O.C. High-Growth Era Gone for Good, Economist Predicts : Recession: When the county pulls out of the current downturn, it won’t be with the long surge in jobs and housing prices as after the 1981-82 slump, Chapman College’s Esmael Adibi says.
The days of rampant job growth and double-digit housing price appreciation are gone from Orange County--and probably for a long time.
Chapman College economist Esmael Adibi predicted Thursday that when Orange County pulls out of the current recession next year it won’t be with the same explosive growth that fueled the nearly eight-year recovery from the recession of 1981-82, the last downturn in the economy.
Instead of 8% annual job growth and 20% yearly hikes in home prices, Adibi said that the next recovery period--expected to begin by the third quarter of 1991--will bring a much more sedate growth pace linked largely to the aging of the baby boom generation.
As that group, which has propelled the economy for the past decade, grows less interested in consuming and more concerned with saving, the resulting shift in spending patterns will reduce upward pressures on prices and help keep interest rates low. Adibi said that the prime rate, now 10%, should drop to about 7.2% by 1994 and that long-term rates will drop by a half a percentage point or more.
Adibi, director of Chapman’s Center for Economic Research, made his long-range forecasts as as part of the college’s 13th annual economic outlook conference. The forecast, considered the most extensive on the local economy, provides projections for 1991 and the next five years.
The biggest economic impacts in Orange County in the next five years will be seen in housing and employment, Adibi said.
One result of the demographic and economic trends will be that even as demand for housing in the county resumes with the end of the recession, prices will not soar as they did after the 1981-82 recession.
“And that signals the end of housing as an investment vehicle in Orange County,” Adibi said. “Instead, people should start looking at homes as a consumer good--to be purchased when you need one.”
He said housing price appreciation will average 6.5% a year for the next five years--barely keeping ahead of an average 4.6% inflation rate.
Adibi also predicted that the county’s annual job growth rate will average a modest 3.4% over the next five years, adding 170,000 jobs to local payrolls. That would put total employment in the county at nearly 1.39 million by 1994, but the growth rate still would lag far behind the annual employment growth rates of the last recovery.
It is that job growth that will create new demand for housing in the county and help pull the construction industry out of its slump. Building activity in the county should jump from an estimated 9,766 dwelling units in 1991--the lowest total since 1982--to nearly 24,000 in 1995, Adibi said.
At the same time Orange County is recovering from the current mild recession, the national economic pump will be primed by a greatly expanded export market as Western Europe unites as a single marketplace with fewer trade restrictions and Eastern Europe and the Soviet Union open their doors to more international trade.
That will make itself felt locally in increased opportunities for manufacturers and shippers of consumer and industrial goods, Adibi said.
With an expected shift from consumer buying to saving for retirement, there is likely to be a profound tilt away from the rapid growth of local service businesses.
The service sector has been the most rapidly growing part of the local economy in recent years. The manufacturing sector, which is under pressure in the current slump, now represents a smaller portion of the economy than several years ago.
From 1980 through this year, good-producing jobs fell from 33% of total employment in the county to 26%.
But the combined demand for export goods and cooling of consumerism “will stem the decline of goods-related production” and temper the growth of the local service industry, Adibi said. By 1995, goods production still should account for 26% of total county employment.
MAIN STORY: A1
Orange County’s Future: Recession and Slow Recovery The forecast for 1991 and beyond shows an Orange County economy just entering a recession and pulling out slowly but steadily over the next several years. The recession and pulling out slowly but steadily over the next several years. The recession is expected to be “extremely mild” and the recovery modest. Job growth and housing appreciation will continue upward, but at much lower rates than before the current recession.
