Orange County is projected to gain more than 20,000 payroll jobs in 2012, an employment growth rate of 1.6 percent, according to Chapman University’s 2012 Economic Forecast. The forecast was presented this afternoon at the Segerstrom Center for the Arts in Costa Mesa by Jim Doti, the Donald Bren Distinguished Chair of Business and Economics and president of Chapman University; and economist Esmael Adibi, director of the A. Gary Anderson Center for Economic Research and the Anderson Chair of Economic Analysis at Chapman.
The report, produced by the A. Gary Anderson Center for Economic Research and the George L. Argyros School of Business and Economics, takes into consideration variables that include payroll employment, taxable sales, construction activity and price indexes on the state and local level, as well as the GDP, employment levels, housing and interest rates, among others, on the national level.
The overall message of the report is that the recovery is continuing, albeit slowly, and that the economy is on the mend. California and Orange County will add jobs in the coming year, but the increase in employment will remain below 2 percent at both the state and local levels. Many business sectors are projected to contribute to the economic growth, while others will see marginal to negligible growth.
"If there's any uncertainty about this forecast that could prove it wrong, it's the Euro," Doti said, referring to the European debt crisis.
Research from the Anderson Center has documented job growth over the past year in nearly every sector, though marginal at best. For the coming year, Chapman projects continued, but weak, job growth; the report projects that Orange County will gain 21,000 payroll jobs in both services and goods-producing service sectors in the coming year, which translates to a growth rate of 1.6 percent. However, to make a significant impact on employment numbers and figure into solid economic improvement, Adibi previously told OC METRO that Orange County would need to see at least a 2 percent job growth rate.
The report draws a corollary between the shaky job market and the current disequilibrium in the housing market. In the early 1990s, job losses coupled with a slow recovery led to a six-year decline in median home prices. At the end of that recessionary period, the median home price was 20 percent below its peak value for the time.
The more recent post-2007 recessionary period has been marked by massive job losses, a similarly slow recovery and a glut of foreclosed properties on the market, factors that have contributed to a much sharper drop in home prices; the median home price plummeted by 59 percent over an 18-month period. The current median home price still stands at 52 percent below the May 2007 peak price.
However, the projected improvement in the job rate for the coming year can, in this light, be viewed as a positive factor influencing housing demand. An equivalent corollary may be drawn between new job creation and home price appreciation.
Personal income increased by about 4.5 percent in 2011, a sure sign of economic recovery, and that trend is expected to carry over into the new year. Chapman anticipates that nominal personal income will grow by more than 5 percent in 2012; after factoring a projected inflation rate of about 3 percent, the real personal income growth rate of 2 percent is projected to be the highest since the beginning of the downturn.
Taxable sales are projected to outstrip the state average in 2012. The report states that current estimates from the Anderson Center indicate that such spending rose by 6 percent in 2011 in Orange County, and further predicts that the region will follow up with a 5.7 percent increase in the coming year, compared to an overall state average increase of 5.4 percent.
Overall, the report projects that the coming year will be marked by weak but “non-recessionary” economic growth. The annual GDP growth rate is estimated to show a marginal increase from 1.8 percent in 2011 to 2.3 percent in 2012. Two factors driving the anticipated growth on the national level are projected to be investment spending and growing consumer spending.
One area that has been a positive contributing factor to the national recovery, but is likely to be reduced as a significant factor, is exports. Global economic weakness due to the European debt situation is projected to bring about a decline in real net exports of about $30 billion from 2011 to 2012. Similarly, housing is another usually strong economic-growth sector that is likely to be absent from next year’s recovery. With housing starts at extremely low rates and the number of vacant and foreclosed homes saturating the market, the housing sector is not expected to contribute to the national economy in the coming year.
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