Chapman University economists delivered a mixed-bag economic outlook for the coming year, predicting growth and job gains, but also rising inflation and a potential recession in 2023.
“We see inflation being very persistent and stubbornly high … Structural inflation is tough to beat,” Chapman economist and President Emeritus Jim Doti said in the annual Economic Forecast presentation on Tuesday, Dec. 14. Noting historical patterns, Doti added, “Generally, you can only beat it with a recession.”
On the plus side, the forecasters see real GDP growth of 4.4 percent in 2022 and continuing improvements in job numbers, especially in California where they forecasted a 4.2% increase in employment – although that is still about 300,000 below pre-COVID highs.
Home Values to Drop
In response to inflation, the Federal Reserve is expected to raise interest rates, a turn that Chapman forecasters say will lower home values.
“As mortgage rates are forecasted to rise from 3% to 3.9 % in 2022, housing prices are forecasted to decline about 4% by year-end,” they wrote in their full report.
Despite supply chain issues, California is benefiting from the billions of dollars in import trade coming through its ports, especially from Pacific Rim countries. Imports from China alone increased 19% from September 2020 to September 2021.
The forecasters also reported on new research related to an innovation metric they unveiled last year. The “Chapman-UCI Innovation Indicator” is the first to use a standardized measurement of business, job and wage growth, among other factors, to draw a picture of whether the region is on course to become an innovation economy hub.
In this year’s analysis, Orange County fell to No. 13 out of the top 50 innovation hubs across the country. The reasons for that are still uncertain but will be a research focus for the economists, Doti said. The attention is important because the average annual wage in innovation industries is $125,000, compared to a $66,000 average for all other Orange County jobs.
No. 1 in Economic Forecasting
The Chapman report remains a bellwether in economic forecasting, shaped by the highly accurate econometric model developed by Doti and fellow Chapman researchers. Anderson Center’s annual Economic Forecasts are recognized as one of the oldest and most respected in the nation.
Watch for details about the June Forecast Update at the Economic Forecast homepage.