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High Desert Training Center Targets In-Demand Skills Training

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OPINION

By Phillip Cothran, San Bernardino County Workforce Development Board Chair

Tuesday, August 27, 2019 — San Bernardino, CA — As we continue to enjoy one of the tightest labor markets in recent history, including a situation where the number of open jobs exceeds the number of people looking for work, we find that many industries in the county, especially manufacturing, are still finding it a challenge to fill open jobs.

A shortage of workers is not just a county challenge, but is a recognized national issue.

According to the 2018 Deloitte and The Manufacturing Institute Skills Gap and Future of Work study, as recently as August 2018, there were 508,000 open jobs in U.S. manufacturing, part of the best annual job sector gain in more than 20 years. While the job gains are positive indications that the industry continues to recover from the Great Recession and reflect strong production levels, it also means that finding talent with the right skills to fill the open jobs could reach crisis proportions.

The study further reveals that most manufacturers believe that the No. 1 cause of the skills shortage is “shifting skill set due to the introduction of new advanced technology and automation,” followed by “negative perception of students/their parents toward the manufacturing industry.” Baby boomer retirements complete the top three causes of today’s skills shortages, according to manufacturing executives.

San Bernardino County’s Workforce Development Board (WDB) released its Labor Market Intelligence Report earlier this year and found some of the same issues as it relates to sector growth in key industries for the region: transportation, logistics and manufacturing.

The study noted that in 2017, the transportation sector accounted for around six percent of San Bernardino County employment. Since 2010, employment in transportation has grown by approximately 27 percent, which is in line with the sector’s growth at the state level. However the report further noted that the transportation sector has created more jobs than the locally available talent pool can accommodate. Based on this data, the transportation industry has pulled in more workers from the county resident pool and it has had to go outside the county to fill vacancies, increasing the percentage of county transportation workers who don’t reside in the county.

This trend is also impacting our local manufacturing industry. In 2017, the manufacturing sector accounted for around nine percent of all jobs in both San Bernardino County and the State of California. Although historically declining, manufacturing employment has grown 22.5 percent since 2010 in the county (CA, 6 percent and U.S., 8 percent). The industry in the county has been growing at three times the pace of the industry’s growth in the rest of the state. To meet that need, the report found that, from 2012 to 2017, the number of manufacturing workers commuting from Los Angeles County to San Bernardino County doubled. In this case, we are importing workers to meet county demand.

The WDB is working proactively to look at ways to both upskill existing talent as well as create a pipeline of workers for our region’s growth industries to ensure they are able to thrive and expand in the county.

A major initiative to help meet this challenge is a new High Desert Training Center at Southern California Logistics Airport (SCLA) in the city of Victorville set to open in early 2020.

Stirling Capital Investments (SCI) and Prologis, Inc. entered into a 10-year agreement with the Victor Valley Community College (VVCC) to donate an existing building at SCLA for a 10-year term. At the new center, VVCC will facilitate hands-on training programs to better prepare the High Desert region’s workforce in the skills identified as in demand by local businesses.

Victor Valley Community College Superintendent-President Daniel Walden, Ph.D, who will be operating the new High Desert Training Center, notes that this is an opportunity to work with local High Desert industries such as avionics, manufacturing, building materials and mining. For all of these industries there are common skills required when seeking workers. The High Desert Training Center can provide this basic level of training referred to as mechatronics, a multidisciplinary branch of engineering that focuses on the engineering of both electrical and mechanical systems, and also includes a combination of robotics, electronics, computer, telecommunications, systems, control, and product engineering. These skills sets, along with specialized training, are all part of the offerings at the planned High Desert center. Walden says businesses gain a significant advantage by employing workers who already have an important knowledge base that they can build upon.

The creation of the High Desert Training Center underscores an important part of the workforce solution. For our county to have a strong, skilled and abundant workforce requires an ecosystem in which public and private stakeholders work side by side to develop and train a workforce prepared for career opportunities.

