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Fullerton Forecast Sees Moderate Growth, Job Gains

The county’s economy has stabilized and is expected to add jobs at a modest clip this year even as housing remains a drag on overall growth, according to a midyear forecast by economists at California State University, Fullerton.

The latest biannual report projects a gain of about 19,000 jobs in the county for 2011. That would reverse a four-year streak of annual declines and drop the unemployment rate from its current 9.1% to 8.6%.

The report issued last week at the Hyatt Regency Irvine marks a turn from a pessimistic outlook.

Shift in View

Economists painted a bleak picture in their prior forecast in October, projecting substantial growth as years away.

Continued tight lending, lingering problems in housing and high unemployment dampened the outlook at the time.

That changed thanks to a strong finish to 2010 and early momentum this year.

“There are clear signs the economy has stabilized and is adding jobs,” said Anil Puri, dean of the Mihaylo College of Business and Economics at Cal State Fullerton. “That is a bright spot since the last forecast.”

The local economic rebound is heavily dependent on the national economy, according to Puri. He said he expects the national picture to improve despite the recent “external shocks to the system” that include the Japan disaster, unrest in the Middle East, social upheaval in North Africa, rising oil prices and concerns about the federal government’s debt.

The U.S. economy is making progress, Puri said. That’s helped the local job market turn the corner.

The county gained 2,100 jobs in March from February, but the unemployment rate increased to 9.1% as more job seekers entered the market.

Unemployment was up from 8.9% in February and still below the 9.9% seen a year earlier, according to the state Employment Development Department.

March marked the eighth consecutive month of year-to-year increases in the number of jobs here and took the 12-month total gain to 13,800, up 1% from a year earlier.

There’s still a long way to go. Orange County lost 162,100 jobs, or 10.7% of employment here, from 2007 to 2010.

The construction industry was hit the hardest, shedding 37,000 jobs in that span. The forecast predicted a slow recovery in hiring in the sector that will keep overall gains to moderate levels.

“Anemic”

Housing construction will be “anemic” until the real estate market rebounds, the report said.

Construction on commercial, retail and office space will be sparse until the economy improves, the report said.

Robust growth isn’t expected until mid-2012.

In typical recoveries the housing market contributes about 19% to gross domestic product, Puri said.

“This time it has contributed very little if any at all. As long as foreclosed homes stay on the market housing prices will stay depressed,” he said.

The median price of a house here was $497,000 in February, down from $535,000 a year earlier.

The forecast predicts housing prices to increase by less than 5% through the rest of the year.

Business expectations have improved in the past two quarters helped along by growth in some industries, namely chips and transportation equipment, Puri said.

Local executives are more optimistic about the economy than they’ve been since before the recent recession.

Cal State Fullerton’s quarterly index of business expectations hit 80.9 for the second quarter. That’s the highest mark since the start of 2007 and up from 71.4 for the first quarter.

It was the second-straight sizeable jump after an 11-point bump in the first quarter.

The latest reading is a stark contrast to a downbeat sentiment that held through the latter half of 2010.

Government Cuts

Local and national debt concerns present some challenges, but budget shortfalls and job cuts at all levels of government are a greater immediate concern, Puri said.

“Everything reliant on federal and state spending will slow down,” he said. “That’s why we expect moderate growth this year and the next several years.”

Puri said he doesn’t expect the problems roiling the public sector to derail a recovery.

“In spite of the deficit issue, there’s a good story about the economy getting better and more jobs being created now and in the future,” he said.

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