The rebounding confidence of Orange County executives has held for the first quarter with a survey of local economic expectations turning positive for the first time since 2007.
An index based on a survey of local executives is at 53.3 for the new quarter, marking its fourth straight quarterly rise, according to economists at California State University, Fullerton.
An index reading of 50 or more signals a positive outlook for the quarter. It’s the first time the index has been positive in two and a half years.
“Moving from negative to positive for the first time since July 2007 is noteworthy,” said Anil Puri, dean of the Mihaylo College of Business and Economics at Cal State Fullerton.
This quarter’s reading is close to that of the fourth quarter, when the index was at 48.8, a virtually positive outlook.
“While a roughly five-point change isn’t always going to be significant, in this case it does merit closer inspection,” Puri said.
The index hit a low of 15.2 in the first quarter of 2009 and a high of 88.7 in the third quarter of 2006.
It is designed to be a leading indicator of quarterly expectations among business owners, managers and chief executives in the county.
Even with an overall rebound in sentiment, local business leaders remain cautious, according to the survey.
The percentage of executives expecting OC’s growth rate to top the national economy’s fell to 41.2% from 46% in the fourth quarter.
“That’s something we’re going to keep an eye on as recovery continues,” Puri said.
Puri said he and other Cal State Fullerton economists have been talking to survey participants and are lining up a panel talk to look at why local executives see slower growth in coming quarters versus the national economy.
The conference is slated for Jan. 28 in Irvine and is set to include Dan Young, head of housing development for Newport Beach-based Irvine Company, Paul Folino, executive chairman at Costa Mesa’s Emulex Corp., and Glenn Gray, chief executive at Tustin-based Sunwest Bank.
“The big question is how much Orange County’s economy can continue to grow with a relatively high unemployment rate,” said survey participant Ray Dellerba, chief executive at Costa Mesa-based Pacific Mercantile Bank. “With a trailing jobs picture, it could take longer for our local economy to fully recover.”
In November, the county’s unemployment rate was 9.4%, up from 6.1% a year earlier. For the 12 months through November, the county lost 53,000 jobs from a year earlier.
Other survey results point to a continued recovery in the local economy.
Business owners and executives who said they expect local economic activity to improve in the quarter held steady from the fourth quarter at 72%. A year ago, only 23% expected improvement.
About a third of respondents said they expect growth within their industries. That’s up from 26.1% in the fourth quarter.
Employment
The survey suggests a stabilizing job market with a subtle uptick in hiring by some and most planning to keep their workforces steady.
Some 20% of respondents plan to hire in the current quarter, up from 14.5% in the fourth. But most, 65.8%, don’t plan any labor changes.
Fourteen percent expect to cut jobs, down from 23% in the fourth quarter.
“The first quarter is looking very promising in terms of improved employment prospects,” said Cal Laird, chief operating officer at Kenny the Printer, an Irvine-based commercial printer with $10 million in yearly sales, 45 workers and plans to hire more this year. “From what we’ve been hearing lately, there’s a cautious loosening of the cost-cutting belt going on.”
Many respondents expect higher revenue this quarter—41.7%, up from 30.4% in the fourth quarter.
A greater number of executives (36.5%) also projects operating profits will improve in the first quarter.
That number was 24.5% for the fourth quarter.
Still, some remain bearish.
“Despite what the survey indicates, we’re still not out of the woods yet,” said Larry Scherzer, head of Los Angeles-based professional services firm Scherzer International, which has OC operations. “I’m still finding a lingering concern about another market correction.”
