Orange County unemployment is expected to creep upward in the remainder of 2010 before reversing course in 2011, but the overall economy should continue recovering at a modest pace, according to Chapman University's mid-year economic forecast unveiled Thursday at the Hilton in Costa Mesa.
In fact, the county could lose as many as 18,000 more jobs this year, a 1.4% increase in joblessness from 2009. However, the forecast for 2011 is better, with Orange County increasing payroll employment by 1.3%, or 21,000 jobs, in 2011.
Revised numbers show that Orange County lost 110,200 jobs in 2009 and that unemployment reached 9.5% in December 2009.
The national outlook appears strong. At their economic forecast update in Costa Mesa, Chapman President James L. Doti and Esmael Adibi, the college's chairman of economic analysis, predicted a 3.2% jump in U.S. gross domestic product through 2011, up from 2.4% in 2009.
"When a recession is in place, there is a momentum and very little that can stop that downward force," Doti said. "The same could be said of recovery, where there are positive forces. There is a lot of room in recovery and we believe that the positive forces will carry us through 2011."
Addressing a breakfast audience of about 700, the economists predicted an increase in consumer spending, which represents about 70% of economic activity.
"There is this mentality of 'I survived,'" Adibi said. "That mentality brings out consumers with a pent-up need to satisfy their spending."
Adibi advised not to focus on the unemployment rate because in actuality, a modest increase in unemployment is a natural trend in recovery.
The labor force shrinks when the economy is bad because discouraged workers leave the work force, sometimes returning to school, he explained.
When the economy begins to stabilize, those same workers begin looking for jobs, causing an increase in unemployment and sending a false signal that the recovery is weakening.
The housing picture appears to already be brightening. The median resale value of single-family homes has risen 14.2% to $430,000 from 2009.
"However, these numbers are bogus," Adibi quipped, explaining that examining the midpoint of total home prices can provide the impression that overall prices are lower than they really are. "These are what you read in the papers and unfortunately what we have to forecast. This represents the median price of homes and that median changes quite a bit."
For 2010-11, Orange County home prices are forecast to rise 6% this year and 5.5% next year.
"Having said this, don't get excited — your home is not going to go up 6% in value," Adibi joked. "Remember that this is the median."
There will still be home foreclosures this year through next year, but Adibi said there will be no spikes like what was seen in the worst of the housing crisis.
The bottom line, Adibi concluded, is that while unemployment will continue to rise, income, spending and economic growth should exceed inflation and the recovery may continue.
Doti said he is optimistic and does not share concerns about a double-dip recession, as some have forecast.
"There has been only one double dip in the past," Doti said. "And that was under very specific circumstances that I won't get into here. Needless to say, it is not likely to happen again.
"If we're wrong — talk to Esmael [Adibi]."