SEVENTH ANNUAL SOUTHERN CALIFORNIA ECONOMIC …economy.scag.ca.gov/Economy site document library/2016econsum… · SEVENTH ANNUAL SOUTHERN CALIFORNIA ECONOMIC RECOVERY & JOB CREATION

Orange County Business Council December 2016

SEVENTH ANNUAL SOUTHERN CALIFORNIA ECONOMIC RECOVERY & JOB CREATION

SUMMIT

ORANGE COUNTY ECONOMIC UPDATE

Prepared for the

Southern California Association of Governments

Table of Contents Page | i

Table of Contents

Section 1 - Introduction .................................................................................................................. 3

Section 2 – Current Economic Conditions ...................................................................................... 4

Section 3 - Key Existing and Emerging Industries ......................................................................... 10

Section 4 – Innovation in Orange County ..................................................................................... 15

Section 5 - Occupational Employment and Salary Growth........................................................... 20

Section 6 - Income and Poverty Statistics ..................................................................................... 24

Section 7 - Educational Attainment Demographics ...................................................................... 27

Section 8 - Housing Market and Construction Activity ................................................................. 30

Section 9 - Final Thoughts ............................................................................................................. 34

List of Figures Page | ii

List of Figures

Exhibit 2.1 Unemployment Rates (Jan. 2008 – Aug. 2016) ..............................................................4

Exhibit 2.2 Orange County Labor Force Characteristics (2008-2016) ................................................5

Exhibit 2.3 Orange County Labor Force Participation Rate (2001 – 2016 YTD) ..................................5

Exhibit 2.4 Orange County Projected Population Change by Age Group (2010-2060) .......................6

Exhibit 2.5 Orange County Projected Population Change (2010-2060).............................................7

Exhibit 2.6 Orange County Population Growth (2000-2015) ............................................................8

Exhibit 3.1 Orange County Industry Employment Breakdown (September 2016) ........................... 10

Exhibit 3.2 Orange County Annual Industry Trends (2010-2016 YTD) ............................................ 11

Exhibit 3.3 Orange County Annual Industry Cluster Employment Trends (2009-2015) ................... 12

Exhibit 3.4 Orange County Annual Industry Cluster Salary Trends (2009-2015) .............................. 13

Exhibit 3.5 Projected Changes in Orange County Employment by Industry (2012 – 2022) .............. 14

Exhibit 4.1 Top 10 Orange County Industry Clusters by Location Quotient .................................... 16

Exhibit 4.2 Venture Capital Investments in Orange County, 2006 – Q1 2016 ................................. 17

Exhibit 4.3 Annual Patent Counts and Growth in Orange County, 2001-2015 ................................ 18

Exhibit 4.4 Top Orange County Organizations by Patent Count, 2009-2013 ................................... 18

Exhibit 5.1 Orange County Occupational Employment Distribution............................................... 20

Exhibit 5.2 Orange County Occupational and Salary Year-over-Year Absolute Growth ................... 21

Exhibit 5.3 Projected Orange County Employment Growth by Occupational Group (2012-2022) .... 22

Exhibit 5.4 Average Salaries of Fastest-Growing Occupations in Orange County (2012-2022) ......... 23

Exhibit 6.1 Orange County Income and Poverty Rates (2000-2015) ............................................... 24

Exhibit 6.2 Orange County Household Income Profile................................................................... 25

Exhibit 6.3 Percent of Orange County Households Earning Above or Below $50,000 ..................... 26

Exhibit 6.4 Poverty Rates by Region (2013) .................................................................................. 26

Exhibit 7.1 Orange County Educational Attainment, Population over 25 (2015) ............................ 27

Exhibit 7.2 Orange County Tech-Related Degrees Granted (2000 – 2015) ...................................... 28

Exhibit 7.3 Median Wages by Educational Attainment, Orange County Workers over 25 (2015) .... 28

Exhibit 7.4 Orange County Unemployment & Poverty Rates by Educational Attainment (2015) ..... 29

Exhibit 8.1 Orange County Median Home Prices (2008-2016): New vs. Existing Homes ................. 30

Exhibit 8.2 Orange County Housing Permits (2009-2016) .............................................................. 31

Exhibit 8.3 Orange County Average Apartment Rental Rates, 2012 – 2016 YTD ............................. 32

Exhibit 8.4 California Association of Realtors Affordability Index .................................................. 33

Exhibit 8.5 Orange County Renter and Owner Housing Costs as a Percent of Income (2015) .......... 33

Section 1 – Introduction Page | 3

Section 1 - Introduction

This report is intended to provide a general overview of current 2016 economic and related

trends in Orange County, along with projections for the short and long-term future, in

preparation for the seventh annual Southern California Economic Summit to be held on

December 1, 2016 and co-hosted by Southern California Association of Governments (SCAG)

and the Southern California Leadership Council.

Metrics highlighted in this report include measures and projections of demographics,

employment, industry clusters, educational attainment levels, income and poverty, and the

housing market, broken down into the following sections:

Current Economic Conditions

Key Existing and Emerging Industries

Innovation in Orange County

Occupational Employment and Salary Growth

Income and Poverty Statistics

Educational Attainment Demographics

Housing Market and Construction Activity

Where relevant, current and emerging regional, state, and national economic trends are

highlighted so that elected officials, policymakers, and region-wide stakeholders might amplify

the benefits of these trends while mitigating their potential negative impacts. Analyzing these

issues will help elected officials, community leaders, policymakers, and business leaders

respond to potential economic and societal changes: demographic shifts, technological

advancement, and the seemingly ever-widening skills gap between employees’ skills and

employers’ needs.

As the Great Recession fades into memory, Southern California must look forward instead of

backward. In Orange County, which helped lead Southern California’s economic recovery and

has surpassed pre-recession highs in terms of employment and the housing market, elected

officials and policymakers should look to the future, and focus on addressing long-standing and

emerging macro socio-economic issues by continuing to leverage Orange County’s strengths

and address potential threats to the county’s continued economic prosperity.

