FULLERTON, Calif. — After a down year due to the coronavirus pandemic, Orange County's economy appears "ready to bounce back with a bang," a California State University, Fullerton report stated.
Orange County companies, especially in leisure and hospitality, are hiring. Unemployment is down, meaning more people are going back to work. Orange County's housing market has been red hot despite the pandemic. Disneyland and Knott's Berry Farm are reopening after being closed for more than a year.
And consumer spending is up, already above pre-pandemic levels, said Anil Puri, director of California State University, Fullerton's Woods Center for Economic Analysis and Forecasting.
"People are spending their money. They got their stimulus checks. They have been saving. And they are ready to spend that," Puri said during the university's Spring Economic Forecast webinar. "And that is healthy for the economy."
The forecast unveiled on Wednesday highlights the economic effects the COVID-19 pandemic has had nationwide and in the Southern California region, including Orange County. The forecast report was mainly positive, but there are still plenty of unknowns and other mitigating factors that could disrupt the economic upswing.
While Orange County's economy is heading in the right direction, some metrics are still lagging behind their other Southern California neighbors and statewide.
"As of March, we are still 137,000 jobs below the pre-pandemic levels of February 2020," Puri said, adding that Orange County has only regained 40% of their job losses from last year while the Inland Empire has regained 64%, California 44%, and nationwide 64%.
"So, there is still a long way to go for Orange County's economy to recover," Puri said.
At least one panelist expects some correction once the paycheck protection program dollars and stimulus checks run out and the eviction moratorium is lifted.
"Right now, we can't foreclose on homes. You cannot evict on homes. So you see a tainted picture in the marketplace," said Neel Pinge, chief risk officer at Commercial Bank of California. "Once the pandemic is lifted, you [will] find a little correction… I would expect the markets to really pull back as well as the economy to slow down a little bit."
Still, the national and local Orange County's economy is on an upward trajectory.
Nationally, "the boom is upon us," said Mira Farka, co-director of California State University, Fullerton's Woods Center for Economic Analysis and Forecasting.
"This is the most optimistic forecast I have given, ever," Farka said.
CSUF economists forecast 6.8% GPD growth this year, numbers not achieved since the growth boom of 1984 when Ronald Reagan was president. GDP growth is expected to increase by 6.8% this year and 5.1% in 2022. The national unemployment rate will hit pre-pandemic levels in the middle of next year, Farka said. She expects unemployment rate to fall to 5.4% by the end of this year and 4.2% next year. The current unemployment rate is 6%.
Farka gave four main reasons they are optimistic about the U.S. economic forecast:
- This is the shortest recession in history (only six weeks).
- The pandemic recession had no mitigating factors such as subprime lending, record-high household debt and overleveraged banks that led to the Great Recession of 2008. The pandemic was a global natural disaster.
- Unprecedented government support. The U.S. government has spent $10 trillion in fiscal and monetary support to local governments, consumers and businesses.
- Successful U.S. COVID-19 vaccine campaign. As of April, nearly 40% of Americans have received at least one dose of the COVID-19 vaccine.
"With the reopening economy, with the vaccines and unprecedented government support, even the fact that this recovery has been uneven and lopsided … that will mend," Farka said. "We will right the ship very soon."
In Southern California, especially Orange County, the coronavirus catalyzed downturn had an immediate impact.
In three months, Orange County lost 280,000 jobs, and unemployment jumped from 2.8% in February 2020, pre-shutdown orders, to 14.9% in May 2020. At the same time, Los Angeles County lost 1.19 million jobs, and unemployment soared from 4.7% to 18.8%. According to the Fullerton economic report, the Inland Empire also saw a job loss of 295,400 and unemployment rise to 14.9%.
"All told, a jaw-dropping 1.83 million jobs disappeared from Southern California payrolls over this time, more than half of the 3.16 million lost at the state level," the Fullerton report stated. "The unemployment rate for the 6-county region had skyrocketed to 15.5% by May from a pre-pandemic low of 4.3%."
But while some sectors struggled during the pandemic, the Southern California housing market skyrocketed after a short lull.
Home appreciation in Orange County rose by double digits, by as much as 12% year-over-year. According to the report, fueled by record-low mortgage rates, the median single-family housing price in Orange County rose to $910,000. Los Angeles also saw demand increase and record home prices. The median price of a home in Los Angeles is $770,000.
"Housing market has been phenomenal, a very unusual housing market," Puri said.
The double-digit percentage price gains, though, are not sustainable, Puri said.
Economists expect the Orange County housing market to taper off in the single digits in the coming years.
Puri and Farka said there is a lot of optimism about the future. After being closed for more than a year, Disneyland is reopening on April 30. The closure of Disneyland may have cost the Southern California economy $6.2 billion in output and 60,000 jobs.
But as more people get vaccinated and business restrictions lifted, expect the local and national economy to improve this year and beyond.
"Welcome to the new roaring, soaring '20s," Farka said.