Innovation economy helping to drive Orange County’s future

Orange County is leading Southern California’s transformation to an innovation economy, drawing high-tech startups like a magnet and creating opportunities for entrepreneurs and an increasingly diverse workforce, a new study shows.

The analysis, by economist Wallace Walrod of the Orange County Business Council, paints a largely positive picture of the OC’s business climate, workforce opportunities and economic outlook, particularly with regard to emerging industries.

“Orange County’s highly educated population is one of its primary competitive advantages. This deep talent pool supports innovation, industry cluster formation and expansion, and overall economic growth,” said Walrod, who prepared the report for the Southern California Association of Governments (SCAG).

In-depth economic analyses covering each of the six counties comprising SCAG were formally released today at the Eighth Annual Southern California Economic Summit at the L.A. Hotel Downtown. The Summit, sponsored by SCAG and the Southern California Leadership Council, brought together civic and business leaders to assess the state of the region’s economy, with a focus on the challenges caused by the housing crisis. More than 400 participants attended.

In Orange County, high housing costs continue to price many residents out of the area, Walrod reported. The average new home in Orange County sells for $789,000, while existing home prices have risen to $685,000 – both significantly above the SCAG regional average.

“This trend, which reflects a growing economy, may pose significant negative consequences,” Walrod wrote, citing an aging population and increased demand for healthcare as additional challenges for the county.

But it’s the OC’s embracing of the innovation economy that will more than likely define its fortunes moving forward. The county is home to a growing number of highly concentrated and specialized industry clusters in areas such as software development, medical devices and biotechnology. These clusters, in turn, attract additional business startups, large numbers of highly educated workers from around the world and more than $1 billion a year in venture capital investment.

“As local, regional and national demographics and industry sectors continue to evolve, Orange County remains a standout performer in both Southern California and the nation as a whole,” Walrod wrote. “Orange County’s highly concentrated industry clusters drive overall economic activity and increase the area’s specialization and ability to innovate, as illustrated by the startups that the county draws like a magnet.”

Other highlights of the report:

o Orange County has added 39,350 jobs during the past year, an increase of 2.6 percent over the previous year. That trend should continue, with overall occupational employment expected to grow by 227,900 jobs between 2014 and 2024.

o Average salaries have increased by $1,522, or 2.8 percent, during the past year, with occupational groups reporting increases – “a welcome development considering the county’s high cost of living,” the report stated. Median household income reached $81,837 in 2016, an increase of $3,409 or 4.3 percent over the prior year and 20.8 percent above the state average.

o The county poverty rate decreased from 12.7 percent in 2015 to 11 percent in 2016, another sign of economic growth.

Michele Martinez, a Santa Ana City Council member and Past President of SCAG, said the report underscores the need for continued collaboration between economic and workforce development organizations, educational institutions and businesses.

“The innovation economy offers great promise for our region, and Orange County has proved itself to be a leader in attracting emerging industries and having the workforce to support them. For us to remain at the forefront, we need to work together more than ever,” Martinez said.

She expressed concern that continued high housing costs could stymie economic growth long term, forcing millennials and future workers out of the county.

“While much of this is market driven, we need to do more at the local level to ease the regulatory barriers to new housing and encourage more affordable housing options,” Martinez said.