Section 2 – Current Economic Conditions Page | 4

Section 2 – Current Economic Conditions

Orange County continues to boast a lower unemployment rate than state and national averages

as 2016 draws to a close, demonstrating the strength and resilience of its economy. The

county’s unemployment rate, in fact, dropped below pre-recession lows in May 2016 (3.6

percent) before rising in July, as part of a national increase in unemployment rates. The

unemployment rate was 4.1 percent in September 2016, 0.1 percent lower than the previous

year and lower than the statewide (5.3 percent) and national (4.8 percent) unemployment

rates. Exhibit 2.1 shows county, state, and national unemployment rates over the past nine

years, highlighting Orange County’s strong recovery from the ravages of the Great Recession.

Exhibit 2.1 Unemployment Rates (January 2008 – September 2016)

Orange County’s strong economic recovery in the aftermath of the Great Recession continues

to build momentum. Exhibit 2.2 shows the county’s labor force from 2008 to 2016; the county’s

current employment has surpassed 2008 levels by over 40,400 employees, reducing its

unemployed population by over 19,400 during the same period.

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Orange County (4.1%) California (5.3%) United States (4.8%)

Source: California EDD


Exhibit 2.2 Orange County Labor Force Characteristics (2008-2016)

While still below pre-recession levels, the labor force participation rate has improved, reaching

a five-year high of 51.4 percent in September 2016, an increase of 0.7 percent from the

previous year. This increase, another display of Orange County’s economic resilience, while still

subdued, suggests a growing economy and improved job creation that encourages many

residents to re-engage in the job market. In the longer term, however, major demographic and

social changes – an aging population, the retirement of large portions of the Baby Boomer

workforce, and the potential loss of jobs due to increasing automation – will likely serve to limit

growth in labor force participation.

Exhibit 2.3 Orange County Labor Force Participation Rate (2001 – 2016 YTD)

1,570,100

1,525,600

1,489,200

1,464,900

1,443,400

1,408,300

1,388,900

1,451,700

1,529,700

66,400

71,500

86,400

101,900

122,700

139,800

149,700

137,600

85,800

2016 YTD

2015

2014

2013

2012

2011

2010

2009

2008

Employment Unemployment

48%

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September 2016 - 51.4%


Source: California EDD, California Dept. of Finance


Orange County is currently undergoing a large demographic shift in terms of age groups and

ethnicities. According to projections by the California Department of Finance, the School Age,

College Age and Working Age groups will experience 9 percent, 13 percent, and 1 percent

decreases, respectively, between 2010 and 2060. Older age groups, on the other hand, will

experience dramatic growth: 111 percent for Young Retirees, 167 percent for Mature Retirees,

and a massive 312 percent for Seniors, as Exhibit 2.4 illustrates. County stakeholders and

policymakers must address the impacts of these changes, which will affect everything from

industry employment, as an older population increases demand for healthcare services, to

senior services, to the housing market, as retirees may seek to find smaller, more affordable

living accommodations.

Exhibit 2.4 Orange County Projected Population Change by Age Group (2010-2060)

Orange County’s demographic makeup is also shifting, as shown in Exhibit 2.5; the California

Department of Finance estimates that the white ethnic group will see a 31 percent decrease by

2060 as the Asian and Hispanic groups increase by 34 and 53 percent, respectively, over the

same period. The county’s diverse population has already provided major economic benefits by

attracting well-educated and talented workers, a trend that will hopefully continue in the

future. As the county becomes more diverse, policymakers should ensure support for all ethnic

groups. Improving English language programs for young students, for example, will help

guarantee a steady supply of young workers to fill job openings created by the retirement of

older workers.

-1%

-9%

-13%

-1%

111%

167%

312%

-50% 0% 50% 100% 150% 200% 250% 300% 350%

Preschool Age (0-4 Years)

School Age (5-17 years)

College Age (18-24 Years)

Working Age (25-64 Years)

Young Retirees (65-74 Years)

Mature Retirees (75-84 Years)

Seniors (85+ Years)

Percent Change

Source: California Department of Finance


Exhibit 2.5 Orange County Projected Population Change (2010-2060)

Source: California Department of Finance, Demographic Research Unit

Before the turn of the Millennium, Orange County’s population growth stemmed from

migration into the region rather than natural increase (births minus deaths), a trend that has

since reversed. Since 2000, natural increase has increased the county’s population by 399,144,

an average of almost 25,000 per year, whereas net migration (both national and international)

has reduced its population by 36,887. While international migration into Orange County has

been a steady source of population growth, domestic outmigration has largely been the culprit,

being primarily a source of population decline over the last decade. The county’s net migration

first turned negative in 2002 and persisted until 2010, reflecting the effects of rising home

prices and the Great Recession. As the recession took hold, individuals and families saw their

savings depleted, causing housing-related investments to turn negative and many residents to

leave Orange County for more affordable areas.

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

White

Hispanic or Latino

Asian

American Indian

African American

Multi-Race

Percent of Population

2060

2015

2010


Exhibit 2.6 Orange County Population Growth (2000-2015)

As Orange County continues to recover from the Great Recession, shifting demographic trends,

generational differences, and technological improvements have begun to transform the

county’s economic landscape. Analysts have identified several potential issues that may impede

the county’s future economic growth. Orange County’s growing skills gap, as highlighted in

several recent OCBC reports, has already had a negative impact on both businesses and

workers. Technological change has outpaced educational and training programs in many

disciplines, resulting in a shortage of employees with skills needed for in-demand jobs. Finally,

many educational programs have neglected the “soft skills” necessary for today’s team-based

work environments.

The combination of these factors suggests that traditional concepts of the career are quickly

becoming obsolete. The aforementioned skills gap – the discrepancy between the skills, often

technically-oriented, needed by employers and those possessed by potential employees – has

led many employers to hire individuals with specific technical skills certifications rather than

those with 4-year degrees. In addition, many employers have opted to hire contract and temp

workers rather than salaried employees, a strategy that gives them more flexibility in

addressing current needs and mitigates the need for annual or semi-annual employee training

sessions to ensure that workers have up-to-date skills. These trends will undoubtedly have

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Population Growth Natural Increase International Migration Domestic Migration



significant direct and indirect consequences on job creation and the labor market, economic

growth and competitiveness, and regional prosperity.

