O.C. Job Forecast Goes From Good to Better


Orange County’s booming economy has outstripped even the most sanguine projections, leading the authors of a closely watched report to revise upward their job growth forecast for the year.

A total of 36,000 new jobs are expected to be created in the county this year, a prodigious 3% increase, Chapman University economists said Tuesday in their updated forecast. Chapman economists previously predicted county payrolls would grow by 2.7%, or 32,000 jobs, in 1997.

“In December, when we presented our forecast, we were way out on that. We were seen as very optimistic,” Chapman President James Doti said. “Now we’re saying we should have been even higher.”

Doti noted that the state’s recently revised statistics for 1996 showed that Orange County’s work force actually grew by 2.8% last year, or 32,500 jobs, rather than the 2.4% increase previously reported.


That indicates the county economy had “more momentum, more forward thrust” going into 1997 than had been expected, he said.

A healthy national economy, surging technology and international trade sectors, and a surprising rebound in construction activity are fueling the growth, Doti said.

Building permits are expected to shoot up 22% to $2.8 billion for the year, with residential construction accounting for the biggest increase.

As a result, construction industry employment is expected to jump by 8.3% this year--the biggest gain of any major job category.


“It’s kind of creeped up on everyone, but it’s dramatic growth,” reflecting developers’ renewed optimism as the economy gains speed, Doti said.

Even so, he said, construction of new housing probably won’t keep pace with overall job growth in the county--and that should boost real estate values, which have remained sluggish during the county’s recovery.

Doti predicts a modest 1.8% rise in house prices for 1997 but sees gains of 3% to 4% a year for the remainder of the decade.


Chapman’s revised outlook underscored what Doti called the “structural change” in Orange County’s economy over the past five years. Jobs lost in the aerospace retrenchment and in the relocation of manufacturing operations to lower-cost areas have been more than offset by growth in service sector jobs--particularly those related to software development, he said.

By the end of 1996, that transformation put the county 12,000 jobs ahead of the previous employment peak in 1990.

International trade, which has exploded in the county in the past few years, is expected to continue “going through the roof,” Doti said. The ballooning import-export market alone could add 1.3% to the county payrolls this year, Doti said.

Nationwide, payrolls will expand by 2.1% this year, up from the 1.5% growth projected earlier.


However, Chapman also predicted that the U.S. economy would cool from the red-hot 5.8% growth in domestic production in the first quarter to a 2% to 2.5% growth rate for the rest of the year.

The slower growth is good news, Doti said, because it means there will be less pressure for the Federal Reserve Board to raise interest rates.

The Fed might hike short-term interest rates once more this year, Doti said. But he expects no further rate increases, and sees long-term interest rates declining--a benefit to businesses needing to borrow money for expansion.

Doti is convinced that a national recession is nowhere on the horizon, mainly because the current economic expansion has been so moderate it’s left plenty of room for more growth.


There are two possible spoilers to that scenario--a spike in inflation and a major stock market correction, Doti said.

In Los Angeles County, the outlook was mixed. The 1997 job growth forecast for the county was revised upward to 2.2%, or 82,000 new jobs, from 2.0%.

However, recently revised statistics by the state revealed that the county’s payroll employment grew just 1.5%, or 55,325 jobs, in 1996. Previously it was estimated that county employment increased 2% last year.


That leaves the county 330,000 jobs shy of its pre-recession peak.

“Los Angeles County is creeping up very, very gradually,” said Esmael Adibi, director of Chapman’s Anderson Center for Economic Research.

Meanwhile, San Diego County is expected to add 25,500 new jobs this year, a 2.5% increase, while payrolls in the Inland Empire will grow by 3.8%, or 31,000 jobs, Adibi said.


The Southern California region as a whole is now expected to account for half of all the job growth in the state this year, compared to the 30% to 40% levels earlier in the decade.

Despite intensifying demand for workers throughout the area, however, Chapman economists don’t expect salaries to rise much in the near future. That’s because unemployment remains relatively high in Los Angeles, Riverside and San Bernardino counties.

Also, they said, many people who stopped looking for a job during the recession--and are no longer counted in the unemployment figures--will be lured back to the work force because of the growing availability of jobs.


O.C., the 12th largest manufacturing center in U.S., is expected to see such jobs rise 3.2%. A12


Payroll Push

Orange County job growth will be at a faster rate this year than the previously forecast 2.7%. Changes in employment:

1992: -1.5%

1993: -0.9

1994: 1.0

1995: 2.2

1996: 2.8

1997: 3.0*

* Forecast

Source: Chapman University

Future Looks Bright

Powered by residential construction, the overall value of building permits in Orange County is expected to increase a half-billion dollars from 1996’s level. But new home building is not expected to maintain pace with overall job growth, which should lift home values that have been depreciating for five years:

Total Building Permit Values

(in billions)

Home Value Appreciation

* Forecast

Source: Chapman University