Orange County’s steady economic recovery will march forward in 2013 but the real ramp up in productivity and spending is still a year away, according to Cal State Fullerton’s annual economic forecast released today.
“The economy is improving but at a much slower pace than anyone would like,” said Anil Puri, dean of the Mihaylo College of Business and Economics. “We predict about two percent growth in the county’s GDP (gross domestic product). It’s much better than two or three years ago, that’s for sure.”
By 2014, Puri predicted the county’s growth rate would be about 2.7 percent.
What’s also much stronger is the housing market and Puri said this is a positive indicator that the economy is picking up a head of steam. The county’s median home price is expected to rise 5 percent to 7 percent next year, said Puri, who teamed with economist Mira Farka in preparing the annual forecast that was presented to a sold out business laudience of more than 900 at the Irvine Hyatt.
Puri said dwindling inventories of resale homes and the lack of new home starts has accelerated sales of residential products. Record low interest rates that the Federal Reserve has pledged to hold down has created a sense of urgency among buyers who are actually “bidding” up prices again in some neighborhoods.
The other factor contributing to the home buying spike, Puri said, is the growing confidence among consumers who have significantly improved their personal balance sheets by shedding large amounts of debt. “Consumers are feeling good about spending again because they feel more secure,” Puri said.
Co-sponsored by the Orange County Business Council, Fullerton’s forecast is the first of several reports that will be released over the next several months as various institutions and economists size up the business landscape locally and nationally.
The jobs picture next year is less clear, said Puri, who doesn’t expect much change in the overall unemployment rate 12 months from now. He predicts an improving economy will produce more than 27,000 new jobs in the county, but the unemployment rate, currently 7.1 percent, won’t dip below 7 percent. The reason is the large number of unemployed workers who are reentering the market as fast as new positions are created. Nationally, he predicts the jobless rate to finish 2013 at about 7.7 percent.
One industry that has held its own through the recession and shows continued promise next year is travel and leisure, Puri said.
“The hospitality sector never lost any real jobs in the recession. Hotels, entertainment and restaurants are doing well and I see no change going forward,” said Puri, who added that Orange County may becoming at long last a more complete travel destination.
Disneyland Resort is still a major draw and with the re-launch of Disney California Adventure hotels throughout the county have reported increases in occupancy rates as a result. But Puri and others believe Orange County’s beaches, dining scene, outdoor recreational options and reputation for safety and cleanliness have contributed significantly to the county’s growing reputation as a place to spend a week not just a night or two on the way to or from Los Angeles or San Diego.
“Two or three years ago, everyone was so scared about what was around the corner,” Puri said. “Now, we are confident the growth is more organic and sustainable. Nobody really believes we will tilt back. We are moving forward.”
Nationally, however, Puri sees the U.S. economy in general idling in neutral if not slipping a bit in 2013 as business waits for Washington to act on taxes and the federal deficit. In addition, uncertainties about Europe and China and how they plan to deal with their economic woes has some worried.
Importantly, Puri said the forecast assumes that Washington will extend all the current Bush tax breaks through the first quarter and delay major budget cuts scheduled for Jan. 1 before eventually compromising over a plan to cut spending and increase taxes.
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