The temporary closure of Disneyland Resort will be a “major hit” to the economy of Orange County, an area that is already bracing for a rising jobless rate that may temporarily spike at 17% because of the coronavirus pandemic, according to California State University-Fullerton economists.
“This is truly a black swan event, which means that nobody could have predicted it,” Anil Puri, director of the Woods Center for Economic Analysis and Forecasting, told the Business Journal after the release of the Spring Economic Forecast last week.
Puri and center co-director Professor Mira Farka forecast a gloomy picture for a U.S. economy already in recession, with a 4.3% contraction likely this year and an unemployment rate projected to average 8.9% in 2020.
OC’s unemployment rate for 2020 is now expected to average 7%, nearly double what it was in mid-March, they predict.
The Fullerton researchers called special attention to the Disneyland Resort, the largest source of jobs in OC.
The Walt Disney Co. generates 57,000 jobs in Orange County under normal times, taking into account both direct employees, as well as contractors and others who rely on the company for their livelihood, according to CSUF data from last year.
Disneyland in Anaheim accounts for $3.7 billion in annual output in the county and $258 million in OC tax revenue.
“It may be months before it’s fully operational. And that’s going be a major hit to both the county and its residents,” Puri said.
“Tough times are ahead,” Puri and Farka said.
The economists project that OC unemployment will average 11.5% in the second quarter, which ends on June 30. They said that “during the next three months the unemployment rate may actually go up to 15% to 17% for a month or two before it comes down.”
“It will start declining, but it will not reach the level of 2.5% to 3% until after 2021,” according to their report presented online rather than in person due to COVID-19 prevention measures.
OC’s unemployment rate stood at 3.6% in mid-March, prior to the wave of layoffs and furloughs taking place across the region, particularly in the restaurant, hospitality, leisure and retail industries.
Puri said it is important that “Orange County business executives try to maintain their workforce —furloughing them, rather than firing them outright.”
“Workers are valuable. Their experience and knowledge of the company is very valuable and so they want to maintain their workforce,” the Woods Center director said. “When things start to get better, they need to bring them back to continue their operations.”
“Some of the damage, we just have to take it on the chin,” according to Puri.
He noted that many OC businesses have international connections, either for supplies or sales. Since other countries are at different stages in dealing with the virus, some ahead of OC and some behind, time and patience will be needed for the recovery.
“We know this is a very deep recession,” Farka said in presenting the U.S. outlook. “We think that what started as a temporary shutdown will leave some permanent damage, some permanent scars. Not everything that was lost during this deep freeze will be regained back immediately when we reopen.”