O.C. Economy Healthy but Expected to Slow


Orange County’s economy has lost its sizzle but remains healthy and should perform well in coming months, Chapman University economists said Tuesday as they presented sweeping modifications to what had been a gloomier forecast at the start of the year.

“The expansion will continue well into 2000,” said Esmael Adibi, director of the private school’s Anderson Center for Economic Research, “but the boom is over.”

Chapman economists also predicted that the national expansion would surpass the 8 1/2-year Kennedy-Johnson era economic boom of the 1960s as the longest in history.

It is that national outlook--a surprisingly strong 3.9% annual growth forecast for this year--that is the biggest factor in the local economy’s performance, said Adibi and James L. Doti, Chapman’s president.


They initially had predicted a weaker national growth rate of 1.9% for the year but said Tuesday that they severely underestimated the consumer spending that has been flowing from strong real estate and stock markets.

The economists did caution, however, that the U.S. boom will begin slowing next year. They said they anticipate a 2.6% national growth pace for 2000.

For this year in Orange County, they said, employment growth will average 3.2%, or 42,000 jobs, the third-strongest performance this decade. They initially had predicted a 1.9% job growth rate.

The Chapman economists said they underestimated Orange County job growth because they had based their forecast on inaccurate state employment data. The state numbers have subsequently been revised upward. Orange County’s 5% job growth in 1998 was roughly 50% higher than that of Santa Clara County, home to Silicon Valley, and was nearly twice the national rate.


As in recent years, many of the newly created positions will come from the construction and services sectors, expected to increase by 6.6% and 3.9% respectively for the year.

High-tech employment growth will cool considerably, though, rising only 1.2% after a blistering 7.8% jump last year.

And tourism, a mainstay of the local economy, will remain flat in 1999 and 2000, Doti said. The number of visitors to Disneyland, Knott’s Berry Farm and other Orange County attractions is projected to level off. Still, the local economy has been bolstered by the rising value of resale homes. Prices are expected to increase by a hefty average of 11%, matching last year’s boost. The current median resale price in Orange County is $260,000.

The Chapman economists said they not only expect housing prices to rise an additional 7.6% next year but also expect an 8% increase in commercial and industrial activity as well--a prediction that industry specialists cheered.


“The real estate market is very stable, and we’re seeing continued growth. I think what I heard [at the Chapman forecast session] is consistent with what I see going on,” said Ronald E. Soderling, senior partner at Resco Properties, a commercial real estate developer in Newport Beach.

Kyle Wescoat, a vice president at Vans Inc. in Santa Fe Springs, said business at the casual shoe maker’s new skate park in Orange has exceeded projections since opening last November. “We’re excited about the Orange County economy,” he said.

The biggest surprise, the economists said, was the extent of the “wealth effect” in Orange County.

From mid-1996 to mid-1999, Orange County consumers pumped an additional $2.25 billion into the local economy because they were feeling richer from the booming housing and stock markets. During that period, the stock market and local housing appreciation generated $90 billion for county residents, they said.


If the stock and housing markets continue to perform at such a torrid pace, an additional $450 million will flow to local businesses in the next year because of the “wealth effect.”


Job Machine

Orange County’s job growth will continue to post healthy increases into next year, but at a slower pace than in 1998. The county led Southern California last year in job growth on a percentage basis, and also topped Santa Clara County’s Silicon Valley.


New Orange County Jobs


1995: 25,000

1996: 33,000


1997: 50,000

1998: 61,000

1999: 42,000*

2000: 39,000*


1998 Job Growth

Area/County: Increase

Orange: 5.0%

San Diego: 4.4


Inland Empire: 4.0

Santa Clara: 3.3

San Francisco: 3.0

Los Angeles: 2.1


Source: Chapman University Center for Economic Research