UCI Researchers Predict 4.6% Increase in Jobs in County by December

Despite earlier predictions by several area economists that employment in Orange County will remain relatively flat in 1988, researchers at UC Irvine are forecasting a healthy 4.6% increase in the number of jobs locally by December.

That forecast underscores other findings of the university’s 1988 Orange County Business and Economic Studies program-findings that show county business executives to be optimistic about the coming year.

The UCI employment forecast calls for 55,579 new jobs to be created by county businesses this year, for a total of 1,186,715 jobs by year’s end.

By contrast, the Chapman College forecast for 1988, based on a computerized econometric model of the county’s economy, predicted 27,415 new jobs for the year, an annual increase of just 2.5%.

Acknowledging that the forecast is considerably more upbeat than others have been, Jone Pearce, associate professor of administration, said UCI’s initial attempt at an employment forecast last year also was way out of line with other regional predictions but turned out to be the most accurate.

Pearce heads the 2-year-old Business and Economic Studies project, in which top executives of the biggest employers in the county are interviewed about their attitudes toward the local economy.

For the 1988 survey, 190 executives, most of them the chief executive officers of their companies, were interviewed from September to December. The executives came from companies with 100 or more employees and represented all major sectors of the business community, Pearce said. Those sectors are construction, manufacturing, transportation, wholesale trade, resale trade, finance, business services and professional services.

Data Supports Finding

The study’s basic finding--county executives are bullish on 1988 despite the financial uncertainties following the Oct. 19 stock collapse--was released earlier this month. But Pearce unveiled new statistics Friday that support the finding.

Overall, 73% of the respondents said they expect their companies’ financial performance to be stronger in 1988 than in 1987--down from 79% last year. But just 3% said they anticipated declining performance, contrasted with 6% last year.

Half of the executives who said they expect improved profits this year said those profits will come from increased sales, while just 21% said internal cost cutting would be the primary reason for a better bottom line.

“In fact, 70% expect their operating costs to increase, so it seems clear that profitability will be driven predominantly by sales, not by cutting expenditures in the county,” Pearce said.

Executives in the construction industry were the most confident of improved financial performance during the coming year, with 89% saying they expected an improved showing and none saying things would be worse this year than in 1987. Least confident were business services executives, with just 61% of that group predicting improved performance.

Increase in Employment

Fifty-five percent of all respondents said they expected to increase employment activity this year. Those projections ranged from a low of 32% in the wholesale trades to a high of 81% in the transportation industry.

The survey found that 40% of the executives expect to have increased difficulty this year finding qualified professional and technical workers, 27% expect difficulty in hiring service industry employees and 25% anticipate problems finding enough clerical personnel and laborers.

“The scarcity of technically skilled people in the county was the biggest reason given for difficulty in hiring professional and technical people,” Pearce said.

And because workers in this category are highly paid, she said, the scarcity appears to come from a lack of training rather than from a flight from the county by skilled people who cannot afford housing here.

Pearce said that while her interviewers did not ask a specific question about the impact of the new immigration laws, difficulty in finding workers with legal status was cited as the chief hiring difficulty by 40% of those expecting problems finding laborers.

Trouble Tied to Immigration

“And 9% of all the executives interviewed said they expected some hiring trouble linked to the immigration reform act,” she said.

As a group, 84% of the executives said they expected sales to increase this year. By industry segment, confidence levels ran from a bullish 94% of the transportation industry leaders predicting increased sales to a moderate 65% of the business services executives anticipating higher sales.

Pearce said 40% of the respondents said they have international sales. A full 75% of those doing business overseas said they believe that the U.S. government hinders international sales, with 44% citing government export restrictions as the major problem and 22% citing government “red tape” and general regulations.

The most difficult aspect of international sales, the respondents said, are cultural and language differences (each was cited by 20% of the executives), followed by problems in obtaining financing, 15%, and supplies, 12%.

Turning back to the local area, 33% of the executives in all industries said they believe that the county will become a more attractive place in which to do business this year, 35% said things would remain unchanged and 32% said they believe the county’s business climate will deteriorate. Those figures are almost unchanged from last year’s findings.

Within industry segments, those expecting the business climate to improve ranged from a low of 19% of the professional services executives to a high of 63% of the transportation leaders.

Pros and Cons Cited

Among those who said they find the county’s business climate improving, five major reasons were cited:

+ 48% said it was because the county provides a good and growing customer base.

+ 45% because of the area’s economic growth.

+ 24% because population density makes the county attractive.

+ 18% because of the affluence of the population.

+ 15% because it is a desirable place to live.

Those who said they found the county becoming less attractive cited these five reasons for their attitude:

- Traffic congestion, 53%.

- Cost of housing, 24%

- Cost of living, 20%.

- Population density, 18%.

- High labor costs, 18%.

In the final broad catagory, 47% of the executives said they expect to increase capital expenditures this year, down slightly from 56% in 1987, while 44% said they expect capital expenditure levels to remain stable, up from 34% a year ago.

By industry, responses ranged from the construction executives’ low expectations--just 22% anticipate increasing their capital investment--to a high of 57% of the professional services executives projecting increased investment.