High cost-of-living is another major concern, primarily driven by high housing (both

homeownership and rental) prices. While wages increases have started to accelerate over the

past year in Orange County, wage growth has not kept pace compared with increases in the

cost of living. The high cost of housing, education and healthcare in Orange County, along with

general inflation, prevents many individuals and families from living in the county. This limits

economic growth as many talented and up-and-coming workers decide to move elsewhere,

draining the county’s talent pool. The county’s high housing costs, in particular, encourage

many residents to choose to relocate their residence to surrounding lower cost-regions and

commute to Orange County for work. Additional housing supply and affordability metrics are

provided in Section 8 of this report that further describe and highlight the extent and impacts of

this significant issue for Orange County.

Finally, rapid technological advancement threatens the county’s future economic prosperity, as

a large percentage of recent employment growth has been in relatively low-skill retail and

tourism jobs with a high likelihood of automation in the near future. Restaurant cashiers and

servers may be replaced by touch-screen kiosks, routine manufacturing positions by robots that

never take breaks, transportation occupations by self-driving vehicles. Higher-skill positions are

also at risk, as accountants, auditors, and even attorneys find themselves competing with

software that can potentially perform their jobs more efficiently. While automation has the

potential to substantially increase productivity, it may also have a significant effect on the

employment landscape.

Section 3 – Key Existing and Emerging Industries Page | 10

Section 3 - Key Existing and Emerging Industries

Recent data from the California Employment Development Department (EDD) shows that

Professional & Business Services, Leisure & Hospitality, and Educational & Health Services

continue to be Orange County’s largest industries in terms of employment. Construction saw

the largest percentage growth of employment (9.9 percent) over the past year, followed by

Educational and Health Services (4.6 percent) and Leisure and Hospitality (4.5 percent).

Exhibit 3.1 Orange County Industry Employment Breakdown (September 2016)

Exhibit 3.2 provides a six-year overview of employment trends by industry in Orange County,

showcasing changes in the county’s key industries. The chart’s employment totals are current

as of September 2016.

18.7%

13.6%

13.2%

9.4%

9.6%

7.4%

7.4%

6.4%

5.3%

3.1%

2.5% 1.8%

1.6%

0.0%

Professional & Business Services

Leisure & Hospitality

Educational & Health Services

Retail Trade

Government

Financial Activities

Durable Goods

Construction

Wholesale Trade

Other Services

Nondurable Goods

Transportation, Warehousing & Utilities

Information

Mining and Logging



Exhibit 3.2 Orange County Annual Industry Trends (2010-2016 YTD)

Alongside traditional industries, Orange County has been able to cultivate a number of industry

clusters which promote higher economic growth by creating a self-sustaining, virtuous cycle of

innovation, productivity, and employment creation. Cluster formation can create economic

competitiveness in a region by generating greater cash inflow, attracting and retaining a skilled

labor pool, and providing a clear pathway from specialized education towards in-demand

careers. Moreover, industry clusters are associated with reduced environmental impact

through efficient supply side management, and a growth in supporting professional and

business service industries such as accounting, legal and management consulting services, all of

which improve the region’s overall economy. By encouraging the development of industry

clusters, the County can strengthen the economic activity in the region and provide a variety of

employment opportunities within the clusters themselves and across all industries in the

region.

Driven by a continually recovering economy providing increased employment opportunities and

slightly higher wages, the Tourism cluster in Orange County added the most jobs between 2014

and 2015, increasing by 4.8 percent or 9,220 jobs. Reflection increasing demand for housing

and corresponding home construction, the Construction industry experienced the second

highest increase in jobs ― up 9.7 percent, and representing an addition of 7,906 jobs. The

Healthcare sector ranked third with an increase of 4.9 percent over the past year for an

0

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100,000

150,000

200,000

250,000

300,000

350,000

2010 2011 2012 2013 2014 2015 2016 YTD

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Professional & Business Services Leisure & HospitalityEducational & Health Services Retail TradeGovernment Financial ActivitiesDurable Goods ConstructionWholesale Trade Other ServicesNondurable Goods Transportation, Warehousing & UtilitiesInformation Mining and Logging



additional 7,843 jobs, likely a result of the increasing need for healthcare services by an aging

population as well as from the implementation of the Affordable Care Act (ACA). The

Information Technology and the Biotechnology sectors, which represent the technological base

of the county, saw an overall increase in employment of 1,208 and 2,650, respectively; a

significant improvement over employment trends experienced the year before which registered

drops in employment for both of these industries. This increase represents the improving

standing and competitiveness of Orange County as an innovation and research center.

Exhibit 3.3 Orange County Annual Industry Cluster Employment Trends (2009-2015)

Source: California Employment Development Department, Quarterly Census of Employment and Wages

Overall, the average salary for major industry clusters in Orange County experienced

considerable increases in 2015, with all industry clusters registering wage increases. The overall

average salary for cluster employment in Orange County in 2015 was $66,962, an increase of

6.2 percent compared to 2014 salary averages. The highest increase in average percent salary

over the past year occurred in Biotechnology, which increased significantly by 28.9 percent; this

was largely driven by wage growth in one particular sub-industry group, Physical, Engineering

and Biological Research. The second highest percent increase in cluster salaries was in the

Transportation industry cluster, which increased by 9.1 percent, followed by Logistics and

Transportation which increased by 7.6 percent and followed by Information Technology which

increased by 6.2 percent.

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100,000

150,000

200,000

250,000

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2009

2010

2011

2012

2013

2014

2015


Exhibit 3.4 Orange County Annual Industry Cluster Salary Trends (2009-2015)

Source: California Employment Development Department, Quarterly Census of Employment and Wages

EDD projects that Professional and Business Services will add 75,100 jobs by 2022, followed by

Educational and Health Services with 42,500, and Leisure and Hospitality with 38,700. Two

industries are expected to contract over the same time period: Mining and Logging, expected

to lose 100 jobs, and Durable Goods Manufacturing, expected to lose 7,700 jobs. These

employment trends, especially the increase in Healthcare employment, reflect expected

demographic changes, as an increasingly older population will require additional healthcare-

related services. One worrying trend is the stagnation of the manufacturing industry

throughout the Southern California region, a historically strong industry with high multiplier

effects. As technology continues to improve operational processes and strategies, industries

reliant on low-skill, repetitive tasks will see a large decrease in their required employment

levels, as software and robotics reduce the need for on-site employees.

