CSU Fullerton Economists Predict Continued Economic Growth In Orange County and Nationally, But At Slower Pace
Dr. Anil Puri and Dr. Mira Farka tell OCBC 24th Annual Economic Forecast Conference attendees that GDP and employment growth will moderate, but don’t see recession soon.
IRVINE, CA — October 25, 2018 — The nation’s and Orange County’s economies – still charging along in “high gear” as a beneficiary of the second longest economic recovery in the nation’s history – will continue to grow through 2020, though at a slower pace than they experienced at the peak of the current recovery. Political turbulence, trade spats and rising interest rates are among the potholes that could jar the economy to slow down.
That was the message delivered by Cal State Fullerton economists Dr. Anil Puri and Dr. Mira Farka to more than 700 guests attending the 24th Annual Economic Forecast Conference hosted by Orange County Business Council and Cal State Fullerton’s Mihaylo College of Business and Economics. The conference was sponsored by U.S. Bank
The nation’s current economic recovery is in its 112th month, said Puri, second only to the 120-month comeback of the 1991-to-2001 recovery. “I expect that the current recovery will continue and will be the longest economic recovery when we convene for next year’s economic forecast,” said Puri.
Puri credited the duration and velocity of the current national recovery to consumers buoyed by job growth, rising net worth and lower levels of household debt. Meantime, businesses are benefitting from corporate tax cuts, strong profits and earnings, and solid investments. Finally, fiscal policy that produced $1.5 trillion in tax cuts, an additional $1.3 trillion in spending and reduced regulations are also helping to sustain the recovery.
Moderating influences on the economic expansion, however, are a housing market that still has not fully recovered from the great recession, said Puri. Housing starts remain below historical averages, resulting in tight inventories and higher prices. As well, emerging inflation, rising interest rates, tariffs, and trade frictions between the U.S., China, Mexico and Canada are injecting fresh tension into the economy.
Farka credits the duration of the current recovery to a “Spartacus” economy that’s “firing on all cylinders.” From 2010 to 2017, average annual GDP grew 2.2 percent, business investment 5.2 percent, industry production 1.9 percent, disposable income 2.3 percent and wages 2.1 percent. Each of those metrics have popped in 2018, with GDP up 3.2 percent, business investment 7.2 percent, industrial production 4 percent, disposable income 3.5 percent and wage 2.7 percent.
Also fueling the fire has been a $14.3 billion reduction in regulatory costs to the economy over the last two years, said Farka.
Farka noted several indicators that point to potential dangers for the economy. These include high levels of low-rated corporate debt, and a federal balance sheet that’s grown its debt-to-GDP ratio by 40 percent in just a year.
Still, Farka predicted national GDP with continue north in 2019 at 2.9 percent before slowing to 2.4 percent in 2020.
Orange County’s economy remains strong, said Puri, and the region’s business executives see it remaining solid. A survey of Orange County business leaders found that 73 percent see increased profits over the next two years and 64 percent predict higher sales. More than half, 53 percent, forecast hiring to remain the same while 49 percent see business investment remaining unchanged.
Still, Puri says the Orange County economy is showing signs of moderating with respect to job growth as housing prices and increasing household debt create headwinds. For instance, Orange County job growth has declined to 1.3 percent this year, down from 2 percent in 2017 and 3.2 percent at its peak in 2015. Los Angeles County job growth in 2018 is 1.4 percent while Inland Empire employment continues at a robust 3.5 percent clip.
Home sales are down throughout the southland in 2018, said Puri. Orange County sales are off 4.5 percent, 2.9 percent in Los Angeles County, 2.8 percent in Riverside County and 3.9 percent in San Bernardino County.
The OCBC-Cal State Fullerton Economic Forecast Conference also included a conversation with international trade expert Michael Camuñez, CEO of Monarch Global Strategies, moderated by OCBC President and CEO Lucy Dunn. Dunn and Camuñez discussed NAFTA and the on-going tariffs skirmish between the U.S. and China. While initially critical of the new NAFTA accord negotiated by the Trump Administration with Mexico and Canada, he now gives it a ‘B’ but advised manufacturing companies to audit their supply chains to identify potential disruptions or cost impacts caused by the new agreement and rising tariffs.
The 24th Annual Economic Forecast Conference was sponsored by U.S. Bank. Additional sponsors wee Experian, Chevron, Commercial Bank of California, Kaiser Permanente, Manatt, Ontartio International Airport, Southwest Airlines, Brookfield Resident, FivePoint Holdings, HBLA Certified Public Accountants, Smart & Final, Southern California Edison, Transportation Corridor Agencies, and Wells Fargo.
To view Dr. Puri’s and Dr. Farka’s presentation, CLICK HERE.
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Orange County Business Council is the leading voice of business in Orange County, California. OCBC represents and promotes the business community, working with government and academia, to enhance Orange County’s economic development and prosperity in order to preserve a high quality of life. OCBC serves member and investor businesses with nearly 250,000 employees and 2,000,000 worldwide. In providing a proactive forum for business and supporting organizations, OCBC helps assure the financial growth of America’s sixth largest county. For more information, visit www.ocbc.org.