Forecast: Only modest job growth for O.C.

COSTA MESA — Orange County can expect mild job growth this year and next, according to Chapman University's mid-year economic forecast Thursday.

Consumer spending should increase but struggles in the housing sector could continue to mean sluggish job growth, according to the forecast.

Economists forecast job growth of 1.5% in 2011 and 2.2% in 2012, resulting in 20,000 and 30,000 jobs, respectively. The 2011 numbers were revised down slightly because of the Japan earthquake, persistently high gas prices and other factors.

But jobs were the main issue.

"We will not get real, meaningful recovery without significant job growth increases," Esmael Adibi, director of the A. Gary Anderson Center of Economic Research at Chapman told a record audience of 800 at the Hilton Orange County in Costa Mesa.

Some areas, such as white collar management positions and health care, showed modest promise in the forecast.

The sectors with the strongest gains predicted for 2012 were professional and business services, 3.2%; education and health services, 2.8%; and leisure and hospitality, 2.8%.

Adibi said the high cost of living in Orange County and California, negative equity in many homes and California's high-tax climate are factors that could hold job growth and consumer spending at bay.

However, he said, roughly 90% of those who want to work have jobs, even though media reports focus on the tenth of the population that is officially unemployed. Unemployment is 9.1% nationwide, 11.9% in California's and 8.6% in Orange County.

Those who kept working during the hard times should help lead consumer spending, buying flat screen TVs they've wanted and replacing older cars, Adibi said.

"Once a recession is over, there is this feeling of, 'I survived,'" Adibi said. "Consumers go out and satisfy all those pent up demands."

Californians showed increasing consumer confidence from the third quarter of 2009 through 2010, but that confidence dipped in the first quarter of 2011 although, according to the report.

There are hurdles, namely high gas prices and a soft housing market, said Chapman President James L. Doti.

"If you have a drop in housing prices, you have a negative wealth effect," Doti explained. "A negative wealth effect leads to a drop in consumer spending and more foreclosures. It is a vicious circle."

Home prices are predicted to decline 3.9% in Orange County and 4.4% statewide through this year with almost no change in 2012.

Statewide there is also a large number of shadow inventory, troubled homes not yet on the market, which is expected to remain for several years.

"We're going to be here for a while," Adibi said. "The best we can hope for is for home prices to stay flat for a while and let job creation catch up."

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