Signs of slowing in the local housing market and in the national economy are registering with Orange County chief executives, business owners and managers.
The group’s fourth-quarter outlook markedly declined from that of the past few quarters, though overall optimism about the local economy still is solid, according to California State University, Fullerton’s quarterly business expectations index.
The index is at 69.9, down from 81.7 or higher for the past three quarters. A reading above 50 indicates executives expect growth in the coming quarter.
The index hit a high of 94.9 in summer 2004 and a low of 31.6 at the start of the Iraq war in spring 2003. Before the fourth quarter, the index’s recent low point was 75.9 a year ago after Hurricane Katrina.
The fourth-quarter reading “may indicate a peak in the business cycle,” said Anil Puri, dean of the College of Business and Economics at Cal State Fullerton.
“It doesn’t mean a recession is on the way,” he said. “We’ll have to wait a quarter or two to see if there is an actual slowdown.”
A slowdown in housing, high oil prices and interest rates are factors in the latest reading, according to Puri.
Tam Nguyen, president of Advance Beauty College in Garden Grove, said his school has seen a rise in costs for goods and services.
“We’ve noticed a rise in all of our beauty products,” he said. “Gas prices also are a struggle for our employees and students, many of whom are now using public transportation.”
The county’s cooling housing market likely is giving executives pause.
Two recent reports show the median price for an OC home is declining on a monthly basis and is flat to down slightly on a yearly basis.
Sales of homes are down more than 30% from a year ago, according to both reports.
Roughly 45% of respondents to Cal State Fullerton’s survey ranked the overall economy as their main concern, up from 37% a year ago and 44% for the third quarter.
Some see the rising cost of labor continuing to pressure the local economy.
Roughly 58% of respondents said they expect salaries and other labor costs to rise in the fourth quarter, up from 55% in the third quarter.
Thirty-three percent said they expect no change in labor costs, down from 38% in the previous quarter. Just 8% see labor costs falling in the quarter.
About 53% of the executives polled expect no change in employment in the fourth quarter, down from 54% a quarter earlier.
Roughly 12% plan to cut jobs, up from 9% last quarter and 4% a quarter earlier.
“Every business owner I speak with says they are expanding and hiring,” Nguyen said. “But the challenge is finding quality personnel.”
The survey was done from Sept. 18 to Sept. 25. Seventeen percent of the 705 businesses contacted responded.
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