As local recessions go, the county’s economy has fallen just about as hard as it did in the early 1990s.
Whether the current recession matches the duration of the prolonged 1990s downturn is another matter.
By most accounts, the county’s economy isn’t expected to regain its footing until next year, which could put it on par with the three-year jobs downturn that ended here in 1993.
A late 2010 recovery would match the length of the 1990s recession, as the county started losing jobs on a yearly basis in the third quarter of 2007.
An early 2010 recovery, or one in late 2009 for that matter, would bring an earlier end to the downturn than seen the 1990s.
“By many counts this recession is deeper than in the 1990s,” said Chapman University economist Esmael Adibi. “Even if it doesn’t last as long as the previous recessions, the declines are deeper.”
The severity of the current downturn,with big job losses and steep drops in the values of homes, commercial buildings and businesses,has some hoping for a recovery after a fairly rapid, painful downturn.
Now vs. 1990s
In February, the county’s 7.8% unemployment rate topped the worst level of the 1990s recession, 7.5%, which came in July 1993 near the end of the downturn at that time.
About 128,300 people now are unemployed, compared to 101,400 in July 1993, according to numbers from the California Employment Development Department.
The county now counts 1.43 million employed workers versus 1.24 million in 1993.
In February, the county lost 72,300 jobs from a year earlier, a 4.8% drop.
During the 1990s, the county’s yearly job losses peaked at 82,100 in February 1991, which was down 6.2%.
Like nearly two decades ago, the current recession came after a period of strong gains in the economy, which led to big run-ups in housing and commercial real estate.
The end of the Cold War and a big cut in defense spending hit Orange County hard in the early 1990s, as did the lingering savings and loan crisis.
Back then, the county’s economy was less diversified, with aerospace, real estate and tourism as the dominant industries.
The economy is broader today, though nearly every sector has seen declines in the current recession. After starting in mortgages, the downturn quickly spread to housing, real estate, the larger finance industry and then just about everything else.
Early 2000s
The severity of the current recession has some looking back to the downturn of 2001 and 2002 as mild by comparison.
Back then, the damage largely came in technology, tourism and commercial real estate as the bursting of the tech bubble of the late 1990s and the 2001 terrorist attacks played out. Unemployment peaked at 5.4% in July 2002.
The housing market was unfazed by the downturn, helped by low interest rates and new types of mortgages that ultimately led to the current recession.
This time around, housing prices have fallen sharply and quickly.
In February, the median price of a home here was down 28% from a year earlier to $375,000 and off nearly 42% from the county’s all-time high in June 2007, according to La Jolla-based DataQuick Information Systems Inc., a unit of Canada’s MacDonald Dettwiler and Associates.
From 1990 to 1993, the median price of a home here fell about 20% to $219,900, or about $320,000 when adjusted for inflation.
Housing
The fast drop in home prices could be a good thing, according to Chapman’s Adibi.
“The more people who can afford the median home price, the faster the market will stabilize,” he said. “We have to have some stabilization in housing first before we recover.”
In the fourth quarter, 48% of households in the county could afford to buy an entry-level home here, up from 27% a year earlier, according to the California Association of Realtors.
Housing prices could fall another 6% to 7%, according to Adibi. They aren’t likely to start climbing again until the county starts adding jobs, he said.
Building Permits, Taxable Sales
Another key economic indicator: building permits, which are government approvals for housing projects, commercial buildings and other projects. In the fourth quarter, the value of local building permits was down by half from a year earlier to $446 million.
By percentage, that’s on par with the worst of the 1990s, when building permit values fell by 47% to $485 million in the fourth quarter of 1990.
For the first quarter, building permits are projected to start leveling out at about $633 million, down 4.7% from a year earlier, according to Chapman University.
Another economic measure, the county’s taxable sales, is forecasted to have been off about 2.4% in January from a year earlier at $13.3 billion.
The worst drop of the 1990s came in 1991, when taxable sales fell 6.3%.
Tax cuts as part of the federal government’s $800 billion stimulus program are hoped to spur retail sales. But the effect in California could be minimal with Sacramento raising taxes to solve its budget problems.
With consumers and businesses holding tight on spending, most eyes are on the government.
Government spending for construction projects, which may total about $90 billion nationwide, could create some jobs for the county, Adibi said.
Still, if California gets $10 billion of the federal spending,and OC about $1 billion,it’s unlikely to have a big impact, Adibi said.
The county will have to work off a steep drop in construction employment that has been playing out since 2007. For he 12 months through February, the county lost 16,700 construction jobs, a 17% decline.
“But anytime you throw money at something it will eventually move,” Adibi said.
