The good news about the economy? “We’re on a steady upward path,” said Anil Puri, director of Cal State Fullerton’s Center for Economic Analysis and Forecasting.
The bad news? “Mediocre growth seems to be the new norm.”
And that blunt assessment applies to Orange County as well as to California and the nation, he added.
Along with economist Mira Farka, Puri will present the university’s annual economic forecast to a sold-out crowd of 800 business executives at the Hotel Irvine today.
On the surface, the forecast’s prediction that the county’s unemployment rate will drop from the current 5.1 percent to 4.8 percent next year and 4.5 percent in 2016 offers hope to those who are struggling to find jobs.
However, that metric, the forecast explains, “may overstate the strength of the labor market recovery. Digging deeper into household employment data (from which the unemployment rate is derived), it appears that some darker forces may be at play.”
For one, in the wake of the deep recession and the feeble recovery, the growth of Orange County’s labor force is trailing that of California and the United States, according to the latest employment numbers.
The labor force includes both those who have jobs and those looking for jobs. If it shrinks or fails to keep up with population growth, it means that discouraged workers are dropping out, or new participants are failing to join the workforce.
And with fewer people telling census workers that they are seeking work, the official unemployment number automatically falls.
The county’s labor force participation rate was 52.2 percent in 2012, and is on track to drop to an estimated 51.3 percent this year. “People are sitting on the sidelines,” Puri said. “A lot of people who dropped out during the recession are staying out. We don’t know why exactly.”
One hint may lie in CSUF’s quarterly survey of Orange County businesses. In the latest poll this September, 69.4 percent of the 62 executives answering questionnaires expected their sales to increase this quarter. However, only 41.7 percent said they plan to hire more workers, and 6.7 percent plan to cut jobs.
Another issue may be that jobs are not paying enough to attract applicants. Puri noted that since the recession “there have been huge issues of wage inequality: the gains have been unequal” for lower-paid workers.
According to the forecast, the creation of new jobs in the county is lagging the historic rate. From 1993 to 2013, the population grew by 585,000 and payroll employment by 337,000 – a ratio of 0.53 jobs per person. Today, the ratio has dropped by half, to 0.23.
“Orange County has not fully recovered the jobs we lost in the recession, while the rest of the nation and California have,” Puri said. “We have OK growth, but it could be better.”
The CSUF forecast for county payroll job growth is somewhat less optimistic than that of Chapman University, which was published in June. Chapman economists predicted jobs will grow at a 2.9 percent rate in 2015, whereas CSUF expects a 2.2 percent increase.
Puri noted, however, that the California Employment Development Department often significantly revises its data months after the numbers are issued.
“We base our forecasts on the data we have now, however imprecisely they are measured,” he said.
In one key sector of Orange County’s economy, housing, the forecast noted a “remarkable improvement.” In August, the median single-family home price was $642,000, compared with a low of $425,000 in December 2008, in the depths of the Great Recession.
“Though this is still around 11 percent below the peak of $720,000 recorded in July 2007,” the report added, “the turnaround has been quite spectacular.”
The rise in home prices has not helped Orange County’s housing-affordability crisis, Puri acknowledged.
“For people trying to buy a home, it is a problem,” he said. “But for people who already own a home, their household wealth is higher now, and that should spur spending and job growth.”
The CSUF forecast is published in partnership with the Orange County Business Council. The chief sponsor is US Bank.