Chapman College Forecasts Dip in Manufacturing Jobs in 1987

Hampered by a continued national trade imbalance, lower levels of investment and sluggish economic growth, manufacturing jobs in Orange County will decline by more than 2% next year, despite an overall increase in local employment, according to the annual Chapman College economic forecast.

Hardest hit will be the county’s construction and aerospace workers, according to projections released Thursday.

Bolstered by a 4.7% increase in service-related jobs, however, total employment is expected to grow by 2.1% next year.

The modest increase in countywide employment contrasts with an estimated 3.7% gain for 1986. Employment growth in Orange County has been inching downward each year after peaking above 8% in mid-1984, according to James Doti, dean of the Chapman College School of Business and Management.

Doti’s revised estimate of the 1986 employment increase is well below his most bearish estimate of 5.2% made a year ago. He explained Thursday that he based his earlier 1986 employment forecast on a projected increase in the Gross National Product that failed to materialize.

Next year’s slower employment growth is serious, but “we are not forecasting a recession,� Doti said. Although the growth rate will decline, total jobs will still grow rather than shrink, a key feature of recession, he added.

Local employment also will be affected by short-term effects of the new federal income tax legislation, which will eliminate many incentives to real estate investment. As a result, Doti believes that valuation of new construction in the county next year will fall 5.2% to $2.98 billion from an estimated $3.15 billion in 1986--the first decline in four years. The 1986 estimate represents an 18% increase from total new construction valuation of $2.67 million in 1985.

Because of the anticipated drop in new construction during 1987, as well as a continuing surplus of commercial space, Doti predicts that the number of jobs in the building industry will fall by 12% to 46,973 next year.

Many of Orange County’s aerospace and high-tech workers also will face unemployment next year as ongoing defense projects wind down, Doti said. Exacerbating the long-awaited drop in military sales are weaker overseas sales. Both will contribute to an aerospace employment drop of 6.2% during 1987, the Chapman forecast says.

Still, Orange County’s economy again will outpace the nation’s during 1987, with the value of goods and services produced locally increasing 5.8% to $50 billion, Doti said. That compares with a projected 5.2% increase in the GNP.

However, Doti’s projection last year that the county economy would grow by 8.1% during 1986 appears to have missed the mark. Doti now estimates that the increase will be about 5.8%. Doti said Thursday that last year’s forecast did not anticipate the year’s low inflation.

Consumer spending and investments are expected to decline nationally next year and there will be no significant increases in government spending to stimulate the economy, Doti predicted. That, coupled with an unimproved trade deficit, will lead to real GNP growth of just 1.8%, he said.

Doti, who holds a doctorate in economics from the University of Chicago, led a team of Chapman students and faculty in the creation of the first Orange County economic forecast in 1978. ORANGE COUNTY ECONOMIC FACTORS

1984 1985 (Estimate) 1986 Total Wage and Salary Employment 959,403 1,005,023 1,041,738 Total Bank Deposits (in thousands) $12,521,081 $13,456,905 $15,229,548 Total Taxable Sales (in thousands) $18,531,064 $20,219,591 $21,411,493 Total Building Valuation (in thousands) $2,233,281 $2,673,552 $3,153,966

(Forecast) 1987 Total Wage and Salary Employment 1,063,354 Total Bank Deposits (in thousands) $17,415,891 Total Taxable Sales (in thousands) $22,875,915 Total Building Valuation (in thousands) $2,989,349

Source: Chapman College Economics & Business Review