Chapman University economists have become more pessimistic about Orange County's economy, saying Wednesday that employment won't grow as fast as previously expected, a reflection of the national economic slowdown.
The midyear update trimmed projected job growth more than 25%, or 14,000 jobs. After earlier predicting annual job growth of 3.5% for the county this year, the economists now say growth should slow to 2.4% this year, picking up slightly in 2002.
The economists said the national economic landscape has changed markedly since the initial 2001 forecast was issued in December, noting such factors as lower stock prices and the slumping high-technology industry. They predicted the nation's economy will "narrowly skirt a recession" this year and recover in 2002.
Although the county also will avoid a recession, higher electricity costs and blackouts could drain $700 million from the economy, they said. The technology slump will be especially painful for Orange County, because the high-tech sector accounts for a higher percentage of manufacturing jobs than elsewhere in the nation.
The county, with its relative affluence, also is vulnerable to stock market gyrations, said James Doti, president of the A. Gary Anderson Center for Economic Research, who presented the report to a group of about 250 business leaders at the Orange college.
Lower stock prices will strip the local economy of an estimated $405 million as consumers rein in spending. But that drag on the economy should be partially offset by swollen home values in the area, which tend to make property owners feel wealthier.
Further, the report predicts a boost of about $520 million to the county, beginning next month, as a result of the retroactive federal tax cut.
However, the county residents and businesses will pay about $500 million more annually in electricity costs, essentially devouring the tax cut gains.
Although the overall projections are less optimistic than six months ago, economists say a variety of factors should provide a boost later this year, including a 12.4% increase in defense spending that will benefit local subcontractors.
Defense spending, which is expected to jump 16.8% in the county next year, "should begin to resurface as a major engine of economic growth," Doti said.