"Construction was the high flyer this year," says economist and Chapman president James L. Doti.

In all, almost 6,000 new construction-related jobs were added in 2000. This respresents an 8% increase in jobs over 1999 figures, which peaked at an 11.6% increase over the previous year. Still, the lagging impact of higher mortgage rates and limited land availability are expected to cool off the construction industry next year to only a 0.3% increase in jobs for the year.

Another contributing factor is a slowdown in construction spending now that Disney's California Adventure theme park is nearing completion, which will account for the loss of several thousand construction jobs in itself.

Likewise building permit activity is projected to slowdown even more than this year, which at $4 billion in valuations is nearing the county's 1988 high. The figure for 2001 is projected to be only slightly better at $4.2 billion in total residential and nonresidential valuations for the year, both growing at about the same 5% rate. However, relatively high lease rates and low vacancy levels for office, industrial and R&D space throughout the county are expected to more than offset the loss in nonresidential permit valuations next year occasioned by the completion of California Adventure.

"Lease rates had a sharp 9% increase in the past year. It will have a negative effect since the cost of leasing will keep growth down. But the vacancy rate for the county is now 7%, and there are not as many dot-coms here as in Los Angeles. So even if we have failures, it is not going to effect vacancy. It will still hover around 7 to 9%. The lease rate by itself will moderate some of the absorption," Doti says.

According to figures released in the latest edition of Chapman's Economic & Business Review, Orange County ranked second to the Inland Empire in job growth in 2000. And the Chapman forecasters are calling for 3.5% job growth, which translates to creation of 50,000 new jobs in 2001. This includes an estimated 7,000 jobs resulting from the opening of California Adventure.

The forecasters are also expecting the Federal Reserve to lower the federal funds rate by 25 basis points during the second half of next year, due to slowing economic growth coupled with lower inflationary pressure.

Instant Insights /

Forecasters Predict Drop in Construction Jobs and Spending in 2001

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