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Tuesday, Mar 19, 2024
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OC Firms to Hire, Invest More in Capital

A higher percentage of Orange County businesses intend to invest in more equipment and hire more employees in the fourth quarter, according to the latest Orange County Business Expectations Survey by California State University-Fullerton.

The overall index decreased to 88.2 in the fourth quarter from 93.2 at the beginning of the third quarter, reflecting less optimism on higher sales and operating profits. A rating above 50% indicates future growth in the economy. The index remains high by historical standards.

“Our index is slightly down, but it is well above where it was last year,” said Anil Puri, the survey’s project director at the Woods Center for Economic Analysis and Forecasting at CSUF. Executives “expect economic growth to continue so they are hiring more people and investing more.”

About 47% of the firms intend to increase their labor forces, compared with 43% in the third quarter. OC’s August unadjusted jobless rate was 4.2%, below the 4.3% in the same period a year earlier, according to the state Employment Development Department.

About 41% plan to increase investment, compared with 36% in the prior quarter. Few business leaders expect to reduce investment in the strong business environment, the report said. About 96% predicted overall business activity will improve in the fourth quarter, compared with 98% in the third quarter.

“I think people feel better about the way the economy is going,” said Ed Laird, chief executive of Huntington Beach-based Laird Coatings Corp., which makes paint coatings for products, including wheels. “We had a record month last month. We just added 10 employees, a 10% increase in the last quarter.”

The Inaction Threat

About 65% of executives said the biggest threat to the U.S. economy will be insufficient political and economic reform, a percentage similar to a quarter ago. Jumping to No. 2 is a potential conflict with North Korea, 15%, up from no mention a quarter ago.

“All of a sudden, North Korea has come up,” said Puri, who’s also interim provost at CSUF, one of the largest universities in the state. “However, compared to political inaction, North Korea takes a distant second place.”

Another rate increase by the Federal Reserve shot to 13% as the biggest threat, about double that of three months ago.

Regulations and the economy swapped places in the survey as the most significant concern of businesses. The top concern now is the economy, 37%, compared to 29% three months before. Government regulation fell to 28% from 36% three months ago. Labor costs were the top concern of 13%, compared to 11.3% in the prior quarter.

Profit Pressure

A big change was in expected profits as 44% expect a higher amount this quarter compared to 63% three months earlier. About 63% said they anticipated boosting sales this quarter, down from 68% in the prior period.

“There may be some pressure on profits,” Puri said. “Now that the recovery is mature, the rate of growth in profits won’t be as large as it has been the last few years.”

About 54 companies responded to the survey. Some 15% of responding firms employ more than 1,000, while 33% have between 100 and 1,000. About 33% have between 20 to 100 workers, and 19% employ less than 20.

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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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