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2010

2011

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Exhibit 3.5 Projected Changes in Orange County Employment by Industry (2012 – 2022)

-7,700

-100

0

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2,100

3,000

5,600

19,100

24,200

24,300

24,500

38,700

42,500

75,100

-20,000 0 20,000 40,000 60,000 80,000

Durable Goods Manufacturing

Mining and Logging

Other Services

Nondurable Goods Manufacturing

Transportation, Warehousing, & Utilities

Information

Government

Wholesale Trade

Financial Activities

Construction

Retail Trade

Leisure and Hospitality

Educational, Health Care, & Social Assistance

Professional and Business Services

Change in Employment


Section 4 – Innovation in Orange County Page | 15

Section 4 – Innovation in Orange County

Innovation is the lifeblood of economic growth and job creation, helping drive not only

significant employment growth in that particular industry, but job creation and economic

activity throughout other sectors and the region as a whole due to both high multiplier effects

and above-average wages. Industry clusters are regional concentrations of related companies

and industries in a particular geographical location that play a unique role in innovation,

regional competitiveness, economic growth, and job creation. These industries typically exhibit

high clustering effects allowing them to benefit from their proximity to one another, as well as

proximity to complimentary industries and their customer base. This section briefly highlights

Orange County’s key innovation industry clusters, their ability to drive economic activity, the

multiplier effects of various industries, and Orange County’s innovative landscape.

At the heart of a regional industry cluster is usually a world-class employer, or core group of

companies, that both compete and collaborate. An ecosystem coalesces from the combination

of interrelated suppliers, service providers such as legal and accounting, capital providers such

as venture capital, research organizations, and educational institutions such as the University of

California that provide specialized training and education, information, research, and technical

support.

Competitive industry clusters that develop innovative, high-value added products and services

are central to regional economic development, paying dividends many times over and provides

a myriad of benefits to the rest of the cluster constituents. Clusters typically generate high-

wage employment, enhance productivity, and spur innovation by creating a virtuous cycle that

brings together a powerful combination of intellectual capital technology, new knowledge and

information, large pools of specialized talent, and venture capital and other financial resources.

There is an emerging understanding in recent regional economic development academic

literature about the key role that the high-tech, high-pay innovation economy plays in

economic growth and job creation and the significant benefits it confers on regional economies.

For example, University of California, Berkeley economist Enrico Moretti’s 2013 book, “The

New Geography of Jobs,” finds that not only do innovative industries bring good-paying jobs to

the regions where they cluster, but that the true impact is much greater than direct effects and

ripples throughout the economy due to high multiplier effects. Dr. Moretti observes that one of

the best ways for a city or state to generate jobs for less-skilled workers is to develop and

attract high-tech companies that hire highly skilled workers as well.

The U.S. Cluster Mapping Project, an interactive website created to highlight regional industry

clusters, provides a detailed view of Orange County’s strongest industries. An industry cluster is

defined as a regional concentration of related industries that arise out of the links between


several interconnected industries in a particular area, such as the automotive industry in

Detroit, the wine industry in Napa and Sonoma, and the entertainment business in Hollywood.

The concentration of these industries is measured by the “location quotient:” the ratio of an

industry’s share of total state employment in a location relative to its share of total national

employment. The location quotient, in other words, measures the specialization or

concentration of a cluster in a particular location relative to the national average.

Medical Devices, the most concentrated industry in the county, boasts a location quotient of

5.54, indicating industry employment in Orange County is more than 5 times more

concentrated than at the national level. As of 2014, Orange County’s Medical Devices industry

employed 18,289, the highest in the nation and 7.2 percent of national Medical Device

employment. Apparel, the second most concentrated industry in Orange County, employed

3,671 employees, or 2.9 percent of the national share, with an LQ of 2.20. Biopharmaceuticals,

Communications, and IT & Analytical Instruments also have notable concentrations in Orange

County. Exhibit 4.1 shows industry clusters with the highest Location Quotients in Orange

County, illustrating the local and national importance of these industry clusters.

Exhibit 4.1 Top 10 Orange County Industry Clusters by Location Quotient

O.C. Industry Clusters by Location Quotient

Industry Cluster Location Quotient

Employment (2014)

Share of National Employment

National Ranking

Medical Devices 5.54 18,289 7.20% 1

Apparel 2.20 3,671 2.86% 3 Biopharmaceuticals 2.12 6,499 2.75% 6 Communications 1.94 10,648 2.52% 4 IT & Analytical Instruments 1.90 26,164 2.47% 5 Hospitality and Tourism 1.83 73,864 2.38% 5 Lighting and Electrical Equipment 1.79 6,585 2.33% 5 Metalworking Technology 1.79 11,391 2.33% 6 Financial Services 1.59 39,022 2.06% 6 Recreational Goods 1.53 3,025 1.99% 4

Orange County’s highly concentrated industry clusters help to not only drive general economic

activity but also increase the regional specialization and subsequent innovative capabilities. As

a result, Orange County has been able to improve its innovative climate serving to attract and

inspire many start-ups in the area. Exhibit 4.2 highlights the annual venture capital investments

in Orange County from 2006 to year-to-date 2016. After a significant influx of venture capital

funding in 2011 totaling over $900 million, investments in Orange County continually decreased

eventually hitting approximately $500 million in 2014 before a large jump was experienced in

2015 where venture capital funding jumped up to $855.5 million. More recently, venture

Source: U.S. Cluster Mapping


capital investments in Orange County have slowed somewhat but have already surpassed levels

experienced in 2014. As of the third quarter of 2016, venture capital investments in Orange

County totaled $581.4 million according to PricewaterhouseCoopers and the National Venture

Capital Association. Venture capital investments in Orange County have been focused on high-

tech start-ups largely located in the Irvine area; thanks to the large number of incubators and

various other business support organizations such as UCI Applied Innovation located at The

Cove which will be highlighted later, Irvine has served to attract a large number of start-ups into

the region helping to drive innovation, patent growth and venture capital investments.

