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Exec Sentiment Up for New Year

Orange County executives are starting 2015 with increased optimism, according to the latest quarterly index by California State University-Fullerton’s Mihaylo College of Business and Economics.

The school’s quarterly business sentiments index reached 91.5 for the first quarter, compared with 85.7 three months ago and 88.8 a year ago.

It’s the highest mark since the third quarter of 2013, when the index hit 93.9.

A reading above 50 indicates expectations of growth in the economy.

The survey, headed by Mihaylo College Dean Anil Puri, aims to gauge local executives’ overall outlook of the economy and aims to measure respondents’ expectations on sales, profit margins, and hiring plans, among other matters. The latest survey was conducted in mid- December and included 49 business owners, managers and chief executives.

Results showed that about 94% of the respondents said they expect overall business activity to improve or stay the same, up from about 89% last quarter.

Growth in Industries

About 65% of the executives, up from 54% last quarter, said they expect “significant or some growth” in their own industries. A smaller proportion—4% versus 8% last quarter—expect decreases in business, and about 31% see little change in store for the next three months.

Dan Struve, chief executive of Irvine-based Helpmates Staffing Services, summed up the general outlook, saying he is “bullish on 2015.”

“The staffing industry, at least, is excited for this year,” he said. “First of all, the overall GDP growth is strong, which is always a good sign for employment growth. The second thing that’s helping is that, with the resurgence of hiring, there’s a tightening of the labor market. You’re seeing customers being more mindful about planning in advance, getting back to the staffing providers, and giving serious thoughts to raising pay rates and acting faster. They need to get things done, and they’re using us as a vehicle, because, if they try to go out and attract employees on their own, they’re having the same challenges as everyone else, and it’s not their core business. Recruiting and sourcing [are] our core business.”

Struve said the staffing industry grew average revenue and headcount by about 7% in 2014, with Helpmates notching a similar rate of growth. He did not disclose financial details but said he expects growth of between 15% and 17% this year.

Helpmates has about 50 full-time employees in the office and 3,000 overall, with the vast majority assigned to clients on a temporary basis.

Struve said business generally tends to be lighter in the first quarter of the calendar year than in other quarters. That could be different this year, he said, thanks to “the overflow [of demand] coming from 2014 to 2015.”

The Cal State Fullerton survey asked businesses about their hiring plans.

About 42% said they intend to hire, the same percentage as a quarter earlier. About 4% said they expect to cut jobs, down from 6%.

Revenue Expectations

Expectations for revenue improved, with nearly 78% of participants saying they predict higher sales in the quarter, up from 69% three months ago. About 22% said they expect little change.

Recent declines in the price of gas have led to “an increase in spendable dollars” among consumers, a turn that is likely contributing to the increased optimism among businesses, said Gene Micco, chief executive of Tustin Community Bank, which has about $65 million in assets.

“But the fast pace of this drop in oil price brings volatility in the markets, and nobody likes volatility,” Micco said. “Still, overall, I think the economy will be strong. The one thing, I think, that we can be sure of is that prices will go back up at some point.”

The survey also asked for profit expectations, which showed little change quarter-to-quarter. About 63% of the companies said they expect higher profits, 31% expect no change, and 6% expect lower profits.

The survey also asked the businesses to indicate some of their biggest concerns.

Worries

The state of the overall economy was the top worry, at 35%, compared with 44% last quarter. Government regulation came close, at 33%, compared with 29% last quarter. About 8% said labor costs were their biggest worry, with a smaller share of the respondents pointing to taxes.

The survey pool’s heightened optimism about their own businesses played into their view of California’s economy overall.

Nearly half—47%—said California will grow faster than the national economy, up from 34% last quarter. Nearly 31%, down from 38%, said the state will lag. About 22% said the two economies will grow at the same rate, down from 28% in the prior quarter.

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