Productivity Index Indicates County’s Recouping Losses

Manufacturing in Orange County has bounced back after a fourth-quarter dip, with employers in the various goods-producing industries adding almost 2,000 jobs in the first quarter and manufacturers telling Chapman University economist Raymond Sfeir that sales, productivity and overall business conditions are on the upswing.

Sfeir’s manufacturing index, which tracks the local industry’s expansion and shrinkage, showed a growth rate of 36.7% during the first three months, the largest increase in at least five years.

The index tracks things like production, employment trends, new orders and the cost of raw materials (increasing costs often put a damper on manufacturing profits, which can decrease production and employment). Index rates in excess of 50 indicate the manufacturing segment is growing, while rates lower than 50 reflect a shrinking industry. The index for the first quarter stood at 58.6, up from a five-year low of 42.9 in the fourth quarter.

Sfeir said manufacturers were reacting late last year to fears that the Asian economic crunch would dramatically cut into sales. But during the first quarter, he said, improving U.S. and European economies offset the loss of business in the slower Asian markets.

Bolstering the Chapman report are the latest numbers from the state Employment Development Department, which show that manufacturing businesses employed 241,000 workers in Orange County at the end of March. That’s a healthy 3.3% increase from 233,700 at the end of March 1998 and represents 18.2% of all wage and salary jobs in the county.

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Manufacturing a Comeback

Orange County manufacturing snapped back in the first quarter of 1999. The manufacturing index combines production, inventories, prices, deliveries, orders, unemployment and the like into a single figure. A value of 50 or more indicates expansion; a value below 50, a contraction of the manufacturing sector. The Orange County trend:

1994

1st qtr.: 60.9

2nd qtr.: 59.2

3rd qtr.: 60.0

4th qtr.: 63.0

1995

1st qtr.: 64.4

2nd qtr.: 61.0

3rd qtr.: 59.0

4th qtr.: 55.8

1996

1st qtr.: 54.9

2nd qtr.: 57.0

3rd qtr.: 62.7

4th qtr.: 60.2

1997

1st qtr.: 63.9

2nd qtr.: 58.6

3rd qtr.: 58.5

4th qtr.: 63.6

1998

1st qtr.: 57.7

2nd qtr.: 55.5

3rd qtr.: 55.0

4th qtr.: 42.9

1999

1st qtr.: 58.6

Source: Chapman University School of Business and Economics