Orange County’s economic recovery is indeed slowing, but fears of another recession or “double dip are unfounded, according to economists at Chapman University.
The highly anticipated midyear economic update, presented by the A. Gary Anderson Center for Economic Research at Chapman University, today confirmed that both the regional and national economies have been buffeted by a series of factors that have combined to put the brakes on the weak, but steady recovery over the past 18 months. Soaring gas prices, the Japanese earthquake and the end of government stimulus spending, as well as the federal budget impasse, have impacted manufacturing output and chilled consumer confidence, and therefore spending, since January.
However, Chapman President James Doti still predicted today “the recovery is downshifting, not reversing itself.” Speaking to more than 750 business and civic leaders at the Costa Mesa Hilton, Doti said this is not entirely unexpected when rebounding from a recession, particularly one as deep and unprecedented as the most recent downturn.
The wild card in the recovery picture, Doti said, is housing prices, which were down 4.3 percent for the first three months of this year after slight gains in 2010. Falling home prices have a direct and negative impact on personal wealth and generally cause consumers to curb or stop spending on durable goods altogether, triggering a domino effect that hurts retail and manufacturing. The other significant concern with declining home prices is the risk of more foreclosures and ultimately more stress and troubles for the nation’s banks.
“Housing is the key,” Doti said. “Although affordability has rarely been better than it is today we are still faced with a lot of mixed signals and concerns on the housing front.”
Although the foreclosure rate has peaked, Doti said it may take another three years before the unprecedented foreclosure chapter in this recession is finally over. As many as 3 million more properties are at risk nationally and, ultimately, must be refinanced or sold before we reach normal foreclosure levels in a healthy economy.
Chapman economists predict that housing prices in the county and California will show a 4 to 4.5 percent decline in 2011 and virtually no appreciation in 2012.
In terms of gas prices, another major drag on the recovery since January, Chapman predicts the price per gallon will remain steady between $3 and $4 through the year, barring any unexpected oil supply disruption.
On the all important jobs front, most industry sectors will continue to show positive growth through 2012. The fastest growing jobs will be in the professional and business services, leisure and hospitality, and education and healthcare. Doti forecast that Orange County will have a net job gain of 20,000 or 1.5 percent by the end of this year and about 30,000 jobs or a 2.2 growth in 2012, roughly the same as California.
Doti characterized this level of job growth as positive and added it will improve personal income and ultimately consumer spending.
'OC METRO Minute,' June 16: Chapman preps for economic forecast
Chapman gives $60,000 scholarship to Elise Drakes
'OC METRO Minute,' June 15: Chapman gives $60,000 to Elise Drakes