Jim Cooper's Orange County; Orange County Economic Outlook

Jim Cooper's Orange County is made possible by grants from the hairy and gray steel foundation providing charitable assistance to deserving organizations in the areas of health education and culture. Why single landmark incorporated developer of Southern California real estate and builder of Landmark homes by Robert Half an account temps providing permanent and temporary accounting financial and EDP personnel and by Disneyland part an important part of Orange County for over 30 years. One of the most dazzling success stories in Orange County is the vibrant economy consistently Orange County the unemployment rate is about half that of California in the nation in general. Last year Orange County the economy created 33000 new jobs. In 1987 it's predicted that twenty one thousand five hundred more new jobs will be created by the Orange County economy. Here's just one remarkable prediction. In 1987 Orange County a gross County product will top 50 billion dollars each year this program take a look at the economic outlook for Orange

County. I'm Jim Cooper and I'll be asking outlook questions of our two special guests today. Think they'll be economically better off in seven than six. Thirty eight percent of the national population who have that.

They seem to back up the Orange County residents hope according to the California Employment Development Department there are now some one billion and 43000 people in Orange County who are employed out of the county. Two point two million population agriculture now accounts for only a small portion less than a thousand jobs. The biggest growing areas of employment in the county are about equally broken down into four principal sections led by wholesale and retail trade. Two hundred sixty eight thousand jobs manufacturing two hundred forty three thousand services two hundred forty two thousand and those employed in durable goods goods like lumber electrical or fabricated metal products. One hundred seventy nine thousand in the past year the total number of new jobs created was thirty two thousand nine hundred up 3.3 percent from the previous year. Wholesale and retail trade were responsible for the biggest share 16000 of those new job services it was second with 72 hundred new jobs government Twenty eight hundred and construction. Twenty three hundred. And now let's meet our two guests both of them experts in their areas of interest in Orange

County Washington. Dr James Doty is dean and professor of economics at Chapman College. He serve the dean of the School of Business and Management. He's the founder of the Center for Economic Research and since 1978 Dr though DNA students have produced and then you will econometric model for Orange County. He had just released his ninth annual study this spring. Kratos Hall will publish a new textbook economic because of metric research which he has coauthored. Dr. Mark Wylder sorry joined the faculty of UC Irvine as a social ecologists in 1981. He just recently produced his fifth annual Orange County survey in the past. This special focuses of these surveys have been on housing transportation growth civil liberties and the news media this year study focuses on economic outlook that Orange County and predict for themselves and their expectations for the future. Well you you both make an interesting pair because you approach your Orange County future from two different disciplines from that of an economist and that of the college as a sociologist How do you regard what you're

doing in the overall picture of Warren County. How do you interact. Well I think we're both looking at different aspects of the development of a an increasingly complicated society. And. I learned quite a bit from Jim's forecasts. Watch the very closely because what's happening in the economy in a in a big and a large sense affects how people feel about living here which is one of the things I'm most interested in. What about your interaction with the attitudinal survey. Well as you know Jim we have any kind of metric model which is a rather cold stark series of equations numbers and people bring that to life and consumer attitudes obviously are very important and to a certain extent the way people feel can almost lead to a self-fulfilling prophecy so there's no question that Mark's news and the information he puts out is very important in

terms of analysis and also in terms of developing a model. I've seen that some of the things that you have said seem to be due to complement what is in the other report and vice versa. One of the things that you brought up with the thesis in your book Trouble in Paradise which is just a new book seems to be borne out again in this new survey and that thesis is that things are not perfect in Orange County. That there is concern about growth. There is a lot of concern number one on traffic. For example the business of traffic in the business of growth and that some of the things that you allude to in your book Trouble in paradise did you find that the new survey buttresses what you found out in this in this book. What we're seeing is people struggling with the transition of our society and Orange County. A more suburban society to do a more cosmopolitan one. And that's exactly what I talked about in the book and. I think more than any other year this year. It really showed in the survey

that people are are you know thrilled about the improvements in their own personal fortunes and in the economy in general as has Orange County has has evolved. But they're troubled about what kind of place this is going to going to be in the future and that is that if you take Warren County and equate it with paradise that many people think it approaches very much with their claim and everything. There are some cracks in the in the fabric of life on their use that are metaphor. Yeah I think so it's not it's not perfect. And you know with such with such an affluent population nowadays in Orange County that I think where we've become a little bit spoiled we've come to expect paradise when in fact all that's going on here and all that all the people who moved here have. You know created some of the problems which we now have to deal with.

