Job Growth Slows; Construction Lag Could Speed O.C. Recession

Job growth in Orange County slowed further in October, and an economist says a loss of construction jobs may nudge the county into recession sooner than the nation as a whole.

The unemployment rate actually dropped to 3.6% in October from 3.8% in September, the state Employment Development Department said Thursday.

But that was probably a statistical glitch. The rate usually drops in October because the September jobless survey is taken near the middle of the month, before many teachers and college professors return to their classrooms. These individuals then show up as employed in the October survey.

Until October, the unemployment rate had been rising steadily since spring. September’s 3.8% rate was the highest in more than three years, another sign that the county--like the nation--may be veering toward recession. Some private economists say the nation may already have plunged into a recession. County businesses created fewer jobs during the 12 months ending in October, up 0.9% compared to 1.1% in September.

Until recently, the number of jobs in the county had grown more than 2% a year, according to Eleanor Jordan, a labor-market analyst for the Employment Development Department.

And most industries did continue to grow or at least stay even over the last year. Construction jobs, however, fell a whopping 12.3%. The construction industry lost 9,300 jobs in October compared to a year earlier, most of them vanishing since spring. That was the biggest year-to-year drop since the industry lost 26% of its jobs between 1981 and 1982 in the middle of the last recession.

“The Orange County economy is pretty much dependent on construction and durable-goods manufacturing,” said Esmael Adibi, director of the Center for Economic Research at Chapman College in Orange.

“So even though everybody thinks the county is recession-proof, we’re actually even more vulnerable to a recession than the rest of the country because of our heavy reliance on the building industry,” said Adibi, who teaches economics at Chapman.

Although construction is down to 66,300 jobs, it still accounts for more than 5% of the county’s 1.2 million jobs.

With large numbers of construction workers laid off, Adibi said, it may not be long before the ripples hit other areas of the county’s economy, such as retail sales.

The Economic Research Center, which tracks the county’s economy, reports double-digit drops in building permits for commercial buildings and residences. Adibi cites three reasons for the downturn.

* Builders have already constructed too many houses and commercial buildings and many sit empty with no takers in sight.

* With all the talk of recession, consumers are cautious about buying new houses and businesses are wary of moving to new quarters.

* And lenders, pushed by federal regulators and their own caution, have turned off the spigot on a stream of financing for new homes, offices and factories.

“The performance of the construction industry now is even worse than it was going into the last recession,” Adibi said, “since there’s also this ‘credit crunch’ to contend with, which wasn’t there before.”

Adibi suggested that the county may already be in a recession.

Still, October’s 3.6% jobless rate looks pretty good compared to the statewide rate of 6% and the U.S. rate of 5.7%. Those rates, however, aren’t directly comparable to Orange County because they are adjusted to factor out seasonal changes in employment, such as the return of teachers to work.

Across the county, 50,100 people were without work in October in a labor force of 1.4 million. That was 1,800 fewer unemployed than in September.

The construction industry lost 2,300 jobs in October compared to September.

Manufacturing jobs have been declining steadily in the county and the nation for years. The county has seen an exodus of manufacturers to areas where land and labor are cheaper. And the cutbacks in Pentagon spending have hurt the county’s big defense manufacturers.

October brought more bad news for that sector, as manufacturing lost 500 jobs.

The state EDD estimated that employment in most other industries remained flat during the month. And jobs in education, as expected, increased by 5,000.

Employment in wholesale trade was up from October, 1989, rising by 2,900 jobs.

Retail trade, mostly employment in food stores, rose by 1,000 jobs. Service jobs--from lawyers to short-order cooks--grew by 10,700.

Manufacturing lost again, down 3,200 jobs.