Orange County businesses may need two years for the jobs picture to return to pre-pandemic levels, while the future of the currently closed Disneyland Resort is weighing heavily on the region’s economic health.
“It may take even longer than that,” California State University-Fullerton economist Anil Puri said of the employment rebound. “Output will recover faster, but jobs recover more slowly.”
Puri and Associate Professor Mira Farka, the leaders of the CSUF Woods Center for Economic Analysis and Forecasting, presented their 2021 forecast late last month, with a prediction that OC will finish this year with a hefty jobless rate of 8% due largely to the COVID-19 crisis.
“Keeping the economy open and running with all the safeguards in place is probably the most important thing,” Farka said. Going back to the “draconian’’ shutdown of March and April “would be absolutely the wrong thing to do,” although it made sense at the beginning of the crisis, she said.
Farka and Puri spoke to the Business Journal by telephone on Oct. 26 after their forecast was released.
Puri said the team remains “relatively optimistic” about the area’s economic outlook, but stressed the need for a coronavirus vaccine, which he sees being available in early 2021 but not widely enough distributed until the middle of next year or later (see story, page 3).
Area executives second that belief.
“We are being very conservative and assuming that there will be no real recovery until businesses get fully operational again, and there is no clarity on when that will happen,” said Tim Britt, chief executive of Irvine-based IT consulting and services company Synoptek.
Britt said late last month that for the most part “our customers are not making big commitments” but rather making small necessary improvements or taking steps to cut costs.
However, “there are pockets of strength where the company sees big projects, for example in home furnishings, home building, wellness, health foods.”
“Our baseline outlook is for the recovery to continue in Southern California and Orange County, though the next phase is expected at a more gradual clip,” according to the CSUF forecast. “We anticipate that it will take up to the end of 2022 for employment levels to approximate those at the beginning of 2020.”
Less-educated workers have “borne the brunt of job losses,” the economists said.
OC’s unemployment rate stood at 2.8% in February just prior to the pandemic. After hitting double digits starting in April, the jobless rate fell to 9% in September.
The CSUF team predicts the U.S. economy will show a once-unthinkable 3.7% contraction in real gross domestic product this year and a 3.9% rebound in 2021. Much will depend on the results of the Nov. 3 elections.
Puri and Farka also said the short-term outlook for the leisure and hospitality sector in Orange County is “worrisome” in the short term, citing Disney’s Sept. 28 announcement that it planned to lay off 28,000 workers companywide, including more than 3,000 employees at Anaheim’s Disneyland Resort.
The economists said the closure from March to September created a loss of $2.1 billion for Orange County and $3 billion to Southern California.
“If Disneyland were to close for a whole year, Orange County would lose 33,200 jobs and Southern California 46,100 jobs with an output loss of $3.4 billion for Orange County and a huge $5 billion loss for Southern California,” Puri said during the Oct. 22 presentation.
Disney and California authorities are in a tug of war over reopening dates.
Puri noted that Disneyland has a huge “psychological impact” on the county’s economy while the closure cuts tax revenue for cities such as Anaheim and Garden Grove.
On other key issues, the Fullerton economists said “the housing market has shrugged off the bloodbath elsewhere in the economy, setting record highs nationally and regionally.”
From January-August, the Orange County median home price rose by 6.9%, according to the CSUF report.
On a national basis, the CSUF researchers said “the commercial real estate sector is a shadow of its former self with demand for office and retail space likely never returning to its former glory.”
Scott Wetzel, executive vice president for the Irvine office of commercial brokerage firm JLL, said “there are some signs the economic climate is beginning to adapt to the new normal” in OC.
“Looking specifically at office-using sectors, Orange County lost 51,000 jobs, while 50% have been recovered,” he told the Business Journal on Oct. 26. “Sustainable growth will depend on how well COVID-19 can be contained and the development and distribution of a vaccine.”