The benefits for all involved are numerous.

For Prologis, this type of community-based partnership is an extension of its commitment to deliver superior customer service to its tenants while strengthening local communities, enhancing regional economies and helping tenants located within its buildings to address labor needs and expand their talent pipelines. Moreover, Prologis and SCI recognize that an added benefit of having this training center housed at SCLA helps support current and future tenants by providing an in-place workforce as well as training for additional skills that could be useful in the advancement of their manufacturing procedures. As an educator, VVCC can now expand its impact by forming more relationships with local employers. These partnerships can also help to convince prospective students that they can find jobs at the end of their studies. The county benefits from the growth of a local training institution that provides more career options for residents through high-quality career and technical education.

Looking ahead, the WDB welcomes the opportunity to celebrate the grand opening of this new training center as well as increasing opportunities to partner with education and the private sector to propel our county economy forward.

 

The Inland Empire Business Journal (IEBJ) is the official business news publication of Southern California’s Inland Empire region - covering San Bernardino & Riverside Counties.

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Economy

Will The U.S. Economy Fall Into Recession In 2023?

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Will The U.S. Economy Fall Into Recession In 2023? Only If The Fed Intensifies Current Tightening Policies; Consumers To Make Up For Weakness In Other Parts Of The Economy

California On The Verge Of Recovering All Jobs Lost Since Pandemic; Investors Buying Up Larger Share Of Homes In The Inland Empire

The U.S. economy has little chance of falling into a recession this year or next unless the Federal Reserve raises interest rates more than they are currently projecting, according to a new forecast released yesterday at the 13th annual Inland Empire Economic Forecast Conference, hosted by the UC Riverside School of Business.

“Although there are signs of stress in parts of the economy, the wealth created by the excessive fiscal stimulus enacted in 2020 and 2021 continues to drive a consumer consumption binge that will propel the economy forward,” said Christopher Thornberg, Director of the UCR Center for Economic Forecasting & Development and one of the forecast authors. “The only possible thing that could tip things downward in the near-term is if the Fed applies even more aggressive quantitative tightening to control inflation than they’re now projecting.”

If the Fed stamps out inflation in the near-term by forcefully reducing its balance sheet, it will drive up interest rates, cool financial markets sharply, and possibly create a modest recession next year led by consumer cutbacks, according to the new outlook. However, in the longer term, if Fed action is inadequate, the United States may be looking at several years of very weak growth, with consumers in a relatively poor financial position at the end.

“This is now a balancing act,” said Thornberg. “Functionally speaking, policymakers went from maximum acceleration – the stimulus – to maximum braking – tightening by the Fed – over a single year, something that would create turbulence in even the healthiest economy.”

Although the new forecast is predicting economic growth to continue in the nation, California, and the Inland Empire in the short run, albeit at a slower pace (“we’ve cooled from white-hot to red-hot”), in the longer term, the major economic wildcard comes from the growing Federal deficit. According to the new forecast, much will depend on how long bond markets are willing to tolerate the excessive level of today’s U.S. government debt.

In California, the state is on the brink of a milestone: recovering all the jobs it lost during the pandemic-driven downturn and mass retirement. While many states have already reached full recovery, as of this writing, California still has a 47,300 job deficit. However, it’s increasingly likely that the state’s job count will be above water by the end of this year, according to the forecast.

