Solid O.C. Economic Growth Foreseen in 1996 : Recovery: Increase in the number of jobs will fuel an upswing in income and spending, annual Cal State Fullerton report predicts.

By JOHN O’DELL

Nov. 1, 1995 12 AM PT

TIMES STAFF WRITER

FULLERTON —

Strong employment growth in Orange County next year should push personal incomes and retail spending to their highest levels since the economy began tumbling with the 1990 recession, economists at Cal State Fullerton said Tuesday.

“The best news for the coming year is that the worst is behind us,” Anil Puri, head of the state university’s economics department, said in unveiling the school’s fourth annual Orange County economic forecast.

While more conservative than a recent prediction by chief economist Lynn Reaser at First Interstate Bank, Puri’s forecast still paints a positive portrait of the coming year, including a substantial rebound in housing construction, increases in export trade and even slight growth in manufacturing employment after years of decline.

The First Interstate forecast said that Orange County employers would add 30,200 new jobs to their payrolls next year; Cal State Fullerton’s Institute for Economic and Environmental Studies, which Puri heads, is projecting 23,300 new jobs in 1996.

Local economists can sometimes sound like charter members of a business boosters committee, but the upbeat forecasts this year seem to be in keeping with the view from outside.

“The data certainly suggests that things are getting better in Southern California,” said Robert G. Dederick, economic consultant at Northern Trust Corp. in Chicago.

“Southern California is once again participating in the national economic expansion,” he said. Dederick cited an improvement in trading partner Mexico’s economy last year, the winding down of federal defense spending cuts, and a significant slowing of the business exodus that rocked the region in the early 1990s.

In a county that has been struggling for almost five years to climb out of an economic slump, 1996 is looking pretty good, Puri told an audience of more than 400 local business people who turned out for an early morning breakfast meeting to hear the first of several local economic forecasts due out in the next six weeks.

The Orange County Business Council holds its annual economic forum Nov. 8 and Chapman University’s 14th annual forecast is scheduled to be released Dec. 7. A fourth major tool for business executives and others looking to get a handle on the local economy follows in February when UC Irvine issues its annual executive opinion poll.

On Tuesday, Puri characterized the Cal State Fullerton forecast as “optimistic, but not rosy. We still have concerns about the nature of the recovery, nationally and internationally.” What happens in Washington and in Mexico City and Tokyo in coming months will have a lot to do with Orange County’s recovery, he said.

Interstate and international trade is an increasingly important component of the local economy, “and when you have to go out and create new markets for your products, you have to work much harder and be a lot more competitive to be successful and generate the demand that creates the new jobs,” said Puri.

But create them local business will do, he said--fast enough to let employment grow at a 2% clip in 1996--the best performance since 1989.

The new jobs will help push gross personal income in the county to a record $72.35 billion, a 6.4% increase from this year’s anticipated $68 billion. After adjusting for a 3% inflation rate, that means a real growth rate of 3.4%. “That’s still substantial,” Puri said.

More personal income usually means more spending, and Puri predicts that taxable sales transactions in the county will jump 6.1% next year to an estimated $31.6 billion from the $29.74 billion projected for 1995. That would mark the first time since 1988 that the county’s taxable sales total increased by more than 6% in a year.

Home builders, hurt badly by the 1990 recession and again this year by shattered consumer confidence in the wake of a softening national economy and the county government’s bankruptcy at the end of 1994, also should stage a comeback in 1996, Puri said.

He is estimating that builders will pull permits next year for 7,184 residential units. This is slightly higher than the average for the 1991-1993 period, but well above the 4,547 units expected to be tallied this year when all of the permits are in.

The 58% increase in housing units won’t be matched by a similar increase in the value of the anticipated new construction, however. Because of consumer pressure to hold prices down, units will tend to be smaller, with fewer amenities than in the past. And some material and labor costs have come down as a result of the industry’s prolonged recession.

Puri is estimating that the value of the 7,184 permits issued next year will be $870.3 million--just 19.5% more than in 1995. In contrast, the 6,569 residential unit permits issued in 1991 had a construction value of $1.1 billion.

In a companion report issued Tuesday, Cal State Fullerton economist Vincent Dropsey said recovering international economies should combine next year with the county’s strengths in electronic equipment and instrument manufacturing to boost exports to Europe, Mexico and Asia.

Dropsey did not project specific trade levels, but said he expects the gross domestic products of the county’s major foreign trading partners to increase an average of 3% in 1996, creating significant export market opportunities for aggressive manufacturers.

And manufacturing in the county should expected increase next year, Puri said. He believes that about 2,200 new jobs will be added to factory payrolls. Metal fabrication, industrial machinery, high-tech electronics, civilian aviation and the plastics industries all should share in the growth.

While Orange County has lost more than 40,000 manufacturing jobs since the recession began in 1990, advances in factory automation have enabled local manufacturers to increase productivity with fewer workers, Puri said. As a result, he said, manufacturing will continue to be a major segment of the economic base.

Despite the huge job losses, manufacturing still accounted for 18% of total employment in the county last year, compared with a 16% share for the nation as a whole, he said.

While Cal State Fullerton’s projections don’t go beyond 1996, Puri said in an interview that he believes the Southern California region will continue its economic recovery well into 1997 and that Orange County “will outperform the rest of the region.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

More Jobs Expected

Employment in Orange County is expected to continue its upward trend this year and next. Total non-agricultural jobs, in thousands, and percentage change from previous year:

Employment (% change)

1990: 1,172 (1.4)

1991: 1,144 (-2.4)

1992: 1,126 (-1.5)

1993: 1,115 (-0.9)

1994: 1,126 (1.0)

1995*: 1,136 (0.8)

1996*: 1,159 (2.0)

* Projection

Source: Cal State Fullerton’s Institute for Economic and Environmental Studies; Researched by JANICE L. JONES / Los Angeles Times

Good News in ’96

Orange County is expected to emerge from its economic slump in 1996, with personal income and retail spending reaching their highest levels in years. Residential building is also expected to rebound from major declines this year.

Personal Income

(in billions, not adjusted for inflation)

1990: $59.0

1996*: $72.4

Taxable Sales

(in billions)

1990: $27.8

1996*: $31.6

Housing Starts

Permits

(in thousands)

1990: 11,979