O.C. Out 5,900 New Jobs as Exports to Asia Drop

Asia’s financial crisis will exact a heavier toll on Orange County’s exports than previously estimated, costing the county thousands of new jobs, Chapman University economists warned Thursday.

The county will lose 5,900 new jobs this year, more than twice the number of new positions that were expected to be sidelined when Chapman first assessed the impact of the Asian crisis in its annual economic forecast in December.

Chapman economists said the troubles have since spread to engulf South Korea and Taiwan. The new study also includes the impact on service-related exports such as engineering, tourism and legal aid.

As a result, the overall job growth will be limited to 31,500 this year, a 2.3% increase. In December, Chapman said that 35,000 jobs would be added in the county in 1998, a 2.8% gain over 1997.

“You’re talking about growth that could have been 3% is now a half a percent lower than that because of this negative impact,” said Chapman University President James L. Doti. “That’s not insignificant.”

Chapman predicts that exports to eight troubled Asian countries will decline by an average of 15%. As a result, total county exports this year will probably remain flat, rather than rising by 2% as previously expected.

All told, the county exports approximately $2.7 billion of goods and services to the countries in the study--Singapore, Hong Kong, Indonesia, Malaysia, the Philippines, Thailand, South Korea and Taiwan.

Doti, an economist, noted that the impact would be far greater if the crisis spreads to China and Japan--the county’s top export market--although he doesn’t expect that to happen.

Some of the damage will likely be offset later in the year by an expected increase in the inflow of products from Asia, which will be less expensive here because of the devalued Asian currencies. That will benefit many county-based companies involved in importing, Doti said.

The Asian troubles also have had a dampening effect on inflation, which has helped keep interest rates low, he said.

What’s more, said Esmael Adibi, director of Chapman’s Anderson Center for Economic Research, many county industries will remain strong this year, including local construction, wholesale trade and transportation.

The negative effects of the Asian turmoil on exporting businesses will vary from company to company, Adibi noted. While some of the hardest-hit firms might have to lay off workers, others simply will not grow as quickly as they had anticipated.

Some companies say they are still in the wait-and-watch mode. At the big engineering services concern Fluor Corp. in Irvine, spokeswoman Lisa Boyette said no projects in Asia have been canceled so far.

But, she added, “we are still watching and are concerned that some larger projects which are still in the planning stage could be delayed because of a financing issue or because when they are completed the market might not be there.”

Beckman Coulter, the Fullerton maker of medical instruments that derives 15% of its sales from Asia, has seen its business take a hit in Malaysia and Thailand. Its biggest concern is Japan, its largest Asian market, said Jay Steffenhagen, vice president of corporate development and strategic planning.

“Our question is: Will the Japanese be successful in stabilizing their economy and precipitating growth,” he said. “There are reports of huge inventories of nonperforming bank loans and increased bankruptcies, which are worrisome.”

Ingram Micro Inc. in Santa Ana, the huge distributor of personal computer software and products, is still expecting to expand in Asia this year. Its Asian distribution partner expects sales in the region to jump to $1 billion this year from last year’s $650 million, in part because China is still seen as a big growth market.

Company spokeswoman Kim Strohm said sales throughout Asia are also expected to rise because the penetration of technology is very low compared with the United States and other developed countries. “Some people theorize that one of the ways they’ll be able to recover from this is to gain productivity from adding technology,” she said.

Even so, Doti believes that high-tech exports are particularly vulnerable to Asia’s troubles. And that’s a problem for Orange County, which has a heavy concentration of technology businesses, he said.

Jack Kyser, chief economist at the Economic Development Corp. of Los Angeles County, said that despite some recent encouraging steps to turn around the Asian economies, Southern California companies can’t let their guard down because the situation keeps changing.

“I think the mood on the street is: Everything is fine,” he said. “But I think this is going to be a long-playing problem and there will be bumps along the way.”

Paul Tambakis, director of the Commerce Department’s Orange County Export Assistance Center, said that despite the Asian turmoil, world markets overall are expanding. Exports to Mexico, for example, have been soaring and that country could surpass Japan as the county’s biggest foreign market.

“Yes, there are downturns in Asian markets, but it’s a big world and there are a lot of growing markets,” Tambakis said. “The real key is diversity and exploring your best markets.”