Posted by the Orange County Business Journal
In Case You Missed It: We’re in Recovery
By Murray Coleman – 3/22/2010
Orange County Business Journal Staff
Orange County’s economy is approaching a full year of recovery, though that may not mean much if you’re still struggling to restore sales and profits or are looking for a job.
Economists estimate the county’s economy has been growing since the second quarter of 2009, after declining for four straight quarters from early 2008 to early 2009, according to figures from Moody’s Corp.’s Economy.com.
But employment, which has been falling largely since the start of 2007, has continued to decline even as the economy has grown. In January, the latest available month for figures, unemployment here broke 10%, the worst in at least 20 years.
“Just because economists call an end to a recession, it doesn’t mean that full-scale recovery is right around the corner,” said Wallace Walrod, head of research at the Orange County Business Council in Irvine. “Unemployment is a real issue and output is still below where we were before the downturn.”
Local gross metropolitan product—a measure of economic output similar to the nation’s gross domestic product—now is pegged at $165.5 billion for OC, according to Moody’s.
That’s down from the county’s high of $172.6 billion hit at the start of 2007.
After falling 4.5% in 2008—or about twice as fast as the nation’s 2.4% drop—the county’s economy started growing again with a 0.5% annualized gain in 2009’s second quarter versus the prior quarter.
That was followed by growth of 1.7% in the third quarter, 5.5% in the fourth and a forecasted 2.1% gain for the current quarter.
According to Moody’s, the county returned to growth one quarter before the nation, which turned positive in the third quarter.
(The Cambridge, Mass.-based National Bureau of Economic Research, a nonprofit researcher that dates the duration of recessions, hasn’t officially declared an end to the current downturn. Barring a major turn in the economy, it’s likely to do so soon.)
“Orange County was ahead of the curve compared to the rest of the country with its large concentration of technology and healthcare companies,” said Eduardo Martínez, a senior Moody’s economist. “Those sectors have performed relatively well during the recovery.”
The county also got hit earlier, as the mortgage meltdown and housing downturn took hold in 2007 and started taking a toll on jobs.
“Orange County was one of the hottest housing markets in the country going into the downturn,” Martinez said. “Its high concentration of mortgage lenders really caused a lot of damage when mortgage markets tanked.”
There’s little doubt from a technical viewpoint that the county is well into recovery, according to Anil Puri, dean of the Mihaylo College of Business and Economics at California State University, Fullerton.
“But some major headwinds remain,” he said. “Employment still looks bad. And Orange County has a sizable hole in its real estate market that it needs to keep climbing out of to reach full health.”
After stabilizing in late 2009, unemployment went from 9.1% in December to 10.1% in January, according to the state Employment Development Department. Layoffs went beyond the usual letting go of holiday workers.
For the 12 months through January, the county lost 72,100 jobs. In all, the county has 160,000 people counted as unemployed, not including those who may have given up looking or who are working part-time but would like to be full-time.
Construction and real estate have been hardest hit and aren’t likely to contribute to the county’s recovery any time soon, according to Martinez.
“You can see a lot of vacancies in Irvine residential developments that went up just as the market collapsed,” the OC native said. “It was really bad timing for the local market.”
Real estate “won’t make as big of a contribution to local growth as it did in the past decade,” Martinez said.
Business services, which includes lawyers, accountants and others, is improving, according to Moody’s.
Chipmakers and other electronics companies also are expected to do well in the county’s early rebound, according to Martinez.
“We’re favorable about the prospects of highly technical semiconductor applications as a growth driver for Orange County,” he said. “The county is positioned well to capture more growth in high-end computing, research and science-related industries.”
“We at The O’Donnell Group feel that until jobs come back are not going to be in a recovery” Jobs = Recovery