Orange County will see slower job growth and higher unemployment next year as a recession is likely to set in across the country, according to economists at California State University, Fullerton.
The median prices for local single-family homes, which hit a new high earlier this year, are also expected to fall between 10% and 15% over the next two years, according to CSUF economists Anil Puri and Mira Farka in their annual forecast.
They released the 28th annual outlook at a conference in the Grand Ballroom of the Disneyland Hotel in Anaheim late last month.
“For the next two years, the picture is going to be tough,” Puri said, citing issues including job losses and higher unemployment rates.
Fed Decisions
Payroll job growth in OC is expected to slow to 0.4% at an annualized pace next year, down from 3.8% this year. The number is expected to turn negative to -0.2% in 2024.
Orange County’s unemployment rate, also taken on an annual basis, will move up from the current level of 3.2% to 4.7% in 2023 and climb further to 5.1% in 2024. The hike will be most pronounced in the second half of 2023 and the first half of 2024, CSUF economists predict.
Puri, director of the Woods Center for Economic Analysis and Forecasting, blames inflation for many of the current economic difficulties.
“Our view is that the Fed will ultimately back off from its ‘unconditional’ fight to slay inflation after winning some battles but without winning the war.”
The CSUF 2023 Economic Forecast report was released during a tense time for the economy both in OC, nationally and worldwide. Inflation, the war in Ukraine and energy costs have led to warnings of belt-tightening ahead.
Puri, a CSUF economics professor, remains optimistic about OC.
“I am always high on the future of Orange County talking in general terms,” Puri told the Business Journal on Oct. 26. “There are no major imbalances in Orange County.”
Home Prices
“After reaching an all-time-high of $1,233,500 in April 2022, median home prices in Orange County have been declining for the last four months on a month-over-month basis,” according to the CSUF economists.
“We do have a housing problem,” Puri said, adding that more construction of multifamily housing will alleviate the situation in the future.
Puri and Farka said their “baseline scenario” calls for a relatively moderate recession next year, and one that will not be as severe as the Great Recession of 2007-2009. Puri said the recession is expected to start in the middle of 2023.
As for his main concerns, Puri says: “Inflation lies behind all of these issues.”
“Inflation will be hard to quash given that it has become widely entrenched and stubbornly sticky,” according to the CSUF forecast.
Puri and Farka expect the Fed’s key interest rate—the federal funds rate—to peak between 5% and 5.25% early next year and to stay at that level until the end of 2023.
Population Decline
Farka is co-director of the Woods Center and an associate professor of economics at CSUF.
“I think the other issue that Orange County needs to pay attention to is the decline in population that began three years ago,” according to Puri.
Puri notes that there is a “smaller number of immigrants coming to the county.”
“That’s going to put pressure on the labor force that’s available.
“As pointed out in our previous reports, immigration has been a source of significant growth in the county’s and state’s population, but it has slowed down dramatically in recent years,” according to the 2023 economic forecast.
OC had 11,200 new immigrant arrivals in 2018-2019, a figure that slid to 2,700 in 2020-2021, the CSUF economists said.