Exhibit 4.2 Venture Capital Investments in Orange County, 2006 – Q1 2016

Source: National Venture Capital Association

Adding to venture capital investments and further highlighting Orange County’s local innovative

spirit, Exhibit 4.3 provides the annual patent count and growth over the past 15 years. While

patent growth stagnated until 2009, between 2010 and 2014 Orange County consistently

registered an increasing number of patents per year before falling slightly from 2,855 patents in

2014 to 2,851 patents in 2015. Overall, Orange County organizations registered a total of

31,541 patents between 2000 and 2015.

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Exhibit 4.3 Annual Patent Counts and Growth in Orange County, 2001-2015

Source: United States Patent and Trademark Office

Exhibit 4.4 highlights the top patent-generating organizations in Orange County, largely in

Information Technology and Life Science industries. With technology continually evolving and

demographic trends pointing to a population which will become increasingly reliant on tech-

and healthcare-related services, the fact that these patents are focused in these industries

suggests that local organizations are not only aware of these trends, but that they will be well

positioned to address these expected economic and demographic shifts.

Exhibit 4.4 Top Orange County Organizations by Patent Count, 2009-2013

Top 10 Organizations in Orange County by Recent Patent Count, 2009-2013

Company 2009 2010 2011 2012 2013 Total

Broadcom 255 333 418 449 393 1,848 Allergan, Inc. 50 78 94 69 133 424 Boeing 35 54 64 56 72 281 University of California, Regents 31 48 39 55 61 235 Western Digital 19 25 32 33 59 168

Hon Hai Precision 48 37 19 25 29 157 Qualcomm 8 19 28 35 43 133 Abbott Medical Optics 2 17 26 22 42 109 Samsung Electronics 29 12 14 27 11 94 Applied Medical Resources 10 16 17 26 21 90

Source: U.S. Cluster Mapping

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05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

An

nu

al Pate

nt G

row

th

Pat

en

t C

ou

nt

Patent Count Patent Growth


While Orange County’s talented and well-educated workforce helps to attract and retain top-

tier, innovative organizations into the region, partnerships between educational institutions,

economic development organizations and private companies have helped to support and

encourage various start-ups in the region, thus cultivating local innovation and

entrepreneurship. The most notable example of a successful partnership in this area is the

University of California’s “The Cove”, a 31,000 square foot facility of collaborative work space

which provides locally based start-ups with access to discovery disclosure, sponsored research,

prototyping, funding, incubation and acceleration. As of early 2016, The Cove housed

approximately 30 start-ups at various stages of their business life-cycle and in a variety of

different industries including Information Technology, Health Care, and Education.

Alongside the emerging growth startups currently calling The Cove home, numerous related

groups also operate there including the UCI Invention Transfer Group, which assesses the

patentability and commercial potential of inventions by UCI faculty, physicians and researchers.

The Transfer Group helps bring these inventions to the market where they can be utilized by

industry professionals. In addition to the support provided by the Invention Transfer Group, the

Cove is also home to Industry Sponsored Research (ISR) which connects UCI faculty and

graduate-level researchers and corporate funding sources to facilitates new research ventures

and opportunities in the region, thus serving to further drive innovation in the Orange County.

The ISR creates business relationships between researchers and industry professionals while

guiding both sides through the funding process in order to create sustainable linkages and

relationships between business and academia. Overall, The Cove is the culmination of years of

collaboration between industry professionals and educational institutions localized in the

business and tech-hub of Orange County, with an overall goal to continually drive innovation

through a comprehensive support system designed to guide start-ups through various stages of

their business lifecycle.

Section 5 – Occupational Employment and Salary Growth Page | 20

Section 5 - Occupational Employment and Salary Growth

As seen in Exhibit 5.1, Office & Administrative Support is the largest single occupational

category in Orange County, accounting for 17 percent of employment, followed by Sales &

Related occupations at 11 percent and Food Preparation & Service-Related occupations at 9.5

percent.

Exhibit 5.1 Orange County Occupational Employment Distribution

Orange County has added 39,280 jobs over the past year alone for a year-over-year increase of

2.6 percent, while average salaries have increased by $1,320 or 2.4 percent. In terms of

absolute growth, Sales and Related occupations added the most occupations with 5,490, an

increase of 3.4 percent, followed by Business & Financial Operations occupations with 5,370

jobs, an increase of 5.5 percent, and Transportation and Material Moving, which added 5,000

jobs for a 6.7 percent increase.

17.0%

11.0%

9.5%

7.1%

6.7% 6.4%

5.2%

5.0%

4.5%

4.3%

3.5%

3.3%

2.9%

2.8%

2.5%

2.2% 1.7%

1.5%

1.1% 0.9%

0.8%

0.1%

Office & Administrative Support

Sales & Related

Food Preparation & Serving-Related

Production

Business & Financial Operations

Management

Transportation & Material Moving

Education, Training, & Library

Healthcare Practitioners & Technical

Construction & Extraction

Building & Maintenance

Computer & Mathematical

Personal Care & Service

Installation, Maintenance, & Repair

Architecture & Engineering

Healthcare Support

Protective Service

Arts, Design, Sports, & Media

Community & Social Services

Life, Physical, & Social Science

Legal

Farming, Fishing, & Forestry

Source: OCBC Analysis of California EDD Data, QCEW Dataset


Legal occupations experienced the largest annual increase in salary; the field’s average salary

increased by 10.2 percent, from $108,900 in 2015 to $119,974 in 2016. The average salary of

Sales and Related Occupations, on the other hand, experienced the largest drop over that time

period, decreasing by $1,016 or 2.2 percent.

Exhibit 5.2 Orange County Occupational and Salary Year-over-Year Absolute Growth

Projections provided by the California Employment Development Department predict that the

Office and Administrative Support, Food Preparation and Serving Related, and Sales and

Related occupational groups will add the most jobs between 2012 and 2022. While these three

occupational groups are expected to add a combined 93,620 jobs between 2012 and 2022, the

average wages provided by these occupations are relatively low: $41,221 for Office and

Administrative Support, $25,402 for Food Preparation and Serving Related, and $45,549 for

-$3,000

-$1,000

$1,000

$3,000

$5,000

$7,000

$9,000

$11,000

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Change in Employment Change in Salaries



Sales and Related occupations. Occupational groups providing above-average wages included

Business and Financial Operations, which is expected to add 22,830 jobs with average salaries

of $82,513, Management, expected to add 17,410 jobs with average salaries of $130,559 and

Healthcare Practitioners and Technical, expected to add 11,990 occupations with average

salaries of $93,972. Overall, Orange County is expected to add approximately 265,400 jobs

between 2012 and 2022 and, as of the first quarter of 2016, the county’s average salary across

all occupations is $55,343.

