Southern California job growth will slow dramatically over the next three years, according to a forecast by Cal State Fullerton economists.
Payrolls in the region spanning Orange and Los Angeles counties and the Inland Empire will grow at a pace of 1.6 percent this year, 1.7 percent next year, and 1.9 percent in 2019, the university’s annual forecast, released Wednesday, Oct. 25, predicts.
That compares with an expansion of 2.6 percent in payroll jobs in 2016.
“While the national employment has been robust,” the report notes, “job growth in Orange County and California appears to have slowed down over the last several months. Southern California and Orange County, in particular, are in a local downturn as employment growth has stagnated.”
Economists Anil Puri and Mira Farka, authors of the report, write that “there does not seem to be an obvious trigger for the current drop in employment. The unemployment rate is still low by historical standards, and the economy appears to be near full employment.
“The growth rate of employment under such circumstances can be expected to slow down, but, short of an error in data reporting, a full rationale for such a slowdown is not apparent at this time. “
On the upside, they add that despite the lethargic job creation, “local business leaders continue to be enthusiastic about local economic conditions and housing prices are still rising.”
Across the region, the Inland Empire will continue to show the most vigorous payroll expansion, albeit slower than last year, the economists predict.
In 2016, jobs grew in the combined counties of Riverside and San Bernardino at a 3.5 percent rate. That will slow this year to 3.1 percent, next year to 2.9 percent and rise slightly to 3 percent in 2019.
In Los Angeles County, job growth was 2.5 percent last year and will drop to 1.3 percent this year, rising slightly to 1.6 percent next year and 1.9 percent in 2019.
Although unemployment in Orange County, 3.6 percent in September, is the lowest in the region, the county lags its neighbors in job creation.
The forecast predicts a precipitous drop in payroll expansion to 0.8 percent this year from 2.3 percent last year. Job growth will then slowly accelerate to one percent annual growth next year and in 2019.
Some of the contrast between the counties has to do with home building, which has been opposed by anti-growth activists in cities such as Huntington Beach. “Construction activity has slowed in Orange County, but is continuing at a healthier pace in other parts of Southern California,” the report notes.
In Southern California, construction permits will grow by 15 percent in 2017, then stabilize at that level for the next two years, the economists calculate. Most of the growth is expected to occur in the Inland Empire and Los Angeles counties.
Construction permits for Orange County, which topped 12,000 last year, are expected to drop to just over 9,100 this year. In the following two years, they should grow at about 8,000 annually, the historical average.
But the report notes, “While the reduction of permits in Orange County may seem quite dramatic, things are not as dire especially when bearing in mind that permit growth had risen by a staggering 34.4 percent between 2014 and 2016,” as Orange County building recovered from the recession slump.
As customary with Cal State Fullerton forecasts, the report delves into greater detail on Orange County than on Southern California generally.
Beyond construction, Orange County has also seen declines in manufacturing, retail, professional and technical services, healthcare and social assistance and local government.
“The declines in healthcare, professional services and retail are more noticeable because they have been some of the main drivers of employment growth in Orange County over the last several years,” the economists note.
Other worrisome signs for Orange County: The formation of new small businesses has ebbed and the county’s average employment by industry has been shrinking.
“Firms in most industry sectors are reducing their employee rolls,” the economists write. “While this trend began before the Great Recession and accelerated during the crisis, it appears to still be ongoing.”
The average number of workers in Orange County businesses fell from 17 workers in 2003 to 15.6 workers in 2015. Similar trends, however, are also occurring at the national level, the report adds.
Only three industries, which are also the main growth industries in Orange County, are bucking the trend. From 2003 to 2015, employment rose in the arts and entertainment, health care and social assistance, along with hotels and restaurants — all of which grew their share of overall employment.
Orange County accounts for 8.3 percent of California’s employment, but it has accounted for 12.5 percent of reported mass layoffs this year — those which must by law be reported to state officials, the forecast notes.
The 6,000 laid off workers included 905 at Live Nation in Irvine, 332 at American Apparel in Garden Grove, 280 at Kellogg in La Palma, 213 at Nature’s Bounty in Garden Grove, 195 at Nordstrom in Santa Ana, 175 at Royalty Carpet Mills in Irvine, 148 at Wet Seal in Irvine and 147 at Ricoh Electronics in Tustin.
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