Orange County to face short, deep recession, Chapman forecast says

The bill is overdue for the pandemic era’s government generosity.

That’s why Orange County should be preparing for a short but steep recession in 2023, according to the latest edition of Chapman University’s economic forecast.

You see, much of 2023’s pain will be withdrawal symptoms from the pandemic era’s overly generous stimulus efforts – from taxpayer grants to individuals and institutions to historically low interest rates. With the coronavirus hits to health and wealth largely in the past, the government economic aid is all but ended.

“That’s why we had a very, very strong recovery. Gangbuster growth,” says Chapman economist Jim Doti. “Now we’re paying the price.”

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The local economy should be strong through the winter but then “it will be a pretty deep recession,” Doti says.

That early 2023 upswing will leave many Orange County business metrics looking flat for 2023.

Chapman forecasts Orange County jobs will grow by only 0.5% for all of 2023 vs. rising on average by 3.9% a year in 2022-23. That will top 0.3% growth statewide and nationally, the forecasts states.

But there will be pain. Local employers will be cutting employment at a 1.3% annual rate next summer, Chapman predicts.

The county will feel a broad-based hiring cooldown.

High-wage business services jobs will rise just 0.1% in 2023 vs. a 2.2% gain in 2022. And low-wage leisure and hospitality bosses will prune payrolls by 0.2% in 2023 vs. gains of 22.5% in 2022, primarily restaffing after extended pandemic-era closures.

All this job uncertainty will put a chill on shopping. Taxable sales are projected to fall by 2% in 2023 vs. rising 18% a year on average in 2021-22.

A big factor is cheap money is dead. So real estate will suffer.

Soaring mortgage rates will cut home sales by 10.5% next year, the forecast says. And home prices will fall 7.3%. Despite the price declines ahead, affordability for house hunters has mostly evaporated.

That adds up to growth in construction jobs cooling to 1.4% in 2023 from 4% in 2022. And finance jobs – think mortgage-making – will drop by 5% in 2023 after a 3.1% tumble in 2022.

The iced sales market will mean housing developers also will pull back.

Chapman forecasts permits for single-family homes will fall 21% in 2023 after a drop of 6.5% in 2022. Multifamily permits, primarily rentals, will fall 20% in 2023 after a 3.3% drop in 2022.

And the county’s economic challenges won’t end with next year’s recession, Doti says.

The high cost of local living and the establishment of work-for-home as a business mainstay will make it hard for the county’s employers to retain workers.

Orange County in the past four years has had stagnant employment at 1.65 million. California added 322,000 jobs in the same period.

The county ranks 22nd among 50 large metropolitan areas in a Chapman-UC Irvine index of high-paying “innovation” jobs.

“Orange County is slowing down,” Doti says.

Source: Orange County Register