What about the fact that this county even as you've indicated in the slowing of growth your surveys said it was not a recession but a slowing of growth and yet even in that slowing we have an economy that's going to produce twenty one thousand five hundred jobs. Can you think of any parallel area that could match that kind of spirit laying economic performance. Very few. Orange County has for the last 20 25 years the growth rate in Orange County has been at least double that of the nation and that has been consistent and we expect that to continue even during a relatively slower growth year like next year. To give an example of some comparison though of where the unemployment rate is around 4 percent in some regions of the south certainly in Texas now and now the mid mountain states you're talking about unemployment in 10 12 almost 15 percent range in some areas and any time when our unemployment is three and a half percent nor in reality even the state of California is running at around 7 Sure.

So we're just. Our unemployment only about half of the state or the national level. I'll tell you what I'd like to do. I've gone to some of the things in your study that I think are very exciting and I'd like to just allude to them and let's chat about them let's start with some of the things that you have said and one of the things that you talk about again is this job picture in 1906 a million 42000 jobs. In 1987 we have one million and sixty three thousand. 500 jobs even in a downturn. Twenty one thousand five hundred game. Let's take a look at where those losses and gains are going to come. According to a report 1987 construction manufacturing will go down twelve thousand seven hundred but the service sector will go up thirty four thousand two hundred So we still have a net increase of about twenty one thousand five hundred new jobs. Talk a little bit about what you have about why that is. Well you can see there's a real imbalance going on there there's a relatively strong gain in one area of the economy. And yet in another relative weakness there are several reasons why we feel that the manufacturing and construction sector will be hit harder next year. Certainly the short

run negative impact of tax reform having a more negative impact on the construction industry explains some of the downturn there. But you also have the continuing weakness on the trade front still showing are still suggesting that the employment in the manufacturing sector will be under pressure. There's no question that trade figures are very important in terms of the total Orange County outlook and with that with a relatively weak trade turn around you're going to see continuing pressure on the both on the import side and on the export side. And our record trade deficit certainly is going to impinge on Orange County there's no question that the two have to be to be exactly up I mean definitely the national trade terrible national trade deficit trade of course and that offends our Certainly Californian and trade with the Pacific Rim nations. One other very When we're talking about moving ahead we're Orange County rated as to the gram.

Exactly exactly. Another important factor I think that will have an increasingly important impact in the years ahead and certainly next year as well would be the defense picture for several years now defense expenditures appropriation levels have been dropping but it hasn't affected aerospace employment in Orange County because of a relatively long lag between appropriations and the impact on employment. The next year is the year we expect that with the year and a half two year lag that employment in the aerospace industry will be under pressure as a result of cutbacks that began a year and a half two years ago. When we when we hear talk about the service the service sector growing What do we mean by service sector and specifically in Orange County does doing mean that they're going to be more people working in McDonald's or more lawyers. Probably more of the former unfortunately we're talking about more lower skilled jobs.

But people are shopping satyrs out and going to the retailing retailing should be strong transportation should be strong wholesaling should be strong but also finance insurance and real estate. There's just been an incredible growth in our financial services industry just incredible the last five years deposits of increased more than 100 percent to the point where if you add las with Orange County total deposits it rivals that of the number one money center in the world New York City in that notable statistic if you just take that one statistic and think about here is Orange County that would link with L.A. be equal to the positives. Is that the right the deposits for New York the biggest financial center in the world. Let's move along to some other things I want to get to ask you some questions too. Let's take a look at building we have two figures that you came up with building. The first one is residential building one thousand eighty six one point seventy five billion nine hundred eighty seven one point seventy five and so we're going to currently keep the same level of residential building but now let's take a look at the non residential building we're talking about the high rise in the show through what they call the see through apartments and all that kind of thing and office building. 1986 one point forty billion eighty seven one point twenty four billion. So that is a

reflection of a lessening of non residential building. Now maybe part of that from the tax law maybe some of that is what you found about mark of resistance hardening. A lack of resiliency about building so that we see that the recent collection for example in Orange County saying don't build those high rise buildings don't build those controls industrial buildings in our area. A slowing down of growth there a little bit of both reasons involved in that I think so. Yeah I think so too. I was I was going to say that I think also Rick we're coming to the point in our economy in Orange County where we're going to see. Some in some regions of the county in which there will be a lot of building and and other regions where perhaps they spend quite a bit of building in the last few years such as the airport area. And I think maybe this can be a little bit less. I saw some signals in the survey we did in terms of what housing costs in the north part of the county would seem to suggest suggests. I'd be curious to hear Adin has say about this that maybe there's going to be some growth in that part of the idea.

