A Mild Cooling Trend in Orange County Forecast
Orange County’s robust economy will cool off next year as the area feels the ripple effect from federal efforts to keep inflation in check by hiking interest rates, Cal State Fullerton economists predicted Thursday.
“The good news is that there’s no recession on the horizon,” said economist Anil Puri, who presented the school’s annual forecast. “We see nothing but a healthy, growing economy over the long run in Southern California, especially in Orange County.”
Orange County, which has a highly diversified economy, should experience robust growth in tourism and the high-tech sector, one of the engines of the area’s recent boom, Puri said.
“I think the technology industry in Orange County is a diverse and strong one with several different sectors ranging from software to hardware to medical devices to computer peripherals,” said Phil Beaudoin, executive director of the American Electronics Assn.’s local chapter.
High-tech businesses that export products such as machinery, instruments and electronics should rebound as Asian economies recover. In 1998, exports to the Asia Pacific region, the county’s largest export market, fell 20%, hitting some local companies hard.
But with the “Asian flu” apparently a thing of the past, Orange County exports are expected to increase nearly 10% this year, to $13.3 billion.
The county’s hot real estate market continues to be a major force, but will grow more slowly in the coming year, according to the report. Housing prices, which set all-time records during the year, will be up 6.5% by the end of the year, compared to a blistering 18.9% jump in 1998.
Rents and housing prices still are expected to rise because Orange County is such a desirable place to live and work, said Stan Oftelie, chief executive officer of the Orange County Business Council.
“If you’re looking at the full spectrum of quality-of-life issues, like schools and job opportunities, there’s no place like Orange County,” he said. “That’s why people and companies are coming here.”
The county’s economic strength is also reflected in its ability to create jobs. In 1998, Orange County accounted for more than one-third of Southern California’s 182,000 new jobs, even though the county makes up less than 20% of the region’s total employment, Puri said.
This year, the county is expected to add 40,900 jobs, a 3.2% increase. Next year, however, economists expect only a 2.8% gain.
Small and mid-size businesses in the county are hiring, expanding and buying new equipment, signs pointing to continued strong growth, said John J. McCauley, executive vice president of Pacific Mercantile Bank in Newport Beach, a new community bank with $62 million in assets.
“The Earth, sun, moon and stars are lined up in Orange County,” he said.
But some sectors have shown unmistakable signs of cooling down. Manufacturing employment grew by 6.4% in 1998, but is expected to increase by only 2.3% in 1999. Similarly, jobs in the retail trade jumped 3.9% last year, but will grow by 1.6% this year.
Even so, Orange County will fare better than its neighbor to the north, which still hasn’t recovered from the recession of the early 1990s, Puri said.
Los Angeles County, despite healthy growth in engineering, management and business services, is projected to record some of the lowest job growth rates in Southern California--1.9% in 1999 and 1.4% in 2000, Puri said.
“The industries there are more mature than elsewhere in the region, and newer industries generally grow faster,” Puri said, adding that Los Angeles County has not been as successful as Orange County in making the transition from defense and aerospace to the new high-tech economy.
Michael R. Englund, chief economist at Standard & Poor’s MMS, said the national expansion will continue, albeit at a slower pace, and that inflation is under control.
Englund, who presented the national segment of the forecast, said the Y2K phenomenon could boost the economy in the fourth quarter, because some consumers will stock up on staples in preparation for the millennium.
