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Fewer Jobs, More Stable Home Prices Are Predicted for County

June 23, 1989|MICHAEL FLAGG | Times Staff Writer

Like the old joke, there's good news and bad news in the Chapman College Economic Forecast released Thursday.

First the bad: Orange County companies will create 21,000 fewer jobs this year than last. The main reason: cutbacks in federal spending, which put defense contractors on the defensive.

And the good: With less people looking for housing, the price of a home in the county won't rise nearly as fast as the 25% jump it took last year. That means fewer people will be priced out of the market.

The big news, though, is that California and Orange County are no longer creating jobs much faster than the rest of the country, according to James L. Doti, a Chapman acting president and a professor of economics. In fact, last year the state dipped below the national average, he said.

No Recession Seen

And the entire nation is headed for a period of slow-to-flat economic growth, the forecast says. Not a recession, this will be more of a "soft landing," devoid of the high unemployment that usually accompanies a recession, Doti predicted.

Orange County won't escape, either. It's an "old wive's tale" that the county's diverse economy cushions it from economic downturns, Doti told several hundred government and business people at a luncheon Thursday.

The county is hit just as hard by recession as any other region, he said, and since its growth rate is usually higher than average, it has farther to fall in a downturn.

"So in a sense, we're hurt more than other places by recession," Doti said.

Here are some specific numbers that Chapman College is forecasting, given the expected downturn in the county's economy:

- Doti predicted in December that Orange County would create about 35,000 jobs this year, down from 46,000 last year.

This new forecast, updated at midyear, predicts only 25,000 new jobs, the lowest number in several years. The reason: The county's important aerospace industry is hurting from cutbacks in defense spending, and it is losing jobs.

- On the bright side, builders got permits for $4.1 billion worth of new residential and commercial construction last year, and that means employment in the construction industry will grow. So will the service industries--such as law firms and accountants--which lease all those new offices.

Doti's jobs forecast was the biggest change from the forecast he made in December. How accurate is it?

Two professors at UC Irvine say their own projection shows an increase of about 30,000 jobs this year, in between Doti's December forecast and his new, lower estimate.

They use an entirely different forecasting system that stresses mathematical formulas. It involves less interpretation than the Chapman College system, said Jone Pearce, a professor of management at the university.

But their reasons for forecasting a decline in job growth this year are similar to Chapman's. The two professors have found that high-technology manufacturing industries can predict the behavior of other industries, said Ray Catalano, an outgoing professor of urban economics at the university. In Orange County, those high-tech industries are starting to grow more slowly, he added.

More Conservative

The state Employment Development Department's own forecast is more conservative than either private forecast: Analysts there predict about 21,000 new jobs for the county this year.

With the construction industry continuing to churn out houses--and fewer new employees seeking a home--housing prices will rise only about 10% this year, the Chapman forecast predicts.

Last year, houses for resale jumped to a median of $211,402, high enough to make Orange County one of the most expensive markets in the nation, according to the California Assn. of Realtors.

That was a 25% increase from the median of $169,277 in 1987.

All types of construction will also be down this year, the forecast says, but not by much. The value of building permits issued will drop from $4.1 billion in 1988--a year in which the county's economy grew far more strongly than Chapman had estimated--to $3.9 billion this year.

HOUSING APPRECIATION FOR RESALE HOMES Year-to-year annualized percentage change Third quarter 1988 27.1 Fourth quarter 1988 27.7 First quarter 1989 28.3 Second quarter 1989* 19.8 Third quarter 1989* 13.5 Fourth quarter 1989* 11.0 *Forecast Source: Chapman College

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