Chapman University economists expect Orange County to see solid employment growth along with a modest dip in house prices next year, but stressed the need to boost the region’s innovation-related jobs and noted that many newcomers to the region aren’t higher-income workers.
The team, lead by Chapman President Emeritus Jim Doti, presented the 44th Annual Economic Forecast on Dec. 14 in the Musco Center for the Arts, before a crowd of 260, with another 3,150 watching virtually.
While they foresee a “strong comeback from the COVID-19 recession,” including 5% local employment growth in 2022, they also underscored many new challenges ahead for the county.
Looking nationally, the Chapman economists forecast next year’s economic growth will be 4.4%, or twice the normal rate.
Signs point to possible recession in 2023, they said.
Consumer prices are predicted to continue their steep rise, with an inflation rate of 6.3% heading toward the middle of next year. The November inflation rate was 6.8%.
Team members Fadel Lawandy, director of the C. Larry Hoag Center for Real Estate and Finance, and Economics Professor Raymond Sfeir, director of the A. Gary Anderson Center for Economic Research, also presented the forecast.
“Although the unemployment rate in the U.S. has declined to 4.2% in November, the labor market is still plagued with problems,” Sfeir told the audience.
There was some good news for home seekers suffering from sticker shock on $1 million-plus home prices, though not necessarily for existing homeowners and prospective sellers.
“By the fourth quarter, mainly because of higher mortgage rates, Orange County’s home prices will be declining 3% to 4% on a year-to-year basis,” the economists said.
“If rates go higher than we are forecasting, it will be worse.”
The Federal Reserve on Dec. 15 paved the way for possible interest rate hikes next year.
Still, the current housing market “is as hot as you can get,” Chapman economists said, pointing to a record-low number of about 20 days to sell a house.
The Chapman forecast said the median price for single-family homes climbed to $1.1 million in Orange County this year from around $800,000 in 2019, as mortgage rates fell and there was a limited amount of new housing stock brought to the market.
For more thoughts from the economists on real estate issues affecting the state, see page 35.
The researchers highlighted the importance of the Chapman-UCI Advanced Innovation Industries Index, a metric introduced a little more than a year ago that takes a quarterly snapshot of how Orange County is doing in comparison to other tech hubs across the nation.
Of the 50 innovation hubs tracked across the nation, Orange County most recently ranked 12th highest. That represents a decline of two positions since 2015.
They emphasized that the high-value-added tech-related jobs have an average salary of $125,000 versus $66,000 for all other jobs.
“These are the jobs that we want to produce in Orange County,” Doti said (see story, page 1).
Unlike all other jobs in Orange County that are still at lower levels than pre-recession highs, innovation jobs are marginally higher, the economists said.
Using just-received data, Doti also sought to dispel any notion that people moving into the county are bringing higher-paying jobs with them.
In fact, it’s just the opposite, as the OC population declines.
“More people are moving out of the county than moving in, and it’s significant,” Doti told the audience, citing a 2.4% population decline in OC in the three years starting in 2018.
He said many of those who move out are “in the prime working age.”
“In Orange County, the AGI (Adjusted Gross Income) per tax return for those people moving to other states is almost $96,000—those coming [to OC count an AGI of] roughly $93,000.”
“It’s not true that higher-income people are moving into the county,” Doti said. “The same thing is true for the state.”