A Pill for Orange County : Health Care Industry May Be Some of the Medicine Needed to Recover From Slump
What’s wrong when Orange County creates more jobs in hamburger production than rocket production?
What’s wrong when a high-tech manufacturer opts to move 500 local jobs to New York because of tax incentives, and California’s state employment agency opens a new office in tony Mission Viejo to handle jobless claims?
The answer is the oft-quoted slogan for Bill Clinton’s presidential campaign: the economy, stupid.
Those words describe the problem and, at least in part, the solution for Orange County in the year ahead.
The county is stuck in one of its worst slumps since World War II and will likely go through a painful restructuring of its economic base beginning this year. That regrouping will be a necessity as real estate continues to stagnate and the defense industry sinks deeper into its slump.
So what will lift Orange County out of the mire? Local experts see a possible solution in another Clinton campaign maxim: And don’t forget health care.
Led by advances in the medical manufacturing industry and a boom in health care services, experts say, the county’s economy will inch out of the recession by the end of 1993--more than a year later than the national economy, which is already showing signs of recovery.
The conventional wisdom, however, is that while the local rebound will lead to slightly better times, they will be different times. No more will the area benefit from the once-pervasive defense industry. No more will a real estate trust deed look like a winning lottery ticket.
Orange County is entering middle age.
“That is the reality of the situation,” said David Anast, publisher of Biomedical Market Newsletter, based in Costa Mesa. The publication tracks trends in the medical manufacturing industry nationwide.
Anast and other experts predict that the local economy will slowly begin to pick up by the middle of the year as the Clinton Administration works through its first 100 days. And because of the stated objectives of the new Administration, the best opportunities may very well be in health care.
“There is a lot of potential there,” Anast said.
That is the good news. On the other hand, the burgeoning health care industry will probably never grow large enough to accommodate all of the thousands of unemployed defense workers. Some may be retrained, but a majority of those who lost their jobs may have to settle for lower-paying positions in the services sector.
Accelerating a trend that began before the recession, the county’s services sector is expected to add thousands of jobs this year, even though overall manufacturing will continue to contract. That means fewer $16-an-hour positions in defense factories and construction, and more minimum-wage jobs in fast-food restaurants and convenience stores.
Consider Haydee Downy, a 26-year-old Los Alamitos resident who is a victim of the struggling construction industry.
She used to earn about $10 an hour as a secretary at a construction company, but she is now learning to make do on the $4.50 an hour she earns as a part-time clerk at a video store. Still, Downey considers herself lucky to be working at all.
“It’s not as bad as it is in Somalia,” Downey said. “Things are tough, but don’t let them get you down.”
Though the incoming Administration will have a hand in what kind of recovery the nation will have, economists say, some county trends will continue, regardless of new federal policies.
While the 1980s were characterized by a boom in development of shopping malls and office towers in Orange County, the 1990s will be a period for mature, slower growth.
Only 22% of the county’s workers will be producing goods in 1997, compared to 26% today, according to Chapman University forecasts. That means a boost in the services industry, which encompasses everything from financial-planning companies and insurance agencies to janitorial services and restaurants. The sector is expected to grow by 23,832 jobs in 1993.
“I think this is a growth area,” said Esmael Adibi, head of Chapman University’s Center for Economic Research.
According to a survey released in December by Manpower Inc., more job losses are expected in the banking and insurance industries. But other service jobs, albeit in a lower wage range, are expected to keep that sector’s growth going.
The net effect of that growth, Adibi said, will be a continued slowdown of the real estate industry. Lower wages means fewer down payments on houses, which means a further drop in real estate values. Adibi forecasts another 2.8% decline in housing prices by year’s end, largely because of the shift away from defense and related high-wage industries.
Orange County has been depending on military contractors since the 1950s, when defense factories began sprawling across the landscape.
In 1991, defense accounted for 4% of the county’s non-agricultural employment, compared to 7.2% four years earlier. By 1995, defense employment is expected to fall to 2.5% to 3%, according to a study by Cal State Fullerton economists.
And though the defense industry may not continue its nose dive of the last few years--it may be near the bottom of its decline now--there continue to be uncertainties.
“Defense is still a wild card,” Adibi said. “We still don’t know how deep the defense cuts will be (in 1993). We do know there will be more hardships.”
The defense slowdown will hurt some municipalities more than others. Five cities--Fullerton, Anaheim, Huntington Beach, Seal Beach and Newport Beach--accounted for 83% of $2.6 billion in military contracts awarded in Orange County in 1991, according to the Cal State Fullerton report.
Industries such as transportation offer one avenue of hope for replacing the estimated 17,500 defense jobs that could disappear in the next four years.
Harry Vaccola, a Lockheed Corp. executive, believes that the federal government stands at a crossroads similar to the one it faced in the 1960s when it decided to begin funding NASA’s space exploration drive. Technology again will be the key, he said, only this time in transportation rather than aerospace.
“We believe the technologies that the aerospace companies have will make that transition move faster,” Vaccola said. “In 1993, with the Clinton Administration, is when we will find out the scope of our national policy.”
Lockheed plans to hire as many as 500 workers for a new transportation subsidiary in Orange County to build smart toll roads for the county’s Transportation Corridor Agencies. Hughes Aircraft Co. in Fullerton, which lost about 2,000 jobs during 1992, is also banking on transportation technologies.
The area is also counting on small businesses for growth. Peter Ueberroth, chairman of the task force created to rebuild Los Angeles after last spring’s riots, maintains that small, minority-owned businesses could well lead Southern California out of its slump.
And while tourism in the region may still be suffering from the fears stirred up by the unrest, Orange County could benefit if more Los Angeles County companies relocate to what they perceive to be safer sites farther south.
Tourism is expected to continue suffering for another reason too: As long as consumers lack confidence, they will cut back on fun to make sure they have money for necessities.
Rebuilding in 1993 As Orange County tries to recover from a lingering recession characterized by a massive hemorrhaging of jobs, many industries are expected to lose even more positions. Two bright spots are the service and retail industries, which are expected to add jobs this year. A look at jobs by quarter for 1992-93, 1993 projected: Construction: Employment in the construction industry picked up a bit in mid-1992 but may end the year at a lower level. 4th qtr. 1992: 49,543 4th qtr. 1993: 47,637 High-Tech, Defense: The defense and technology industries can expect hard times to continue in 1993 as the number of government contracts shrinks. 4th qtr. 1992: 75,632 4th qtr. 1993: 74,827 Manufacturing: An erosion of manufacturing jobs is likely. Though food processing may see modest gains, durable-goods manufacturing will keep declining. 4th qtr. 1992: 149,664 4th qtr. 1993: 149,625 Federal, State, Local Government: Jobs lost at the U.S. Postal Service and positions created as unincorporated areas become cities will mean little change. 4th qtr. 1992: 128,797 4th qtr. 1993: 128,729 Retail: Renewed consumer confidence means more than 8,000 jobs will be added within the retail industry, which includes restaurants. 4th qtr. 1992: 198,581 4th qtr. 1993: 199,963 Services, Health Care, Tourism: The service industries, which include health care and tourism, should gain more than 17,000 jobs this year. 4th qtr. 1992: 323,999 4th qtr. 1993: 333,438 Source: Projections by Chapman University Center for Economic Research; Researched by DALLAS M. JACKSON / Los Angeles Times
