O.C. Recovery Expected to Continue : Economy: Chapman predicts job growth but says bankruptcy will affect figures. Dip in housing activity, retail sales forecast for rest of year.
Despite the many financial problems connected with Orange County’s bankruptcy, a Chapman University report Tuesday maintained that the county’s economic recovery and job expansion will continue this year, albeit scaled back.
In their midyear economic report, Chapman researchers did predict drops in housing activity and retail sales. But they clung to their earlier forecast made just after the December bankruptcy filing: that the insolvency will cost the county about 4,000 of the 21,000 new jobs it had been projected to create this year.
However, Esmael Adibi, director of Chapman’s Center for Economic Research, quickly added a caveat.
“If Measure R fails and the cloud of uncertainty becomes more intense, that could shave off several [more] thousand jobs,” said Adibi, who along with Chapman President James Doti publicly supported Measure R, the sales tax increase initiative.
Indeed, Doti emphasized to the 200 mostly business executives in his presentation at Chapman’s campus in Orange that the 17,000 new jobs projected constitute “the best-case scenario.” That employment figure also represents a 1.5% increase from 1994 for Orange County, compared with Chapman’s projected job growth of 1.1% for Los Angeles County and 2.3% nationally.
Yet if Orange County doesn’t solve its financial problems, he warned, “the uncertainly will negatively affect capital investment and relocations. How much is uncertain.”
Doti’s listeners seemed just as wary.
“I think his view is conservative,” said Raymond Dellerba, president of Eldorado Bank in Irvine, referring to the projection that the bankruptcy will erase 4,000 new jobs. “I think it could possibly be higher. People aren’t going to want to come here until they know we’ve resolved our problem.”
Chapman, in its 17th annual forecast in December, had projected a second year of growth in Orange County’s construction activity for 1995.
But on Tuesday, Doti said he now believes total new housing units in the county will decline by 7% from 1994, instead of climbing 16% as previously forecast. And the value of building projects started in Orange County this year will drop 4.3%, to $2.2 billion, instead of increasing to $2.6 billion as previously forecast.
Doti attributed these changes to several factors that have dramatically slowed local housing sales this year, including the heavy rains and the increase in national mortgage rates as well as the county’s bankruptcy.
Average resale house prices in Orange County, Chapman economists predicted, will decline by 1.8% in 1995 from the previous year, an improvement from the 5.2% drop in 1994. This year would mark the fifth straight year of declining house prices.
The researchers also slightly revised downward Orange County’s total taxable sales increase for 1995, to 6.2% from 6.9% previously. This adjustment too was partly attributed to the bankruptcy.
Chapman’s report said the number of visitors to Orange County will likely fall by 1% this year from last year, a projection made on the basis of the exchange rate and transportation costs.
Doti said all of these indicators suggest that Orange County’s recovery will be very modest, compared with robust rebounds following past recessions.
“It appears it will be the weakest recovery on record in Orange County,” he said.
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Economic Picture
Chapman University economists revised their previous forecast of housing growth in Orange County, saying the county is now headed for a decline from last year. The number of jobs continues to grow, although at a slower pace.
HOUSING UNITS BUILT
TOTAL NON-FARM EMPLOYMENT
* Estimated
** Projected
Source: Chapman University Economic & Business Review
