Chapman: O.C. economy on steady upward path

The 36th annual Chapman University Economic Forecast offered a projection similar to last year’s: slow and steady economic growth or, as researchers put it, an economy “stuck in low gear” come 2014.

Monday’s presentation at Segerstrom Hall in Costa Mesa pointed to modest gains in job creation, consumer spending and other indicators contributing to a 2.2% annual increase in gross domestic product.

In Orange County, construction seems to be king. Esmael Adibi, director of Chapman’s A. Gary Anderson Center for Economic Research, noted that it is the fastest growing sector of the local economy.

Chapman researchers said construction spending, most of it for residential properties, grew by 23.5% in 2013 and that trend is expected to continue in 2014.

Home building is one of several elements that will positively affect overall job growth, Adibi said.

He predicted some 35,000 more payroll jobs in Orange County next year, a 2.5% increase from 2013, and 332,000 in California, a rise of 2.3%.

“We’re moving in the right direction,” Adibi said.

Chapman’s “consumer sentiment” survey also indicated a six-year high fueled by job creation, strong home prices, lower gas prices and good equity programs.

“That consumer sentiment improvement impacts spending,” Adibi said. “So we think consumer spending, even though income is not growing as fast, is going to do better than last year.”

The county and state housing prices should rise 5.6% and 4.9%, respectively, according to Chapman’s research. The downside: Homes will become increasingly less affordable, holding down demand.

The U.S. as a whole, since the recession ended in June 2009, has undergone 51 continual months of recovery, said Chapman’s president, James Doti.

Compared to the recessions of 1975 and 1983, “our recovery has been less than half the normal growth you have following a recessionary period,” he said.

Unlike those earlier recoveries, the current one shows no signs of “running out of steam,” Doti said.

“Our current recovery, being weaker, still has some legs,” he said. “In fact, if you look at some of the measures of capacity, [there are] no signs of inflationary pressure.”

Doti said economists worry about the opposite occurring — deflation, a general decline in prices.

He also predicted a $274-billion increase in consumer spending next year, or about 2.2% more than 2013 — one of the more “pessimistic” outlooks published, Doti said.

Like in Orange County and California, housing affordability nationwide has also dropped sharply recently, Doti said.

“Higher housing prices, higher interest rates — housing isn’t as affordable as it was six months ago,” he said, adding that housing still remains “more affordable than it has been historically.”

The Economic Forecast’s midyear update is scheduled for June 19 at the Renée and Henry Segerstrom Concert Hall in Costa Mesa.

The Daily Pilot was a sponsor of Monday’s event.