All Things Considered, O.C. Businesses Bullish : Survey: Most executives say recession is over for them. Two-thirds expect companies to do better than last year.
Growing disgust with what they see as burdensome government regulations has supplanted Orange County business executives’ concerns about traffic snarls and nearly equals their upset over high housing costs, a just-released UC Irvine report shows.
Still, though dissatisfaction with the local business environment hit new heights this year, fewer executives than ever are considering pulling their companies out of the county.
And while economists still waffle on whether the national recession has ended, most of the county’s executives seem to have decided it is over for them, the university’s 1992 Orange County Executive Survey found.
More than two-thirds of the survey respondents said they expect their businesses to fare better financially this year than last.
One negative sign is the prediction in a companion hiring forecast that the total number of jobs in the county will shrink by 0.6% this year. But forecast co-author Rob Valletta, a UCI economist, said that also can be an indication that the worst of the county’s economic slide has passed.
“Most companies resist laying workers off as long as they can,” he said. “And when they do, it becomes part of the recovery process” because it reduces fixed costs and typically helps improve productivity levels and earnings.
Valletta and fellow economist David Brownstone predicted that the number of jobs in the county at year’s end will be about 14,000 less than the 1.214 million jobs tallied in December, 1991.
“For the first time, Orange County will lag behind the rest of the Los Angeles basin in employment growth during a recovery period,” Valletta said. “The heady days of the early 1980s are over. It was a growth spurt that just couldn’t be sustained.”
At the same time, however, the economists predict that the county’s monthly unemployment rates through December, 1993, will be slightly lower than those posted in 1991 when the peak was 5.4%.
The annual survey--the sixth conducted by the UCI Graduate School of Management--is based on interviews in November and December with executives of 184 Orange County businesses, 124 of them classified as large businesses with 100 or more employees. The margin of error is plus or minus 6%.
A key finding this year is the increase in overall confidence levels after a steep decline last year, said Lyman Porter, a professor of management and co-director of the survey.
Only 4.4% of the respondents said they think 1992 will be a worse year financially for their businesses than 1991--down from 5.3% who thought so last year.
And 67.5% said they think the coming year will be better financially. That is up from 65.3% in 1991, which was the lowest reading since the survey began in 1987. By contrast, 75.3% of the executives surveyed in 1990 expected that year to be better financially than 1989.
One reason for the elevated optimism is the importance of foreign trade to the county’s economy and the opportunities for trade growth, said Kenneth Kraemer, a management professor and survey co-director.
“Almost half of the firms in the survey already have international business dealings and by 1997 that will have climbed to 60%,” he said.
Most of the trade growth is expected to occur in the Pacific Rim, he said.
Trade with Mexico also should be a growth area in the next five years, Kraemer said, with an anticipated 12% increase in the number of local manufacturing firms setting up operations there by 1997.
In seeming opposition to the increased level of optimism about financial performance, the number of executives who find Orange County a less attractive place for business than in past years grew to an all-time high of 56.5%, up from 34.7% in 1991. And only 6.1% of the respondents said they think the county is more attractive these days, the lowest approval rating in survey history.
“I think part of the big change comes from the fact that business hasn’t been that good in general,” Porter said. “If the national economy is a lot better this time next year, we will see a drop in the percentage saying things are worse here.”
In one sign of the economic slump local businesses are trying to cope with, only 28% of the survey respondents said their firms were likely to expand this year. That’s down from 41% in last year’s survey--taken in the early part of the recession.
The high cost of living, including housing costs, remained the leading cause of disenchantment for the second consecutive year, cited by 24.6% of the executives.
But government regulation--which wasn’t even mentioned by respondents in the first four surveys--shot into second place, finishing well ahead of traffic congestion, which 21.5% of the executives said it was their main gripe.
Traffic snarl dropped into third place in the survey, cited by just 15.4% of the respondents, down from 23.1% last year.
Porter said he believes traffic has declined as an irritant partly because, with all the media coverage of traffic improvement plans in recent years, people perceive things will get better.
“But it also is less a factor because other things have come to the forefront, things like government regulation,” Porter said. “With the new state air quality rules, environmental programs and worker safety laws, a lot of businesses see their costs rising. They are not only concerned with what is already in effect, but with what is coming.”
Ironically, business executives also recognize that local government has little to do with the regulations they complain about and know that their anger should be directed at the state, Porter said.
Only 14% of the executives surveyed said they are satisfied with state government--down from 51% last year. Yet 55% of the respondents are happy with the business environment provided by county government and 62% said they are satisfied with their city governments.
Asked about the probability of relocating out of Orange County this year, only 20.2%--almost all in manufacturing industries--said it was somewhat likely or very likely, down from 25.3% in 1991 and the lowest percentage since the question was first asked in 1989. And 79% said relocation was not likely--the highest level ever.
Of those who are contemplating a move, 63% said they would probably head out of state, a major change from last year, when only 21% said they were looking outside of California.
Porter said nearly half the executives from the 124 large businesses in the survey said they have been contacted in the past year by business development officials from other states hoping to lure them away from California.
The three states most often cited as aggressive recruiters, he said, were Arizona, Nevada and Texas.
O.C. BUSINESS OUTLOOK: Confidence Is Up, Just Barely
After a sharp dip in 1991, the number of Orange County business executives who believe their companies will do better financially in the coming year is on the rise, according to an annual UCI Executive Survey. How executives see 1992’s economic picture. Biggest Concerns Most frequently cited reasons for Orange County’s diminishing attractiveness:
1991 1992 Housing/Living Costs 34.6% 24.6% Government Regulation 3.8% 21.5% Traffic 23.1% 15.4% Cost of Doing Business Here 9.6% 10.8% Problems Hiring Employees 9.6% 9.2%
NOTE: Margin of error is plus or minus 6%. Response rate to survey was 64%, with 184 completed interviews from 348 contacts.
Source: UC Irvine 1992 Orange County Executive Survey
