October 27, 2008
UCLA Anderson Forecast: Gloomy Outlook for Orange County Economy
OC home prices to stabilize in the summer of '09
LOS ANGELES -- The economic outlook for California and Orange County has become more pessimistic over the last few weeks according to the latest UCLA Anderson Forecast for Orange County. The Forecast was presented today in Irvine, California, before hundreds of leaders in the business community.
In its annual economic forecast for Orange County, the Forecast projects the U.S. and state economies will move in tandem over the next few years, with income and employment deteriorating further before the housing market hits bottom.
"Our forecast for slow growth in the 4th quarter was dependent upon consumer demand holding up. The consumer is now uncertain about the effect of current economic policy and is pulling back. Consequently, economic growth projected for the current quarter in California is not going to occur," said Jerry Nickelsburg, senior economist, UCLA Anderson Forecast, who authored the California Report. "Moreover, the shrinkage in the mortgage finance market in Orange County creates a deep hole in Orange County employment, and history tells us it will be a five to six year process to fill it in with new jobs."
"The real estate sector begins its recovery next year as home sales pick up beginning in the second quarter of 2009 and home prices stabilize in the summer," the Forecast says. In non-residential real estate, office markets will remain weak and higher vacancy rates will persist. There is no change predicted in industrial space market conditions. With the continued decline in the number of jobs in Orange County, investment in non-residential structures will remain at low levels in 2009. New residential investment, particularly in multi-family housing will rise moderately in 2009.
Since labor markets are continuing to weaken, the adjustment process will continue over the next six months, but employment will begin to make a modest comeback in late 2009, with finance, retail and housing labor markets having suffered the most. The Forecast predicts that non-farm job growth rises to 1.1% percent in 2010 and 1.5 percent in 2011. Higher paying jobs in the professional services, information, government and healthcare sectors contribute to positive growth in average salaries. Also remaining stable and perhaps strengthening on the employment side is the leisure and hospitality sector, education, professional services, natural resources, and local government.
The UCLA Anderson Forecast for Orange County also states that population growth remains positive, averaging 0.7 to 1.0 percent per year over the next 3 years. A small increase in birthing due to the rise in fertility population and net-migration turns positive in 2010 as labor markets create more jobs.
"Inflation in Southern California declines in 2009 and 2010. The absence of housing price appreciation, a slowdown in rental rate appreciation, weaker U.S. economic growth, and declining energy prices will relieve pressure on the general price level, both regionally and nationwide," states the Forecast report.
About UCLA Anderson Forecast
UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state's rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast on the Web at http://uclaforecast.com.
About UCLA Anderson School of Management
UCLA Anderson School of Management, established in 1935, is regarded among the very best business schools in the world. UCLA Anderson faculty are ranked #1 in "intellectual capital" by BusinessWeek and are renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides management education to more than 1,600 students enrolled in MBA, Executive MBA, Fully-Employed MBA and doctoral programs, and to more than 2,000 professional managers through executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a world-wide network of 35,000 alumni, UCLA Anderson develops and prepares global leaders.
Hialary Rehder, (818) 689-5551, firstname.lastname@example.org