Key Findings:

  • In the United States, inflation is moderating and may have peaked, but it won’t decelerate rapidly. Expect price growth and interest rates to remain elevated in the near term.
  • Consumer spending now accounts for the highest share of U.S. GDP since 2006. This consumption is also apparent in the rapidly growing U.S. trade deficit, which accounts for the largest a share of GDP since the runup to the Great Recession.
  • There is a massive amount of equity in the current U.S. housing market driven by a decade of low mortgage debt accumulation. The industry also has very low inventories of existing homes for sale and vacancy rates are still at a record low level. This is not a market that is due for a collapse—at least not yet.
  • The major problem for new housing is the ultra-low mortgage rates homeowners currently enjoy. Anyone who sells now will have to go from a sub-3 rate to something in the 5+ category. That is not a move most homeowners make—unless they have to. The ‘move-up’ market is all but frozen.
  • California’s employment recovery has been uneven, with inland communities faring better than coastal areas. The Inland Empire has 5% more jobs today than it had prior to the pandemic, while at the other end of the spectrum, there are still 3% fewer jobs in Ventura County.
  • California’s labor force contracted during the pandemic and employers have struggled to find workers, especially in coastal communities. The primary reason behind the labor force changes is population growth. From 2019 to 2022, population grew in inland communities and declined in coastal communities, driven by affordability.
  • After two years in which California’s housing market went gangbusters, and home prices increased an average 43%, the rising interest rate environment, in addition to stretched prices, has led to a major slowdown in 2022. A price crash in the market is nowhere in sight, although a slowdown in price growth is expected.
  • The share of homes purchased by investors in the Inland Empire is at record highs. This parallels the nationwide interest by private equity in purchasing large swaths of residential real estate. This forecast expects the share of homes purchased by investors in the region to increase.
  • Current sale price cuts for homes in the Inland Empire are more of a reality check than a price decline warranting concern. The rate of bidding wars has only dipped to levels seen in the early part of 2020.
  • The Inland Empire has experienced a tremendous boom in Transport and Logistics employment (16.6% of all jobs in the region are now in this sector). The Information sector has also grown, but lags other employment categories, highlighting the relative underrepresentation of knowledge workers in the region. This forecast expects employment in the Inland Empire to continue expanding, although at a tapered pace.

The 13th annual Inland Empire Economic Forecast Conference was held on October 5th.  A copy of the forecast book can be downloaded in its entirety here.

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Economy

No Near-term Recession Says Leading Forecast; Supercharged Consumers will Propel U.S. Economy into 2023

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Recession Potential Will Grow If Federal Reserve Tightens To Control Inflation… But The Sooner The Better; California On Verge of Recovering All Jobs Lost To Pandemic

Despite real signs of stress in parts of the system, for now, consumers will carry the U.S. economy through this year and into 2023 without a downturn, according to Beacon Economics‘ latest outlook for the United States and California. The wealth created by the excessive fiscal stimulus enacted in 2020 and 2021 continues to drive a consumer consumption binge and the new forecast anticipates economic growth to look better in the second half of 2022 (when final numbers are available) than it did in the first half.

Inflation will continue to run hot, and interest rates will continue to rise as a result, but those circumstances are not recession causing, according to the outlook. Instead, expect a slow pace of overall economic growth, with weaker numbers from the more rate sensitive sectors.

“Functionally speaking, policymakers went from maximum acceleration – the stimulus – to maximum braking – tightening by the Fed – over a single year, something that would create turbulence in even the healthiest economy,” said Christopher Thornberg, Founding Partner of Beacon Economics and one of the forecast authors. “But in the near-term, while parts of the economy will remain cool due to rising interest rates, that supercharged U.S. consumer, armed with a $30 trillion increase in household wealth over the pandemic period, will keep momentum going.”

The new forecast also argues that inflation may have peaked but will not decelerate rapidly. “Until the Fed gets serious about tightening, that is reducing the money supply and raising interest rates, expect price growth to remain elevated,” said Thornberg.

Although the potential for a real recession in the nation will increase if and when the Fed applies more aggressive quantitative tightening to control inflation and push up real (rather than nominal) interest rates, the faster the Fed acts the better in order to prevent a truly deep negative business cycle, according to the forecast.

