October 22, 2007

Economists see O.C. growth
Cal State Fullerton forecast shrugs off weak data, saying a recession is 'not in the cards,' new jobs are ahead for the county in 2008.
By ANDREW GALVIN
The Orange County Register

Orange County's economy continues to expand, and job growth will extend into next year, economists at Cal State Fullerton said Monday as they presented their annual local forecast.

Although state and federal data show that Orange County has experienced almost zero job growth this year, economists Anil Puri and Mira Farka of CSUF's College of Business and Economics are predicting that when all is said and done, the county will see growth of 1 percent, or 15,300 jobs, in 2007.

For the 12 months through September, Orange County added just 300 nonfarm jobs, or 0.02 percent growth, according to data from the state's Employment Development Department. In recent years, the department has tended to revise its initial monthly estimates upward in an annual process known as benchmarking.

"Given large upward adjustments at benchmarking that EDD has made in recent years to the Orange County data, we are skeptical of the extremely slow growth that their current monthly surveys are showing," Puri and Farka wrote in their forecast. "We are not predicting a recession or a decline in overall employment for the county."

In presenting the forecast at a luncheon for 850 guests at the Hyatt Regency Irvine Monday, Puri reiterated that "recession is not in the cards," although the county will come "painfully close to a near-recession with very slow growth."

Puri and Farka predict that job growth will slow to 0.9 percent in 2008. In 2006, growth was 2 percent, or 29,100 jobs.

The forecast comes after a week of data releases that prompted another prominent watcher of Orange County's economy, Esmael Adibi of Chapman University, to voice fears that the county is headed for a recession, which he defines as two consecutive quarters of negative year-over-year job growth.

Besides EDD's September data that came out last week, the U.S. Bureau of Labor Statistics released a report that showed Orange County had job growth of just 0.1 percent in the first quarter of this year. EDD found 1.1 percent job growth in the first quarter this year before growth dwindled in later months.

The federal data, although not as timely as EDD's monthly reports, is considered more reliable because it is derived from employers' actual unemployment insurance filings. The EDD numbers come from monthly surveys of a smaller number of employers. The EDD looks at the federal numbers when it does its annual benchmarking revisions.

Puri and Farka are less sanguine in their outlook for Orange County's housing market.

They are predicting a 30 to 50 percent drop in the number of home sales in Orange County next year, and a 5 percent drop in prices.

In October 2006, they predicted a price drop of 2 to 4 percent for Orange County homes. That turned out to underestimate the actual damage: in September, prices fell 9.5 percent from the same month a year earlier, while the number of sales was down 44 percent.

Puri is dean of CSUF's College of Business and Economics. Farka is an assistant professor of economics.