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The Orange County economy is headed for slower job growth and higher unemployment while the much-debated U.S. tariffs on imports are here to stay, according to economists at California State University, Fullerton.
The researchers, Anil Puri and Mira Farka, ruled out a U.S. recession in the near future though they acknowledged the outlook is complicated.
“While odds of a downturn have risen appreciably, we still expect the U.S. economy to skirt a recession, even as growth slows and inflation ticks higher,” the economists said in their Spring Economic Forecast.
The report was issued on April 30, the same day that the U.S. Commerce Department reported the U.S. economy contracted 0.3% in the first quarter as businesses rushed to stock up on imports ahead of the Trump administration’s tariffs, and consumer spending slowed. It’s the first decline since the first quarter of 2022.
While the CSUF report didn’t issue a GDP forecast for the first quarter, it predicted a 1.4% growth this year followed by a 1.7% increase next year. The economy grew 2.8% in 2024.
“We expect the national economy to weaken noticeably in the second half of 2025 and into 2026, with Southern California counties following a similar trajectory,” the report said.
The economists predicted OC’s average unemployment rate to rise from 3.9% last year to 4.7% both this year and next, with monthly rates likely exceeding 5.3% by late 2025 and early 2026.
“OC business sentiment has collapsed,” the report said.
Its survey of about 50 business leaders from March 17 to March 25 showed a drop from an 85.9 rating in the previous quarter to 52.2 in the current quarter; a reading over 50 indicates a belief that the economy will grow. It’s the lowest reading since 2020-21 during the height of the pandemic when it reached below 20.
About 20% of the respondents said their top concern was inflation followed by 17% for geopolitical risk and 13% for both interest rates and government deficits.
Tariffs to Stay High
The forecasters did make a prediction on the higher import duties.
“We believe tariffs are here to stay for the duration of the current administration, the current 16.2% average likely marks a ceiling, leaving ample room for negotiation,” the CSUF forecast said.
“Imports will decline as the tariffs bite. The first quarter of 2025 was unusually high because importers are building inventories before the tariffs fully kick in,” Puri told the Business Journal.
Puri’s advice to OC business leaders: “Caution as you move forward.”
Puri is the director of the Woods Center for Economic Analysis and Forecasting at CSUF while Farka is a co-director of the center and a professor of economics.
Expensive Housing in OC
Housing, as usual, plays a key role in the OC part of the forecast (see story this page).
“The fact is that OC and Southern California are expensive housing markets. We expect little change in prices unless a recession takes hold—we are not projecting a recession at this time,” Puri said.
Orange County jobs are projected to grow by just 0.5% in 2025 and 0.4% in 2026, down from 0.6% last year.
“While these shifts generally mirror national patterns, a key difference lies in the stagnation of labor force growth— particularly in Los Angeles and Orange Counties, where the number of people in the labor force remains below pre-pandemic levels.”
Orange County had 236,000 “unauthorized immigrants” as of 2019, second only to Los Angeles County, according to Migration Policy Institute estimates cited by Puri and Farka.
DOGE ‘Slashing Confidence’
Elon Musk’s hugely controversial DOGE cost-cutters came in for a zinger in the CSUF report.
“The grandly named Department of Government Efficiency (DOGE) has drawn so many negative headlines that, just three months in, its most notable accomplishment may be slashing confidence rather than budgets,” according to Puri and Farka.
The CSUF forecast said “the possibility of a U.S.–China deal is probably higher than what originally meets the eye.”
“As outlined in our national report, the U.S. economy has begun to slow—due in part to the natural phase of the business cycle, and in part to the Trump administration’s policies on tariffs, government restructuring, and immigration,” said the report.
“Wall Street remains on recession watch.”
Home Ownership Costs—OC’s Perennial Issue
All roads seem to lead back to the difficulties involved in home ownership in Orange County when anyone considers the local economic outlook.
“Housing affordability remains a major barrier to homeownership, despite a modest drop in mortgage rates over the past 15 months,” according to the Spring Forecast released by California State University economists Anil Puri and Mira Farka.
In Orange County, the median price of a single-family home surged from $861,000 in April 2020 to $1.33 million by April 2022—a 54% jump.
The cost then fell and later rebounded, climbing 32% over the next 17 months to reach $1.45 million by June 2024.
As of February 2025, the median price stood at $1.47 million, according to Puri and Farka.