Economic Storms Abroad Darken Sunny O.C. Forecast

Suddenly, worries about a shortage of workers in Orange County are beginning to dissipate amid growing concerns over just how deeply the economy could be hurt by the Asian financial crisis.

Earlier this year, despite the troubles in Asia, the county economy appeared to be steaming ahead. Job growth remained powerful, and the unemployment rate was impossibly low. Businesses’ biggest complaint was the lack of qualified job candidates, and economists were questioning whether economic growth would be stalled if companies couldn’t find workers quickly enough.

All that has taken a back seat to the growing realization that Asia’s problems are far worse than originally thought and that the impact on the local economy will be deeper and more prolonged than first expected. In a telling sign, last week’s government report on the job market showed that the county’s unemployment rate edged up to 3.1% in July from June’s 3%.

To be sure, Orange County’s economy remains healthy and unemployment is still minuscule. “It’s still robust growth,” said Esmael Adibi, director of Chapman University’s Anderson Center for Economic Research. He noted that annual job growth is still running at a healthy pace, in the mid-3% range. What’s more, Orange County’s economy has suffered far less than the state as a whole, mainly because Northern California’s high-tech dependency left it more vulnerable to Asia’s woes.

“But we have to watch it,” Adibi warned. The statewide slowdown in growth will soon spread to Orange County because many local firms make components used in products sold to the most deeply troubled Southeast Asian nations, he said. More worrisome, he said, is the uncertainty over other Asian and non-Asian foreign economies, including recession-racked Japan, China, Russia, Brazil, Argentina and even Mexico.

It is primarily the domestic economy that is keeping the county’s prospects alive, Adibi said. But if the troubles on the international scene continue to plague the stock market and--perhaps most important--dampen the enthusiasm of American consumers, the local economy will weaken considerably in the year to come, he said.