O.C. Lagging U.S. in Recovering From Recession, Economists Say : Economy: Downturn is over but expansion not yet a reality, says Chapman University study. Property values still declining.
Likening Orange County’s economy to an ailing patient fighting off the flu, Chapman University economists said Thursday that the county is recovering from the recession--but at a much slower pace than the rest of the nation.
Reiterating earlier predictions that Orange County is a year behind the rest of the nation in shaking off its malaise, Chapman President James Doti said few jobs will be created in the coming year and that real estate values and family incomes will continue to decline.
But he emphasized that the local economy is moving forward, if only at a snail’s pace. In fact, Doti said, the recession is over. All that remains are the painful side effects.
“Say you are sick on Wednesday,” he said. “On Thursday, you are a little better off than you were the day before. You’re not out jogging, but you can say you are recovering.”
Indeed, Doti and economists at Chapman University said the latest annual study shows little cause for rejoicing as the new year approaches.
Rejuvenation and expansion are not yet a reality after a period in which thousands of jobs were lost in the shrinking defense and construction industries, Doti said at a press conference during the 15th annual Chapman Economic Forecast conference.
For the coming year, the county will probably have “virtually no job growth.” Though the size of the work force will not increase, at least losses will not continue, the report said, noting that 28,000 workers were laid off in 1992 and 46,000 the year before. By the middle of the decade, though, the county should regain all the jobs it has lost, said Esmael Adibi, director of Chapman’s Center for Economic Research. The caveat, however, is that the new jobs will be more in the lower-wage service industry than in better-paying sectors such as defense and high technology.
Adibi said that four factors are affecting employment in Orange County.
On the positive side, national gross domestic product--the sum of all goods and services produced in the United States--will probably grow from an anemic 2% this year to a slightly more robust 3.1% next year. And the national trade deficit will shrink from $34.7 billion to $21.8 billion next year, the report said, as the United States exports more goods than it has in the past.
On the negative side, military spending is expected to be reduced further in the coming year, Adibi said, affecting many of Orange County’s high-tech industries that rely on government contracts to stay alive. And the value of real estate will continue to sag. Doti predicted that the average value of housing in Orange County will dip another 2.8% before bottoming out.
Housing values are expected to begin rising again after 1993 at an annual rate of about 4.5%, but that will be meager compared with the real estate boom of the 1980s.
“Nothing is going to be as strong as it used to be,” Adibi said.
The negative variables put sufficient drag on the local economy to make the recovery slow and painful, the economists said. In fact, Doti said, he foresees stronger growth in the Inland Empire, where there is very little defense-related industry and where real estate prices are are lower.
In Orange County, median family income--which measures all wages earned by members of a household--is expected to decline 3.5% from $56,346 this year to $54,380 in 1993, Doti said. However, total personal income--the measure of all wages earned in the county by county residents--is expected to rise 5.3% from $64.5 billion this year to $68 billion in 1993.
As with housing values, yearly personal income growth for the next four years will not come close to the 1980s rate of increase of 9.5% a year, the report said.
Gross county product--the local equivalent of the GDP--is also expected to rise next year, reaching $79.8 billion. That would be a 5.4% increase from the $75.7 billion projected for this year.
Chapman economists say that, as Orange County recovers, it will regroup. The defense and retail industries will continue to be downsized, while other industries will gain important footholds. Health care and computer technology will be among the growth leaders in the county in the next few years, the economists say.
It is highly unlikely that the county will see an economic boom in the immediate future, the economists said. In fact, Adibi predicted another downturn after 1996, when inflation spurred by renewed growth will begin to take its toll.
Still, with the growth of the health care industry leading the way, the county could take advantage of increased exports and a nationwide rebound.
“The national recovery is accelerating,” Doti said, “and that is real good news.”
