year’s 3.5% growth rate, economist Kathleen B. Cooper told a breakfast group of 275 businessmen and businesswomen at the Irvine Hilton.

But this year’s projected growth rate for the state is higher than the 2.4% she predicted for the nation as a whole. Last year, Cooper said, the nation’s economy expanded by 2.9%.

Cooper’s projections launched the 10th annual economic conference held by Security Pacific in counties throughout the state. The conference began in Orange County.

The trade deficit and the devalued dollar are not the only factors slowing growth, she said. Weaker consumer and government spending also will play major roles.

“The need to reduce the federal budget deficit will contribute to California’s softer economy in 1988 because the state receives a significant amount of federal dollars, particularly in the area of defense,” she said.

Orange County’s economy will be hurt more than the state’s, Cooper said, if voters pass a slow-growth initiative this spring.

“A slow-growth initiative will add to housing prices and reduce the number of jobs. It will be tough for the county to grow and thrive,” she said. “There’s no question it would have a detrimental effect on the area.”

Statewide, she predicted that real personal income would increase by 3.3% this year, down from 3.5% last year. The figures, she said, reflect higher inflation and slower employment growth.

Yet inflation, she said, should remain at last year’s level of about 4% through most of this year, though it will edge up slightly after the November presidential election.

And she estimated that more than 300,000 non-farm jobs will be created statewide this year, nearly duplicating last year’s 5.8% increase. About 225,000 of those jobs will be in trade and services, which include half of the state’s wage earners. Construction jobs, growing at 10% annually since 1982, will fall 4.4%, she said.

“Actually, 1989 is a year we worry more about,” she said. “When you look at U. S. history, we’re already in the longest peace-time economic growth period. I get nervous about that.”

She said the nation should expect a recession in 1989 or 1990, though she does not expect it to be a serious one.