Exhibit 5.3 Projected Orange County Employment Growth by Occupational Group (2012-

2022)

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

0

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10,000

15,000

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25,000

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35,000

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Projected Absolute Change (2012-2022) Q1 2016 Salary



EDD estimates that Fashion Designers (+54.3%), Personal Care Aides (+49.6%), and Brickmasons

and Blockmasons (+49.0%) will be the fastest growing occupations on a percentage basis

between 2012 and 2022. The latter two occupations are part of Orange County’s most rapidly

expanding industries, Healthcare and Construction; Information Technology is also experiencing

noteworthy growth.

Exhibit 5.4 Average Salaries of Fastest-Growing Occupations in Orange County (2012-2022)

$-

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

An

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al Salary P

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t Jo

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Projected Growth (2012-2022) Q1 2016 Mean Annual Wage


Section 6 – Income and Poverty Statistics Page | 24

Section 6 - Income and Poverty Statistics

Orange County continues to benefit from one of the highest median household incomes in

Southern California; the U.S. Census Bureau’s American Community Survey measured the

county’s median household income at $78,428 in 2015, a $2,265 (3 percent) increase from the

previous year. Orange County’s 2015 medium annual income was $14,000 (21.5 percent) higher

than the state average of $64,500, and $22,653 (40.6 percent) higher than the national

average. The county’s per capita income of $35,651 - the highest in Southern California -

increased by $765 (2.2 percent) between 2014 and 2015.

While both median household income and per capita income have steadily increased in Orange

County since the Great Recession, recovering by 10.6 percent and 13.6 percent since 2010,

respectively, the county’s poverty rate remains high at 12.7 percent in 2015. While the poverty

rate remains above the 12.2 percent rate in 2010, the past few years have registered slight

improvements after reaching a recent peak of 13.5 percent in 2013. Although the county’s

median income and job creation rate have both improved, they have failed to keep up with cost

of living in some communities. In addition, differing definitions of poverty mean that the official

poverty rate may fail to reflect actual conditions, particularly in ”Red-Zone” areas which suffer

from above-average unemployment rates and below-average income. While rising home and

rental prices, as mentioned before, have had a major impact on encouraging many young

professionals to move away from Orange County, they have had an even more drastic impact

on those living in poverty.

Exhibit 6.1 Orange County Income and Poverty Rates (2000-2015)

Exhibit 6.2 provides an illustration of household income distribution across various income

groups for 2000 and 2015. As shown in the chart, households making between $50,000 and

$74,999 a year were the county’s largest income group in 2000, representing 20.7 percent of

the population; by 2015, this income group fell to 15.2 percent and the $100,000 to $149,999

income group represented 17.2 percent of the county’s residents. Since the turn of the

-2.0%

3.0%

8.0%

13.0%

18.0%

$0

$20,000

$40,000

$60,000

$80,000

$100,000

1990 2000 2010 2014 2015

Po

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ate

Pe

r C

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a an

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ian

H

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old

Inco

me

Per Capita Income Median Household Income Poverty Rate

Source: Census Bureau, 2015 American Community Survey, 1-year Estimates


millennium, all income groups making over $100,000 annually have significantly increased, with

those making $150,000 to $199,999 and those making over $200,000 increasing by 4.7 and 7.5

percent, respectively. On the other hand, income groups making $75,000 and less decreased in

size. While these trends indicate rising incomes across the county, they fail to reflect the

economic climate of specific locations within the county, especially those that have not

benefited from countywide wage increases to the same degree. In addition, many areas have

seen cost-of-living rise faster than incomes due to several factors, including skyrocketing

student debt, increasing housing costs, and inflation.

Exhibit 6.2 Orange County Household Income Profile

4.9

%

3.8

%

8.7

%

9.9

%

14

.7%

20

.7%

14

.0%

13

.9%

4.7

%

4.8

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4.8

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3.5

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7.1

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10

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15

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7.2

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15.0%

20.0%

25.0%

Pe

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nt

of

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l Ho

use

ho

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2000

2015



Exhibit 6.3 Percent of Orange County Households Earning Above or Below $50,000

Additional concerns regarding affordability and poverty rates in Orange County are raised by

the major differences between the Orange County’s official poverty rate, measured using

federal poverty-level standards by the U.S. Census Bureau, and the California Poverty Measure

(CPM), developed by the Public Policy Institute of California (PPIC) and Stanford University. The

CPM, unlike the official poverty rate provided by the U.S. Census, takes into account trends

specific to California to provide a much more accurate account of the current economic

environment. While Orange County, as shown in Exhibit 6.4, has the region’s lowest poverty

rate according to the U.S. Census, its CPM was the second highest in Southern California.

Exhibit 6.4 Poverty Rates by Region (2013)

Poverty Rates by Region, 2013

County

Percentage in Poverty, Official Poverty Rate

Measure

Percentage in Poverty, CPM

Measure Differential

Percentage of Children Ages 17 and Below in Poverty, Official Rate

Orange 12.7% 21.8% 9.1% 18.2%

Los Angeles 18.3% 25.7% 7.4% 26.8%

Riverside 16.6% 20.1% 3.5% 23.8%

San Bernardino 19.2% 19.4% 0.2% 27.0%

California 16.2% 21.2% 5.0% 23.4%

United States 15.9% 21.7%

42.0% 36.9% 35.7%

32.6%

58.1% 63.0% 64.4%

67.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

2000 2005 2010 2015

Pe

rce

nt

of

Tota

l Ho

use

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Household Earnings > $50,000 Household Earnings < $50,000

Source: American Community Survey, Public Policy Institute of California, and Stanford Center on Poverty and Inequality

Source: Census Bureau, American Community Survey, 1-year Estimates

Section 8 – Housing Market and Construction Activity Page | 27

Section 7 - Educational Attainment Demographics

The educational attainment of Orange County’s residents has been a primary driver of

economic prosperity over the past several years; a well-educated workforce helps the county

attract, retain and create innovative businesses and has allowed it to become a hub for several

specialized industry clusters including biotechnology, medical devices, and semiconductors.

