Local business leaders’ outlook has recovered from the initial shock of President Donald Trump’s tariff threats and brewing trade wars, but it has a long way to go to regain the enthusiasm measured for the start of the year.
“Markets have recovered. People are not as scared and shocked as they were in the last quarter,” said a team of California State University, Fullerton, economists led by Anil Puri.
His team’s survey-based OCBX index of future expectations came in at 68.6% for the third quarter, which started July 1, well above the 52.2% for the previous three months. A reading above 50 indicates OC Business leaders’ belief in future growth in the economy.
“The tariffs shock has worn off to some degree,” Puri told the Business Journal on June 26, the same day the index was released.
Trump has also made moves to calm brewing trade wars with other dozens of countries, though the outcomes are far from certain.
Still, the latest OCBX number is well below the 85.9% that had been foreseen for the first quarter as many businesspeople were looking ahead eagerly to Trump’s second term.
Puri also said that while OC businesspeople foresee the overall economy improving, they don’t expect their sales to increase. “They expect sales to continue to slow down.”
Further Improvements Seen
Puri said that he foresees more optimism for the final three months of this year, starting Oct. 1.
“I expect the index to be higher because the tariff situation should clarify some time in the third quarter,” Puri said. “Interest rates should come down” possibly as early as this month’s meeting of the rate-setting Federal Reserve. Rates are now in a range between 4.25% and 4.5%.
“Hopefully the geopolitical situation will improve,” Puri added as he looked forward to the end of the year.
While the OC mood is more upbeat for now, there are plenty of cautionary signs on the horizon. For example, the Commerce Department said the U.S. economy shrank at a 0.5% annual pace from January through March as the trade conflicts disrupted business.
OC Jobless Lower Than State, U.S.
Orange County’s unemployment rate fell slightly to 3.6% in May from a revised 3.7% in April, far better than the 4.9% for the state as a whole and below the U.S. number of 4%.
“More firms are planning to either hold on to their employees or add to their workforce compared to the prior quarter,” the CSUF economists said.
Most of the business leaders surveyed see no impact on their businesses from Trump’s deportation of undocumented migrants.
Interest rates, geopolitical risks and tariffs were the most concerning issues for OC businesses, displacing inflation, according to the survey results. Inflation was 2.4% as of May.
The CSUF survey was conducted during June 16-25. Just over 500 people received the survey with a response rate of 9%.
The OCBX index is a measure of the overall view of the economy, and it is constructed from the various responses to the survey.
Local Businesses Downplay Deportations: CSUF
The California State University, Fullerton economists in their latest quarterly survey of OC business leaders cite the Donald Trump administration’s stepped-up deportation efforts that have dominated the news for months.
“When asked about how this will affect their business, 60% said it would have no impact,” according to the survey led by Anil Puri.
The survey added that “17% each expect either a large negative impact or small negative impact and 7% expect deportations to have a positive impact on their businesses.”
The number of undocumented immigrants in OC was on estimated 236,000 in 2019, based on U.S. census bureau numbers and other sources, according to the Migration Policy Institute.
The majority came from Mexico, followed in order by Korea, the Philippines, Vietnam and El Salvador.