That's interesting but in general you both seem to say that there is a slowing down of the growth when you talk about industrial and commercial. Few of the big high rise buildings fewer the big industrial developments. Even in the residential side which shows no change in the aggregate that's masking some changes going on inside that statistic Namely we expect more in the way of single and less in the way of apartment construction but netting out to no change there. Let's talk a bit about the figures that are interesting inflation and you've of course factored in the national inflation into the your own model for orange kind of 86 with 2.6 percent inflation 1987 3.3 percent. Is that on target about with what the nation is another without these figures in line with the nation or are they much different in Orange County pretty much in line a little bit higher because Orange County tends to weigh housing costs. A little higher than the nation median and it's a higher weight on how Here's something you both alluded to the median income at incredibly high median income for this county 86 it was forty one five one hundred

eighty seven 43000. You alluded to that too Mark in your study about the difference as a 3.6 percent increase in our income in a county that's that's a very interesting figure. I don't know what my what percentage maybe we'll get into that weird but what percentage are we greater than the national norm and I mean the national norm and median family income just to stick here is 20000 around 20000 So there's there's a difference in differential from 43 to 28 and I might note that that 43000 figure that we've developed is based on a methodology that tends to underestimate income rather than all the rising in my little bit higher than the figure we saw definitely. And I haven't that supported your data pretty much it was your my household income figure for this year was around 41000 household would include families and singles. So that means a family income would certainly be higher than than even the numbers that Jim gave or is that a kind of down day. Does that mean we've got a sort of a magic insulation a magic cushion in Orange County that even in

downturns we tend to do better. Is that fair to say. Well we have we certainly have a lot of people who are and very very comfortable. Physicians you know who are better able to weather a downturn as you say a slowing in the growth. Where I think they're less they're less likely to be affected by downturns in terms of their their physicians and in terms of our hard general you know the way or our regional economy is here. But these people have higher bills as well. They have to buy homes with a median price of around 150000 versus the rest of the nation where it's closer to 80. You said in your report that although you're forecasting a slowdown in growth that's going to slow down where you're going on the minus side it just means that the plus side is less. That's very important distinction right. I think it's a very important thing and you say the slowdown while a serious could could by no means be characterized as a recession now. So you're saying that I think that moderation is the right word we could be using in this discussion when in

moderation and growth and we see a pick up near the end of the year which is good news that to suggest that longer run we may soon see even faster growth in the future. I think before we to start talking about some of the very years we should talk a bit about the different approach you use pretty hard statistics National and all of the local and many many figures that you put into it. Whereas your study was based on was a thousand and those thousand interviews with people of what they expect to happen. But you had a very good success with that. The accuracy of that. Yeah. We also asked people for some factual information. So in that way it's hard figures. And what we have been looking at in terms of income pretty well coincides with what Jim has found that we've seen aggressive 1084 a gradual slowing down and the growth in household income and at the current trend I would bet that you're right on track for next year that the next year is going to be the lowest level of growth and personal income or house hauling them that we've seen.

So there's a similarity although although you started from a different discipline to get there you seem to be both arriving at some of the same findings. Let's take a look at some of the things that I found interesting in your study. Let's talk about the overall expectation for the county and we say the county future what how well or how badly do they expect the county to fare in its future as opposed to a personal expectation of the future. And you have 83 35 percent of the people in Orange County expected that they get worse and 86 percent. Forty seven percent expect the county to get worse. Now let's lay that right up against the comparison to what they think about their personal future. You said the USA expectation to think their own personal future is going to be better in 87. 38 percent but look at Orange County figures Orange County expectation 58 percent think they're going to be better off next year. I would note a little ambivalence is not a paradox that people saying my personal life is going to be more rosy next year but the county is going to be less rosy in that what it's what you're finding.

Yeah what we saw and I might add this is the first year where this is we've been doing the survey that we found more people saying the county was going to be worse and better in the future. You know well people have been gaining financially with the growth of the county. They've been at the same time losing confidence in the county as a place to live as as a as a as a society. And but that doesn't have to do with the economics of the old saying I think the county is going to be better off next year. Not that they're going to they think the county is going to be better off financially next year but they think that the county as a place to live is will be will continue to lose its appeal because of the issues of growth and traffic especially and immigration. This figure. Were you surprised that 47 percent of the people in Orange County I think it's going to be worse. I think your it was the most surprising finding in a survey this year not only because of the numbers but because there was a big switch from the year before. Let's talk about people who think they're better off now and that compare the two again

now and throughout the United States. Forty five percent people think they're better off now better off now than last year and last year I'd been in Orange County 63 percent of the people think they're better off now from the last year that get back to these median income figures is it because they're making more dollars to make more money on it. It has to do with. The level of income as well as the growth in income that many people experienced during the last year and of those people a lot of them are very optimistic who thought that they're better off than they were last year the majority of them are optimistic about the next year as well. Another figure I found amazing is the number of the affluence of the affluent and we would call I think 50000 or more you getting into it and income that sort of upper middle. So let's take a look at what the Orange County income changes have been for over $50000 income 1082 was 60 percent of the people who were over fifty thousand nine hundred thirty three percent. That's a doubling more than a doubling in four years. People who have incomes of over