These industry clusters provide both high wages and significant multiplier effects that help

growth in other, related industries. Exhibit 7.1 shows the educational attainment of the

county’s population over age 25. In 2015, 46.4 percent of this group had an associate’s degree

or higher, an increase of 0.7 percent from 2014. This provides one indicator of county residents’

increasing educational attainment.

Exhibit 7.1 Orange County Educational Attainment, Population over 25 (2015)

Exhibit 7.2 offers another indicator of educational attainment, the increasing number of tech-

related degrees awarded at local universities and colleges, including the University of California,

Irvine, California State University, Fullerton, and Chapman University. The number of

undergraduate tech-related degrees has substantially increased since the turn of the

millennium, more than doubling from 1,402 in 2000 to 2,865 in 2015. Tech-related graduate

degrees have seen even more dramatic growth over the same time period, increasing from 434

in 2000 to 1,220 in 2015.

9.0%

6.9%

17.3%

20.5% 7.6%

25.1%

13.7%

Less than 9th Grade

9th to 12th Grade, No Diploma

High School Graduate

Some College, No Degree

Associate's Degree

Bachelor's Degree

Graduate or Professional Degree

Total Population Aged 25+: 2.15 Million



Exhibit 7.2 Orange County Tech-Related Degrees Granted (2000 – 2015)

Exhibit 7.3 Median Wages by Educational Attainment, Orange County Workers over 25

(2015)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Nu

mb

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of

De

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es

Gra

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d

Undergraduate Graduate

$21,229

$28,614

$40,013

$60,712

$85,175

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

Less than HighSchool Graduate

High SchoolGraduate

Some College orAssociate's Degree

Bachelor's Degree Graduate orProfessional

Degree

An

nu

al W

age

s

Source: University of California, Irvine; Chapman University; California State University, Fullerton



Despite the rising cost of education, academic degrees continue to provide significant economic

benefits, as seen in Exhibits 7.3 and 7.4; higher educational attainment correlates with both

higher median wages and lower rates of poverty and unemployment.

Exhibit 7.4 Orange County Unemployment & Poverty Rates by Educational Attainment (2015)

Orange County’s deep talent pool and increasing educational attainment, as mentioned before,

provides an important competitive advantage that will most likely continue for the near future.

Recent economic and social issues, however, may threaten the county’s competitiveness. The

rising cost of education, for example, limits attendance at four-year universities, and the

county’s high cost of living and lack of gainful employment positions may force talented

workers, once educated within the county, to relocate elsewhere after graduation.

Policymakers and county stakeholders should take steps to address these issues so that Orange

County retains its young Millennial workforce talent, thereby maintaining one of the county’s

most valuable competitive advantages.

22.8%

12.3%

9.0%

5.3%

5.4% 6.4%

4.9% 3.4% 0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Less than High SchoolGraduate

High School Graduate Some College,Associate's Degree

Bachelor's Degree orHigher

Po

vert

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ne

mp

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t R

ate

s

Poverty Rate Unemployment Rate



Section 8 - Housing Market and Construction Activity

Orange County’s strong housing market demonstrates the county’s economic resilience;

supported by job creation, increases in household incomes, and a favorable interest rate

environment, post-Recession housing prices have rebounded to surpass pre-Recession levels.

Rental rates have seen similar increases as rising demand for rental properties confronts

constrained new supply.

Exhibit 8.1 shows Orange County home prices from January 2008 to May 2016, broken down

into prices paid for new and existing single-family housing units. As of August 2016, new homes

sales have risen in average price to $749,000, while existing home prices have also seen

increases, as their August 2016 average of $649,000 represents a 6.4 percent year-over-year

increase.

Exhibit 8.1 Orange County Median Home Prices (2008-2016): New vs. Existing Homes

Looking forward, in the presence of an increasing population, increasing wages, tight housing

supply and a low interest rate environment, Chapman University estimates that a combination

of factors – population growth, wage growth, a limited housing supply and low interest rates –

will increase county home prices by 4.6 percent in 2016, significantly more than the 2.7

increase in 2015.

The post-Recession increase in residential building permits offers another sign of Orange

County’s continuing economic vitality. As seem in Exhibit 8.2, the number of permits grew

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Jan

-08

May

-08

Sep

-08

Jan

-09

May

-09

Sep

-09

Jan

-10

May

-10

Sep

-10

Jan

-11

May

-11

Sep

-11

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

May

-16

Ho

me

Pri

ce

Existing New + Existing

Source: California Association of Realtors, CoreLogic/DataQuick


dramatically between 2009 and 2012, increasing by an average of 320 permits per month.

Approximately 1,098 residential permits have been granted thus far in 2016, a greater than 600

percent increase over 2009’s average of 182 permits per month. 8,805 building permits have

been granted thus far in 2016, with Irvine accounting for 3,399 or 39 percent of the total. While

other Orange County cities, including Anaheim, Huntington Beach, and Santa Ana, have also

seen significant permit activity, Irvine has been the largest contributor to Orange County’s

growing housing market for several years.

Exhibit 8.2 Orange County Housing Permits (2009-2016)

Orange County apartment rental rates have mirrored the rise in home prices, increasing from a

2015 average of $1,854 to $2,001 in June 2016, a growth of 8.0 percent.

