EYES ON THE BALL: Orange County’s Economic Recovery Faces Challenges, Opportunities
As we mark the two-year anniversary of the initial government response to COVID-19, it is important to assess how Orange County was impacted and what to expect going forward.
Our recovery will continue to be a process, as there are lingering effects from the state and federal pandemic response that will impact our economy for many years to come.
Most prevalent of these longer-term impacts will be the economic effect from massive government pandemic-aid spending on top of continued deficit spending. As an example, total federal pandemic-related spending has now surpassed $4.5 trillion dollars and continues to grow. In addition, the Federal Reserve provided liquidity support and purchased massive amounts of debt securities in order to keep the market running smoothly. The after-effect of these unprecedented efforts is pervasive and already being felt with increasing prices and rising interest rates. All of this is exacerbated by the situation in Ukraine and related free market constraints.
The pandemic hit Orange County especially hard given the significance of tourism to our economy. The Walt Disney Company remains the largest employer in the region, and the Anaheim resort district is a critical driver to entertainment and retail markets across Orange County. The parks’ reopening was a crucial component of our recovery and will continue to be significant for employment and growth due to the multiplier-effects of the tourism and entertainment industry. Tourism is a meaningful driver of our brick-and-mortar retail, which provides a significant part of Orange County’s tax revenue.
The greatest concentration of employment in Orange County is in the provision of health care. This sector also experienced significant changes in demand as our providers had to shift their delivery of care to address the virus. Never before has the benefit of our quality health care system in Orange County been more valued than it was through the height of the pandemic. Health care providers quickly adapted to the needs of the market and utilized technology in an accelerated manner. The strong network of health care providers in Orange County and their emphasis on innovation will continue to be a key component of our economic success.
The advancement of Health Care Information Technology is also critical for the region based on the significant role many of our local companies have in that sector. Medical Devices and Information Technology are two of Orange County’s strongest industry clusters, and even before the pandemic, our local colleges and universities were expanding their program offerings in these areas. This is just one example of the resiliency of our economy and how well connected our educational institutions are to the future workforce needs of our local businesses. Bringing business and education leaders together will continue to be an important role for the Orange County Business Council as we see many other industries continue to accelerate the advanced use of technology.
But the pandemic has also increased some of the local challenges we have been facing in our economy. It is estimated that 25-30% of our workforce will continue to work from home and many training and advanced educational programs will be delivered online instead of in-person. This re-emphasizes the need for access to broadband services throughout the county, particularly in our lower-income communities. Access which can most effectively and efficiently be delivered by our private sector providers.
This continued trend will also have an impact on the demand for commercial and residential real estate. Office space will be transformed, and demand for housing will be less interested in higher density projects. All of this requires a fresh look at the many factors that have limited our ability to grow Orange County’s housing supply, particularly the aggressive use of the California Environmental Quality Act (CEQA) to limit the ability to complete housing projects. Our return on investment for numerous government initiatives related to housing supply is negligent, and it is time to allow the private sector to provide what the market is demanding.
Going forward, it is critical that our policies become focused on attributes that allow for economic growth. This is imperative given the level of government obligations which have been incurred and are increasing. The continued funding of our many government programs, and our ability to service the obligations associated with them, is dependent upon our ability to grow the economy.
It is time to take a fresh look at the compiling restrictions that have been placed on the private sector which are driving job-creating businesses away from California and limiting the ability for our remaining businesses to grow. Business growth requires an increased workforce, and that workforce needs local housing and a reliable infrastructure system that is efficient, cost effective and properly focused on the demographics of Orange County.
As we come out of the pandemic, we can recognize and appreciate the resiliency of our local economy and the ability to transition in key sectors to foster future growth. Our ability to build upon the current manufacturing base and be a leader in technological innovation will serve us well as we continue to diversify Orange County’s economy. With workplace structures being redefined, we have a unique opportunity to build upon our economic base and provide greater opportunity with more equity for current and future generations.
In order to accomplish this, we will need stable public policies that support growth in the private sector in order to provide a broader base of employment and more permanent sources of tax revenue, which will be necessary to fund current and future public obligations.
Photo credit: The Orange County Register