O.C. Recovery a Year Off, Chapman Predicts : Economy: Even then, growth after 1994 won’t match boom times of late 1980s, university’s annual forecast says.

Orange County can expect a return to prosperity, but first it has to muddle through 1994, according to a new economic forecast released Thursday.

It will be at least another year before the county’s economy will see a healthy increase in jobs or a rise in housing values, Chapman University said in its 16th annual economic outlook, and even then the growth will be far slower than the robust expansion of the late 1980s.

“It’s just been such a slow recovery,” economist and Chapman President James Doti said at a forum Thursday on the university’s campus in Orange.

One bright spot for the coming year will be retail spending, according to the report. Taxable sales are projected to increase by 3.6% next year following a 0.5% rise expected for 1993.

Specialty stores such as clothing boutiques and gift shops are expected to benefit from increased sales as consumers begin to regain confidence in the economy, the report says. And the Laguna Beach wildfire, which destroyed 366 homes on Oct. 27, will boost sales at building-supply stores as contractors and homeowners buy materials to rebuild.

The Laguna Beach reconstruction, which the Chapman study values at $100 million, will stimulate the region’s depressed construction industry temporarily but will not have a major effect, the report says. The value of building permits taken out in Orange County next year is projected to be $1.6 billion, less than half of the total for the 1989 boom year.

“Construction is simply scraping along the bottom. It would be hard to conceive of a situation that’s worse,” Doti said.

He said that construction employment has been cut nearly in half during the past four years--from 75,000 in 1989 to 43,000 now. And many of the survivors, Doti said, are workers holding only part-time jobs.

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The Chapman Economic Model, the basis for the report, is a major barometer of economic change in Orange County. The model compares the movement of various indexes--from employment rates to the prime interest rate--to gauge the direction of the national and local economies.

The Chapman report is less bullish on job growth next year than a study released in September by Cal State Fullerton economists. And its findings of renewed consumer confidence contrast with a UC Irvine survey earlier this fall that found just the opposite to be likely.

None of the three reports, however, paints a picture of prosperity for 1994.

The Chapman study projects that employment across all sectors of the economy will continue to decline through the first half of 1994 but will be partly offset by hiring in the second half, “leading to virtually no net gain in employment”--a mere 2,200 new jobs in a county that employs 1.1 million people.

Payroll increases in the health care and computer industries will only barely outpace continued layoffs in construction and the defense industry, the report says.

That minimal job growth will stifle home sales, and residential property values will decline in 1994 for the fourth consecutive year, the report says.

By 1995, though, homes will begin to increase in value, gaining an average of 4.5% for that year. And the number of home-building permits will climb by 23%, the report projects.

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Finally, international trade fostered by the North American Free Trade Agreement, which will take effect Jan. 1, will give Orange County companies a greater incentive to export next year.

“International trade will steadily increase in importance as an engine of economic growth in the Orange County economy,” the Chapman report says.

The full effect of the free trade agreement, which calls for a gradual reduction of tariffs, is still years away. In the meantime, Doti said, Orange County will continue to reap small benefits.

CHAPMAN UNIVERSITY FORECAST

Slow Road to Recovery

Chapman University’s Center for Economic Research is predicting continuation of a sluggish recovery in 1994. How the Chapman indicator compares to actual and projected percent change in employment:

Chapman indicator (4th quarter, 1998, projection): 3.7

Employment growth (4th quarter, 1998, projection): 2.1

Note: Chapman Indicator Series is based on a weighted average of movements in four factors that significantly impact Orange County employment growth: real Gross Domestic Product (GDP), foreign trade, defense spending and the value of residential and non-residential construction projects in the county.

Source: Center for Economic Research, Chapman University.

Researched by JANICE L. JONES / Los Angeles Times

Charting O.C.’s Economic Health

A look at Chapman University’s Center for Economic Research forecasts for job creation, taxable sales, personal income and construction spending:

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More Jobs on the Way

After three years of negative growth, jobs are expected to increase slightly next year with the pace picking up beyond. Number of jobs created in thousands:

1998 (Projection): 27.9

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Rising Taxable Sales, Personal Income

Taxable sales are expected to increase by 3.6% in 1994 while personal income will go up 5.5%. Figures in billions:

Personal Income: 1994 (Projection): $65.4

Taxable sales: 1994 (Projection): $27.5

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Value of Construction Projects Steady

The dollar value of construction projects requiring a building permit is expected to drop this year, but rebound slightly in 1994. Collar amounts for permit valuations in billions:

1994 (Projection): $1,627,345

Source: Center for Economic Research, Chapman University.

Researched by JANICE JONES / Los Angeles Times