Chapman Experts Say O.C.’s Recession Is Over : Economy: University’s computer gauge indicates the downturn also ended in the Inland Empire early this year. Other specialists are not convinced.

ORANGE — The recession that has claimed thousands of jobs in Orange County and the Inland Empire during the past two years has ended, economists at Chapman University declared Thursday.

But individual business owners and wage earners probably won’t see much difference yet: The local economies will continue creeping along the bottom of a deep trough, and employers won’t be adding workers to their payrolls this year.

The downturn ended in the first quarter and made known its demise mainly with a shift in the direction of a line on a computer chart, Chapman President James L. Doti said.

Doti, a former economics professor who developed the school’s computer model of the Orange County economy, is the first forecaster to declare an end to the local recession.

At UCLA on Thursday, economist David G. Hensley issued a report that stated flatly: “While the halting recovery continues nationally, California still seems firmly mired in its recession. . . . There is nothing we can point to in the recent evidence to suggest that a local recovery is imminent.”

Chapman’s more upbeat prediction does share the prognosis of most economists for the rest of 1992: “a very weak recovery” at best.

Doti also said Chapman forecasters now think that the national economy began its recovery in mid-1991, months earlier than most economists date the recovery from the recession that began in July, 1990.

Doti made his declarations Thursday at separate meetings in Riverside and Orange. They were part of the Chapman Center for Economic Research’s midyear update to the annual Orange County economic forecast and its first forecast for the Inland Empire: Riverside and San Bernardino counties.

His comments on the recession raised eyebrows among other local economists.

Doti and Chapman are “in the business of doing this for people who want to see something good,” Bruce DeVine, chief economist for the Southern California Assn. of Governments, said of the forecasting.

“The evidence I have doesn’t show an end to the recession here, but perhaps his indicators do lead the rest of the region. It is hard to argue the point until later, when all the data is in,” DeVine said.

Anil Puri, dean of the economics department at Cal State Fullerton, said he would not challenge Chapman’s announcement, but thinks it is “almost impossible to pinpoint the start and stop of a local recession because there are no estimates by government agencies of the local economic output.”

An examination of local employment trends, said Puri, who is co-author of a recent study examining the effect of this recession in Orange County, “gives us mixed results, with no positive signs of improvement but general evidence that the hemorrhaging has stopped.”

He and the Chapman economists are in firm agreement on that point.

Esmael Adibi, director of the Chapman economic research program, said that, while he expects a net loss of 2,000 jobs, or 2% of the work force, in Riverside and San Bernardino counties this year and 7,000 jobs, or 0.6%, in Orange County, those numbers represent a significant improvement over 1991.

The state Employment Development Department reported in March that employers in Orange County slashed 45,262 jobs last year, a 3.8% decline in payrolls from 1990, while the work force in the Inland Empire counties declined by 6,600 jobs, or 6.6%.

The state job-loss numbers represent a massive readjustment from the tallies reported by the EDD during 1991, when the estimate was that fewer than 20,000 jobs were lost in Orange County. Before the new numbers were released, Chapman had been predicting a net gain of 9,400 jobs in Orange County this year.

Throughout the 1970s and 1980s, Orange County was the region’s economic powerhouse, outperforming the inland region in categories such as job growth and annual rises in retail spending.

But in 1993, as the two areas’ economies begin showing definite signs of recovery, there will be a decided shift, Adibi said.

For the rest of this decade, he said, the economy of Riverside and San Bernardino counties will grow much more rapidly than that of Orange County.

“You can see that even in the 1991 numbers,” he said. “The Inland Empire did not experience the recession as we did.”

While Orange County’s job losses have been pretty evenly divided among all employment categories--construction, manufacturing, retail, business services and government have all been hit--the entire decline in Riverside and San Bernardino has come from construction layoffs.

“They lost nearly 16,000 construction jobs last year but gained almost 10,000 in all other categories,” Adibi said.

Those gains most likely came from the expansion of companies based in Orange County.

In fact, Adibi said, the demand for the Chapman research center to produce an annual Inland Empire economic forecast came from Orange County businesses that have recently set up operations in Riverside and San Bernardino and want information on which to base budgeting decisions.

In its updated forecast for 1992, the Chapman research center predicts that retail sales in Orange County will grow by a slight 0.9% this year to $26.68 billion from $26.44 billion in 1991.

In the Inland Empire, while the total dollar volumes are much smaller, retail sales are expected to grow by 2.5%--or almost three times the Orange County rate of increase. The predicted 1992 dollar volume of $20.49 billion is up from $19.99 billion last year.

Those numbers, however, have to be adjusted for what Chapman predicts will be a 2.9% inflation rate, meaning that economists there don’t expect any real growth in consumer spending this year.

The Chapman report also predicts that the Inland Empire residential real estate market will continue being plagued by the same kind of devaluation that has helped Orange County home buyers recently but has hurt sellers.

The average home-resale prices in Riverside and San Bernardino counties, Adibi said, are expected to drop by 3.4% this year, to $169,166 from $175,120 in 1991.

In Orange County, Chapman predicts a 3.3% decline in resale prices, to an average of $240,373 from $248,576 last year. The Chapman economists do not predict new-home price trends. Development industry insiders have been predicting a 2% decline in average selling prices for 1992.

The average new-home price in April was $276,100 in Orange County, $169,480 in Riverside County and $157,772 in San Bernardino County, according to TRW Redi Property Services.

On a positive note, Chapman’s economists are predicting an increase in construction activity in both Orange County and the Inland Empire this year.

The anticipated release of about $400 million in local Measure M sales tax funds for public transportation improvements would account for the entire 15.4% rise in Orange County--to $2.99 billion from $2.59 billion in 1991.

In the Inland Empire, Adibi said, construction spending is expected to edge up a slight $41 million or 1.4% to $2.88 billion this year, entirely because of renewed housing construction.

RIOTS HURT ECONOMY: The Los Angeles riots took a toll on tourism, jobs, income, UCLA study contends. D1.

Economic Rebound?

Chapman Leading Indicator Series points to an O.C. recovery. There is a recession when the indicator is below zero for two straight quarters, a recovery as it turns upward.

Source: Chapman University

Tale of Two Regions

Orange County has more jobs and taxable sales than the Inland Empire, but the Inland Empire is creating jobs and increasing taxable sales at a faster rate.

RECOVERY IN THE INLAND EMPIRE?

Despite popular opinion, the Chapman University report indicates that the Inland Empire is in an economic recovery, as suggested by the upward swing for the past few quarters.

JOBS CREATED

Employers in the Inland Empire have created and kept a higher percentage of jobs than those in Orange County.

Year Orange County Inland Empire 1986 4.1% 7.1% 1987 4.4 6.9 1988 5.9 4.2 1989 3.6 9.8 1990 1.2 6.5 1991 -3.8 -0.9 1992 -0.6 -0.3

TAXABLE SALES

Over seven years, the Inland Empire’s rate of increase in taxable sales has been more than double Orange County’s.

Year Orange County Inland Empire 1986 4.8% 9.1% 1987 11.4 14.2 1988 7.6 11.0 1989 7.9 13.9 1990 1.3 6.9 1991 -4.8 -3.8 1992 0.9 2.5

Source: Chapman University Center for Economic Research