Stock photo via GraphicStock.
Stock photo via GraphicStock.

The economic recovery is slowing, with forecasters Wednesday predicting a possible recession looming nationally, statewide and in Orange County, where a trend is emerging of high-paying jobs being replaced with low- salary service sector positions.

“Last year the real (Gross Domestic Product) grew about 2.4 percent, and we’re not expecting anything better than 2.1 this year,” said Raymond Sfeir, director of the Anderson Center for Economic Research at Chapman University.

In Orange County, the area’s recovery peaked in job growth at 3.5 percent in the third quarter of last year. By the fourth quarter of this year, Chapman economists predict the rate to dip to 2.5 percent, for an annual average of 2.6 percent.

Last year, the annual average rate of job growth was 3.2 percent.

“It seems that the jobs we have been producing here in Orange County have been lopsided toward the low-quality jobs that pay less than the top manufacturing jobs or information or technology jobs, and that’s why our average income in Orange County has not been increasing at the same percentage when you compare it with California,” Sfeir said. “California is closing the gap with Orange County.”

The county is not creating higher-paying manufacturing jobs and there’s been an exodus of tech-related jobs in the area, Sfeir said. The new jobs are mostly in the service sector and don’t pay well.

Job growth in the county has trailed the country’s and state’s rates since 2007.

“Even more alarming is that most of these jobs are being generated in low-paying categories like education and health and leisure and hospitality,” the university’s experts say in their annual report.

Silicon Valley has been a “job machine” for the state, picking up the slack for the rest of the state, particularly in Orange County.

In 2007, Orange County’s per capita personal income was 16.4 percent better than the state, but is now only 8.7 percent greater.

Orange County is also seeing an exodus of residents, who are seeking greener pastures elsewhere in the country, the experts said. The rate has been low, but has doubled over the past couple of years, they noted.

Personal income growth in the county is predicted to go from 4.7 percent last year to 5.2 percent this year, just below the state’s rate of 5.4 percent.

The county’s taxable sales growth also will lag the state, increasing from 3.1 percent last year to 4.1 percent this year, according to the forecast. The state’s rate is expected to go up from 3.6 percent to 4.3 percent this year.

Forecasters also expect upward pressure on housing prices in Orange County because of low mortgage rates, higher median family income and a tight housing supply. Housing appreciation in the county is expected to go from 2.7 percent last year to 4.6 percent this year.

Nationally, the experts don’t predict the worst for the economy.

“Although it is too early to call for a recession, it now appears that the current recovery is in its latter stages and nearing an end point,” the Chapman report says.

Sfeir does not expect Brexit — England’s departure from the European Union — to have a dramatic effect on the local economy.

“The exchange rate is important for us because we do a lot of trade with Europe and Britain, but I don’t expect that to be heavily impacted by Brexit, even if it is finalized and whatever shape it is,” Sfeir said. “The value of the dollar versus the British pound and the Euro are going to be important.”

The pound has dropped to 1.33, a rate not seen since the mid-1980s, Sfeir said.

“If it stays that low, and I don’t think it will stay that low, it will affect a little bit of our exports as they go down and imports go up,” Sfeir said.

City News Service

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