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Execs’ Optimism Dips As Election High Fades

Optimism among Orange County business owners and executives has subsided after the all-time high recorded in the first quarter, according to the latest California State University-Fullerton’s Orange County Business Expectations Survey.

The index fell to 92.4 at the beginning of the second quarter, down from 97.9 in the first quarter and 84.4 in the fourth quarter. The dip may have occurred because the survey was conducted soon after President Donald Trump and Congress failed in late March to reform Obamacare, said Anil Puri, the survey’s project director and a former dean of the Mihaylo College of Business and Economics.

“The confidence index rose sharply when President Trump took over, and expectations were very high,” Puri said. “In the first quarter, expectations were yet to be fulfilled.”

The result is still the third highest reading since 2002, indicating business leaders anticipate robust regional growth. The index ranges from zero to 100; a number higher than 50 indicates that business owners expect economic growth.

“I view business as strong in Orange County, but it is not gangbusters,” said Dan Struve, chief executive of Helpmates Companies, a staffing firm that filled 5,000 temporary jobs last year. “Gangbusters for me was 2006 and 2007 when it was booming. Our salespeople became order takers. It’s not to that degree yet. One can be hopeful.”

About 69% of executives who responded to the survey said they predict significant or some growth in their own industries, up from 59% in the prior quarter and 54% two quarters ago.

The employment growth picture is optimistic, as about 41% of firms expect to increase their labor forces, up from 35% in the prior quarter and 25% two quarters ago. About 70% of firms anticipate higher sales, up from 65% a quarter ago.

A leading indicator that companies are planning to hire is the addition of human resources representatives, Struve said.

“There are quite a few HR jobs open, which means companies are trying to add employees,” he said. “When the C-suite is uncomfortable with the direction, they stop adding or cut back on HR.”

Job Seeker’s Market

Orange County unemployment fell to 3.7% in February from 4.1% a year earlier. In March, the U.S. unemployment rate dropped from 5% to 4.5% year-over-year.

Companies should prepare to pay higher salaries, because employees have more choices, Struve said.

The biggest concerns among OC executives responding to the survey were the overall economy, 30%, government regulations, 28%, and labor costs, 13%. International competition, inflation, taxes and credit availability registered less than 6% each as among the most significant factors affecting the respondent’s company.

Sacramento regulations that are worrying businesses include restrictions on contingent staff and mandated increases in minimum wages, Struve said.

“Sacramento is not doing employers any favors.”

The biggest threat to the U.S. economy is insufficient political economic reform, 56% of respondent said, followed by too rapid reform, 20%.

Concerns about the Federal Reserve raising interest rates fell from 33% to 13% quarter-over-quarter. Executives are also less worried about federal debt payments, 7.4%, a steep drop from 25% in the prior quarter.

The survey was based on responses from 54 executives in Orange County. About 39% of the enterprises employ more than 100; about 28% have 20 to 100 employees; and the remaining 16% employ 20 or fewer.

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Peter J. Brennan
Peter J. Brennan
Peter J. Brennan has been a journalist for 40 years. He spent a decade in Latin America covering wars, narcotic traffickers, earthquakes, and business. His resume includes 15 years at Bloomberg News where his headlines and articles sometimes moved the market caps of companies he covered by hundreds of millions of dollars. His articles have been published worldwide, including the New York Times and the Washington Post; he's appeared on CNN, CBC, BBC, and Bloomberg TV. He was awarded a Kiplinger Fellowship at The Ohio State University.
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