O.C. Slump Worse Than Expected : Economy: Chapman College economists now say the county will lose 5,000 jobs this year instead of gaining 1,500, as they earlier believed.

TIMES STAFF WRITER

For Orange County, the recession turns out to be a little worse than expected.

Economists at Chapman College now say the county will wind up losing 5,000 jobs this year instead of adding 1,500, as they predicted late last year.

Most of those workers will be laid off in construction and manufacturing, two of the county's biggest industries.

The recession locally, however, is still "relatively mild," the Chapman economists say, as it is for the nation as a whole.

Chapman released the updated forecast Thursday, nearly a year into this recession. The forecast predicts the county's economy will perk up slightly near the end of the year.

"It won't be a rapid recovery, and there won't be trumpets sounding," said economist James L. Doti, the new president of Chapman College and head of the forecast. "But when we look back from 1992, we'll probably date the beginning of the recovery from the third quarter of 1991."

That's a little later than what the Chapman economists had predicted last winter, when they said the economy might turn up by now. But the new forecast for a recovery in the third quarter squares with what many economists are now predicting for the national economy.

Doti says a sharp drop in short-term interest rates should stimulate business activity.

Contrary to conventional wisdom, Orange County is not "recession-proof" because of its broad range of businesses.

The forecast says the county has been hit just as hard as the nation. In fact, looked at one way, Orange County was hit harder because it was growing faster than the nation until the recession. Now it is slumping at about the same rate as the national average: Both the county and the nation had a tiny fraction fewer jobs at the end of the first quarter of 1991 than at the end of the same period in 1990.

Most local home builders and developers and many factory owners can confirm this diagnosis. Building permits have been in a "free fall" lately, according to the Chapman forecast, and the value of defense products shipped from local plants has been dropping since 1986.

The Chapman economists had thought in December that job losses in these industries would be offset by gains in other businesses. But in fact the losses in construction and manufacturing turned out to be larger than expected.

Some preliminary figures show the national cutback in defense spending has cut deeper in Orange County than elsewhere, Doti said.

In the real estate business, developers built too many offices all at once, creating a glut. Even if there weren't many more offices than tenants, the wreck of the savings and loan industry means there are fewer places for developers to borrow money to build. And the banks--prodded by worried regulators--have turned off most of their real estate lending too.

As for home builders, the Gulf War, high prices and the recession left them with several thousand unsold homes that are just now being sold off. Many are losing money and some smaller builders themselves are not only laying off people but perhaps going out of business entirely.

"The nose dive of the construction industry is hitting Orange County particularly hard," says the Chapman forecast.

One telling figure: Orange County lost more than 15% of its construction workers between March 31, 1990, and March 31, 1991. For the United States the loss was only 6% and for California it was 9%.

"The reason we're hit harder here is because the building industry grows more here than most other places during growth periods," Doti said. Construction is a major local industry because--until recently--the county was growing rapidly and there was still plenty of empty land to build on.

There are a few bright spots: Tourism spending in the county went through the floor during the Persian Gulf War, but will probably end the year a percentage point or two ahead of inflation, the forecast said.

And the county has a larger percentage of its factory workers making products for the world market than does California or the nation. Nearly 8% of local workers are employed in businesses that export their products, compared to 6.5% for the state and 5% for the nation.

"These findings underscore our long-held view that growing volumes of international trade will be the major engine of economic growth in Orange County during the next decade," according to the forecast.

Recession Will Cost O.C. 5,000 Jobs Orange County is still looking at a mild recession, but it is less mild than previously thought, according to an updated 1991 economic forecast unveiled Thursday by Chapman College's Center for Economic Research. Perhaps the most telling sign of weakness is the revised job prediction--which now calls for the county to lose 5,000 jobs this year in the first annual decline since the recession of 1982.

ECONOMIC INDICATOR

Orange County's economy could start emerging from recession by the fourth quarter, a long-term indicator series devised at Chapman College suggests. The Chapman economic indicator is based on changes in gross national product, countywide building permit values, foreign trade and defense spending.

TOURISM INDEX

Orange County's economy gets a big boost from tourism. The revised forecast's visitor index shows a halting increase in tourism activity this year. The tourism index is based on air passenger arrivals, hotel occupancy rates and tourism-related taxable sales. Source: Chapman College Center for Economic Research

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