Starting in 2023, if Fed action is inadequate the United States may be looking at 3 or more years of very weak growth, with consumers in a relatively poor financial position at the end. If the Fed stamps out inflation in the near-term by aggressively reducing its balance sheet, it will drive up interest rates, cool financial markets sharply, and possibly create a modest recession next year led by consumer cutbacks. However, the nation would come out of it with a strong private sector.

In California, the state is on the brink of a milestone: recovering all the jobs it lost during the pandemic-driven downturn. While many states have already reached full recovery, as of this writing, California still has a 73,000 job deficit. However, if the economy adds the same number of jobs as it did in the latest numbers in the next data release, the state’s job count will be above water.

“California’s labor force contracted during the pandemic and employers have struggled to hire the workers they need, especially in coastal communities,” said Taner Osman, Research Manager at Beacon Economics and one of the forecast authors. “These difficulties circle directly back to the long-term affordability crisis facing the state as the labor forces in more expensive coastal areas have declined while they have grown in relatively affordable inland communities.”

View the new The Beacon Outlook including full forecast tables here.

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Economy

It’s The Demand Curve, Stupid…

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It’s The Demand Curve, Stupid…

By Christopher Thornberg

The biggest obstacle to slowing inflation is that the real causes of it—excessive consumer demand and rapidly rising wages—are too politically toxic to acknowledge.

The August CPI report showed prices in the United States continuing to increase, contrary to the predictions of most Blue-Chip forecasts and the Federal Reserve. This has spooked the markets and caused a sharp decline in the various indexes—the S&P 500 dropped over 4%. The decline in the markets doesn’t surprise me—they are the ultimate drama queens of the economy, overreacting to everything. They will likely bounce back soon enough.

What does perplex me is how we collectively continue to be surprised when the official inflation forecasts fall well below reality. This same kabuki dance has been repeated almost monthly for more than a year now, with expert economists assuring us that price growth will soon decelerate and maybe even reverse, followed by a gnashing of teeth and predictions of doom when it turns out the data is not living up to the optimism.

I am certainly not suggesting that inflation is easy to forecast—especially on a month-to-month basis. But the problem I see here is different. The major forecasts and official prognostications aren’t just missing the mark, they have consistently predicted lower inflation rates than have been occurring. In statistical parlance the forecasts have bias. And this bias stems from the fact that the cause of inflation has been misinterpreted as primarily a supply chain issue, when in fact it is an excess demand and labor cost issue.

Consider the various explanations for inflation over the last year. They have typically attributed the problem to parts shortages (e.g., empty car dealer lots and high used-car prices), energy markets (the high cost of gasoline), the war in Ukraine and grain markets (food prices) among other issues. The following quote is from a Wall Street Journal reporter discussing her interviews with various economists prior to the summer CPI estimates:

“[June] will probably prove to be the peak for the annual measure of CPI. That’s because pretty much all of the major drivers of the inflation surge this year and last year are fading or outright reversing. Energy prices are on the downswing, most obviously gasoline prices. Upstream, energy and food commodity prices have come down a lot in recent weeks too, which suggests that there’s more easing to feed through to consumers in store, particularly on the grocery front. Supply-chain pressures seem to be gradually improving.”[1]

If we think about inflation as being strictly driven by limitations in inputs, then any relief in those supply pressures should cause prices to fall. But this is not the case today, as the August number clearly demonstrates. The supply-chain theory of inflation is wrong. And the reason many experts continue to get it wrong is because the true causes of today’s inflation—excess consumer demand and rapidly rising labor costs—are politically toxic and difficult to acknowledge in these terse populist times.

Excess consumer demand has been caused by an overstimulation of the economy on the part of the Feds. As I have written many times, the pandemic hit to the economy was never the crisis it was portrayed to be, and the $6.5 trillion in fiscal stimulus, largely funded by $5 trillion in new money created through the Fed’s quantitative easing program, was vastly more than necessary. It set financial markets to new (unsustainable) highs and ultimately generated a 25% bump in household net worth ($30 trillion in new wealth) in just 2 years. This new “wealth” has driven consumer spending to new highs, and that is what is causing inflation. As Milton Friedman famously quipped: “Inflation is caused by too much money chasing after too few goods.”