$50000 How do you account for that. Well certainly it's not all inflation I think you're right and all of that later some of it is inflation but most of it is just the way the economy has been shifting and there are more more high income jobs here and and people who are remaining in the county or are you know seeing salary increases every year in the south county it's been most pronounced. And you know one of the things that's going on in Orange County is the South County is becoming more and more. And a center of affluence where almost half of the people in the south county are earning comes and that higher higher incomes are getting to have a Mason and Dixon mentality. Do you think we are here with the people in the south anything to be the higher end people in North County in the lower end. Economically this is beginning to show in the statistics but I think that that you may begin to see more of a resurgence in the in the North County particularly in terms of development and the housing side

but I think there you do certainly see a differential in terms of income and certainly with respect to future manufacturing growth and service growth that we're becoming almost a test tube Valley and most of that development is going on in south county. I agree with Jim I think you're going to you're going to see over time or no actually for leveling. We're going to in the writing of leveling because there are a lot of things now about the North County that make it an attractive place for for a development on this next one. I guess I would like to add a third disciplined political science because I think it's in the area that I'm very much involved in and that's the question of attitudes about growth. I say political science because the insurgency is in the proper election that just took place. We've seen it in the last November general election. We had 19 minutes of elections and I'd say in two thirds of those issues of growth were injected into our if they weren't injected directly they were injected in directly in the candidates who were slow growth candidates got a lot of backing. Let's take a look at this figure if there was a referendum on slowing growth. 63 percent of

the people would vote yes in Orange County. Thirty seven percent would vote no. Now that seems to be borne out to me and what you're finding that there's a slowing down in some of the industrial building what you're saying what you found in your report and what I saw in the in the election in November is that a lot of candidates in there in the county who were city council candidates ran on those issues and those were the main issues that they ran on in many of these races. Growth no growth that's true and it's it's become for some candidates a road to success. The interesting thing that we found is that while two to one people support slow growth for their city or community by two to one they oppose it for the county which gets back to their view of their personal finances vs. the county's future they want to see their cities protected as suburban areas while the county grows and the economy and they can and they can egress of course that's impossible because because if every city slowed down their growth as people want of course and you have now have no growth in the county which is what people don't want I

think there's a realisation there in that statistic that individuals realize that the growth has to take place. They don't want to close to them. But for the county they realize economically how important it is. It's true on the freeways into about the problems of the airport. True about all of the so-called infrastructures that have to be created to accommodate this growth and the growth seems to be coming whether people like it to happen or whether they don't like it to happen. It's coming it's a fact. Let's talk about the problem that gets back again to this thing for its tax. You delineated a number of problems but let's just take the top four because I think they're very interesting. First with traffic 38 percent that's no mystery that with all the vexation we have about traffic it comes out pretty easy number one concern of people in Orange County Number two though. Population growth and development. Wasn't there hadn't been showing up in the charts this high the fourth crime yes. Immigration yes but a clear winner. Number two place with population growth and development. What about that. Now you want to talk about that Mark.

Well there was a tripling in the number of people mentioned growth and immigration as the most serious problems in Orange County. And this because this has really led to the concerns about the future. You know we could talk at length about that but. People are becoming fearful of the kind of community that's developing they're not sure about it. And this is one of the reasons that that's that slow growth has become a popular issue in Orange County. Do you see that continuing or do you think that will ameliorate as we go on. I think that if you use it in your it's sort of hardening about continuing for several years until people have a sense of what kind of society this is going to become. And personally I think it's going to become a for a better society I think would be a better place to live in the future because of greater diversity socially and residential and so we come full circle and what is the economic

outlook for our county which is the thesis of our program today. If you had a capsule like that what would you say someone some friend of yours that I think questions him. I would say Jim that next year's apposition year almost is setting up a strategy for strategic positioning for stronger growth in the future. So it is even though less growth if you have a stronger picture in the future you have some very strong positive you have real interest rates dropping. You have a trade turnaround the beginnings of a trade turnaround that will gather momentum in future years. If you had to summarize what kind of outlook you have or next year what would you say. And you're going to generalize on your whole findings. I with I think they basically say it's going to be a year in which we have a pause in the economy. Not a great pause but a pause and people are still to come. Despite their ambivalent thinking they're going to still keep moving her. I think so. The pluses are too great.

Plus they're too great with a very interesting that from a social ecologist and from the Economist. Our time is about up and I want to thank both of our guests for their insights and their comments on the economic outlook for the county in 1987. Please join me next week at the same time for a look at Orange County stake in the Pacific Rim. I'm Jim Cooper thanks for being with us. Jim Cooper's Orange County is made possible by grants from the herion gray steel foundation

providing charitable assistance to deserving organizations in the areas of health education and culture. Why signal landmark incorporated developer of Southern California real estate and builder of Landmark homes by Robert Half an account temps providing permanent and temporary accounting financial and EDP personnel and by Disneyland Park an important part of Orange County for over 30 years.