0

500

1,000

1,500

2,000

2,500

Jan

-09

May

-09

Sep

-09

Jan

-10

May

-10

Sep

-10

Jan

-11

May

-11

Sep

-11

Jan

-12

May

-12

Sep

-12

Jan

-13

May

-13

Sep

-13

Jan

-14

May

-14

Sep

-14

Jan

-15

May

-15

Sep

-15

Jan

-16

May

-16

Bu

ildin

g P

erm

its

August 2016 - 708

Source: U.S. Census Bureau CenStats


Exhibit 8.3 Orange County Average Apartment Rental Rates, 2012 – 2016 YTD

The county’s high home prices have, in all likelihood, driven apartment rental rates up as well,

as the inability of residents to afford traditional single-family homes increases the demand for

multifamily units. The Traditional Housing Affordability Index (HAI) created by the California

Association of Realtors (CA) measures the percentage of households who can afford to

purchase a home in a specific region. Orange County has historically ranked lower on the HAI

than other California counties, an issue that continues to this day. As of the second quarter of

2016, only 22 percent of county households could afford to purchase a home. While this is a

slight improvement over 2015’s HAI of 21, it is still well below affordability levels of neighboring

counties as illustrated in Exhibit 8.4. Orange County also ranks below its neighbors on CAR’s

First-Time Home Buyer Affordability Index; only 43 percent of the county’s first-time

homebuyers can actually afford to purchase a new home, a rate that has not improved since

2015. Burdened by student loan debt, increasing healthcare prices, and marginal wage growth,

young professionals find themselves effectively priced out of Orange County and other high-

cost areas throughout the nation.

$1,607 $1,682

$1,765 $1,854

$2,001

$-

$500

$1,000

$1,500

$2,000

$2,500

2012 2013 2014 2015 2016 YTD

Ave

rage

Ap

artm

en

t R

en

tal R

ate

Source: RentBits


Exhibit 8.4 California Association of Realtors Affordability Index

California Association of Realtors Affordability Index

Traditional Affordability Index First-Time Home Buyer Affordability Index

County Q2 2016 Q1 2016 Q2 2015 Q2 2016 Q1 2016 Q2 2015

Orange County 22 23 21 43 44 43

Los Angeles 30 31 30 49 50 50

Riverside County 41 42 40 61 62 61

San Bernardino 56 57 56 73 73 73

San Diego 26 28 25 45 47 47

Ventura 29 30 25 51 52 49

Exhibit 8.5 shows the percentage of income spent by Orange County residents on housing,

illustrating the heavy burden faced by many county renters and homeowners. Traditionally,

economists and housing professionals have used the 30 percent rule – a person or family

should spend around thirty percent of their income or less on housing – as a rule of thumb. 57.7

percent of county renters and 39.5 percent of county homeowners exceed that 30 percent,

with almost half of renters spending more than 35 percent of their income on housing. This, in

turn, leads to a corresponding decrease in discretionary spending - and the ability to save for

the future - and thus serves to inhibit widespread economic prosperity in Orange County over

time.

Exhibit 8.5 Orange County Renter and Owner Housing Costs as a Percent of Income (2015)

17

.8%

12

.6%

11

.8%

10

.5%

47

.2%

31

.5%

15

.8%

13

.2%

8.9

%

30

.6%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

Less than 20% 20% to 24.9% 25% to 29.9% 30% to 34.9% 35% or More

Pe

rce

nt

of

Re

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r an

d O

wn

er

Po

pu

lati

on

Percent of Income Spent on Housing

Renters

Owners

Source: California Association of Realtors


Section 9 – Final Thoughts Page | 34

Section 9 - Final Thoughts

The strength and resilience of Orange County’s economy has become even more apparent in

the post-Recession era, as the county has lead Southern California’s economy recovery and

enjoys pre-Recession levels of economic activity as well as one of the nation’s highest qualities

of life. Orange County must leverage its strengths and address its weaknesses in order to

continue on this positive trajectory. Although county employment has seen a significant

increase, the skills gap continues to limit economic growth and frustrate both employers and

workers. Automation threatens to stop or even reverse the county’s employment growth as

self-driving vehicles, computerized kiosks, and other new technologies replace many jobs. High

housing costs drive young Millennial workforce talent to move to lower-cost regions and

commute to Orange County, or in some cases, out of California all together. Finally, the

county’s increasingly older population demography places a heavier burden on government

services in terms of healthcare, transportation, and other services.

Orange County elected officials, policymakers, and stakeholders must face these problems head

on and preserve – and hopefully even enhance - the county’s competitive advantages. Further

increasing the county’s educational attainment rates, for example, could help close the skills

gap, while also supporting innovative industry clusters which will pay significant dividends in

the form of economic growth, job creation, high wages, and significant multiplier effects on the

local economy. Above all, a better understanding of the county’s demographic, education,

economic, innovation, and housing trends will help stakeholders and policymakers preserve the

county’s high quality of life and competitive business environment far into the future.

In addition to this report, Orange County Business Council also provides a variety of other

related economic, workforce, housing, and demographic reports including:

Orange County Workforce Indicators Report: A product of the research partnership

between the Orange County Business Council, County of Orange, and Orange County

Development Board, the Workforce Indicators Report examines the growth of industry

and employment, salary and wage trends, demographic changes and the educational

attainment of Orange County students. Click here for a link to the report.

Orange County Community Indicators Report: A partnership between Children &

Families Commission of OC, United Way OC, Orange County Community Foundation,

and CalOptima, the 2015 Orange County Community Indicators Report focuses on three

pivotal issues currently facing Orange County related to housing, children’s health, and

the opportunity gap between high- and low-income families and their children. At the

same time, the report retains the core components of past reports including population,

demographic and workforce trends. Click here for a link to the report.

http://www.oc.ca.gov/

http://ocwib.org/

http://ocwib.org/

http://www.ocbc.org/wp-content/uploads/2016-WIR-Full-Report-FINALsmall.pdf

http://www.ocbc.org/wp-content/uploads/OCCIR_2016_Web.pdf

Section 9 – Final Thoughts Page | 35

Orange County Workforce Housing Scorecard: The 2015 Workforce Housing Scorecard

examines and analyzes the current and projected housing trends and provides a preview

of where Orange County is headed in terms of workforce housing, and how it will impact

demographic, economic, and business competitiveness factors. Click here for a link to

the report.

http://www.ocbc.org/wp-content/uploads/2015-Housing-Scorecard-FINAL-PAGES-3.20.15-small.pdf

Documents

SEVENTH ANNUAL SOUTHERN CALIFORNIA ECONOMIC …economy.scag.ca.gov/Economy site document library/2016econsum… · SEVENTH ANNUAL SOUTHERN CALIFORNIA ECONOMIC RECOVERY & JOB CREATION