Weakened by a sluggish national economy, Orange County’s job growth has slowed this year, but is expected to pick up gradually in 2014 and 2015, according to a forecast by Cal State Fullerton economists.
Although the “healing process” from the Great Recession has continued, the economists conclude, “2013 has faced an unusual array of issues such as political gridlock, geo-political turbulence, monetary policy uncertainty and fiscal tightening, culminating in the … government shutdown.”
The CSUF forecast predicts an average Orange County payroll job growth of 2 percent this year, a drop from last year’s 2.3 percent. By 2015, however, job growth is expected to rise to 2.8 percent.
“This political infighting in Washington is creating business uncertainty – and business hates uncertainty,” Anil Puri, director of the university’s Center for Economic Analysis and Forecasting, said in an interview. “The shutdown was a jolt to an already fragile economy. Then (government negotiators) just kicked the can down the road.”
Puri and his co-author, economist Mira Farka, will present their analysis Thursday morning to about 900 local executives at the Hyatt Regency Irvine. The report is the university’s 19th annual forecast in partnership with the Orange County Business Council.
Orange County’s outlook remains somewhat brighter than that of Southern California and the nation as a whole, the economists found. They predict a 1.6 percent average rise in payroll jobs in the six-county Southern California region this year, the same growth rate as the nation overall.
During 2014 and 2015, they estimate, job growth will rise to 2.3 percent in Southern California and more slowly in the nation as a whole, to 1.7 percent.
“Orange County households have reduced debt and are positioned to improve spending,” Puri said. “That leads to more sales and more jobs.”
The unemployment rate in Orange County is steadily declining. The forecast predicts a drop this year to an average 6.1 percent from 7.6 percent last year. By 2015, unemployment in the county should dip to 5.1 percent.
By contrast, Southern California’s rate will remain higher, at 9.6 percent this year and 8.6 percent in 2015, according to the forecast. Nationally, joblessness is expected to drop from an average rate of 7.5 percent this year, to 6.6 percent by 2015.
Unemployment rates only count those who are actively looking for work. “The precipitous drop in the unemployment rate should be taken with some caution, since it tends to ignore individuals who have dropped out of the labor force,” Puri said. “A huge backlog of people have either left the labor market or been unemployed for a long time.”
From 2010 through August of this year, Orange County gained 80,200 payroll jobs, a rise of 6 percent. The growth, however, has been “uneven across industry segments,” the report noted.
Construction employment is building momentum, with a 15.9 percent rise over four years, although it remains well below its level at the height of the building boom, according to the forecast.
“Other sectors appear to have cooled down,” the economists noted. “Professional and business services, one of the largest employment sectors in the county, added only 3,100 jobs in the last 12 months, compared to a gain of 11,400 over the previous 12 months.
“Retail trade actually showed a loss of 1,500 jobs compared to a gain of 1,100 jobs in 2012.”
Orange County’s median single-family home price remains at least 15 percent below its 2006 peak, at the height of the real estate bubble. But the forecast concludes that a rapid price rise over the past year “bodes well for future consumer spending.”
The economists predict “a tempering in housing price appreciation” due to uncertainty over interest rates and the overall economy. But that will by no means amount to a reversal of the upward trend, they said.
At the moment, Puri said, many Orange County businesses are delaying hiring and investment because of concerns about whether Congress and the administration can agree on a budget and how long the Federal Reserve will continue its bond-buying stimulus.
“The fundamentals of the economy are getting stronger, but political uncertainty is putting households and businesses in a holding pattern,” he added.
The forecast will be available online by mid-afternoon on Thursday at business.fullerton.edu/centers/ceaf.