Looking at the supply side only mistakes the symptoms for the disease. Gasoline prices shot up because the minor issues with supply were magnified by the major jump in demand. Estimates of short-run demand elasticity for gasoline suggest the market is inelastic, but still, an increase in price will lead to a decrease in consumption if those prices are only being driven by supply constraints. Yet, the Bureau of Economic Analysis’ GDP data shows that in the last 18 months, even as energy prices rose 97%, consumption of energy products increased by 7%. Prices rose so dramatically because of the surge in demand, not the limitations on supply.

And now that energy prices are falling as supply catches up, money not spent on energy is simply flowing to other spending—healthcare, housing, restaurants, travel—and causing more inflation in those categories. And those sectors also have supply shortages—driven by labor shortages rather than supply chain issues. Just as excess demand drove up energy prices, excess demand is also causing a rapid increase in worker earnings, which is another important contributor to business costs and output prices. According to the Atlanta Fed’s wage tracker, U.S. worker earnings are now growing at a 6.7% annual pace—the highest rate ever recorded in the 40 years of data they have created.

And therein lies the political problem. If we acknowledge that inflation is being driven by excessive consumer demand, then we must admit that Americans are overconsuming. That’s an idea that doesn’t fit the miserabilist narrative that underpins political debate today. Both parties consistently tell their supporters how terrible they have it and then immediately blame the other party’s policies. Apparently, in the political world, most U.S. households are living hand to mouth, workers are highly underpaid, and we’re all just one paycheck away from financial disaster. To suggest otherwise would be gauche.

For the record, U.S. consumers are overconsuming. Consumer spending as a share of nation’s GDP is the highest it’s ever been, except during the runup to the Great Recession—not a comfortable comparison. This overconsumption is one of the root causes of the growing U.S. trade deficit, currently at almost 5% of GDP, again the widest it’s ever been except for the 2005 and 2006 period. As for the idea that real earnings growth is negative, you only get this result if you use the CPI estimate of inflation, which overstates the situation for technical reasons we won’t dive into here.[2] The appropriate deflator is the PCE deflator from the Bureau of Economic Analysis, and if we use that, real earnings growth is positive, albeit not at a 40-year high pace.

Of course, this story is only explaining the mechanisms within basic monetary theory. If you want to predict how much prices will increase, you only need to look at money supply. The Federal Reserve’s quantitative easing program expanded the money supply of the United States by 40%. Therefore, holding all else constant, prices need to go up by 40% to equilibrate the size of the economy to the size of the money supply.

While the Fed’s quantitative easing caused inflation, oddly their response to the problem has been primarily to push up the Federal Funds rate, the old tool that Ben Bernanke had largely moved past during his tenure. The big hikes in the Federal Funds rate have done very little to reduce the money supply; it has only stopped growing. If the Fed is serious about slowing inflation, they need to engage in quantitative tightening—which they say they will be starting this month.

By tightening of course, they will, by definition, cool consumer demand and weaken labor markets, as these are the ultimate sources of inflation. Given that policymakers are seemingly unwilling to acknowledge that the problem is excessive spending as well as wage growth, it unfortunately suggests they will be unwilling to do what is necessary to slow inflation.

The only question then is how much longer will we continue to be surprised by it.

[1] https://economics.cmail19.com/t/ViewEmail/d/A6E3C20BCF922DDB2540EF23F30FEDED/DE3F8A096023AA9114399806BE9B4083?alternativeLink=False

2 For more about the CPI’s inflation estimate see: https://www.clevelandfed.org/newsroom-and-events/publications/economic-trends/2014-economic-trends/et-20140417-pce-and-cpi-inflation-whats-the-difference.aspx

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