Longer Term Vulnerabilities – Labor Shortages, Trade War Impacts, Surging National Debt – Challenge Future Economic Growth For Nation, State, and Region
October 11, 2018— RIVERSIDE, Calif. (www.ucr.edu) — Although the Inland Empire was hit harder by the Great Recession than most places in the nation, its economy today looks very different, according to an new economic forecast released at the 9th annual Inland Empire Economic Forecast Conference. For the second year in a row, the region is home to the fastest job growth in Southern California, and, according to the analysis, when looking at pre-recession job peaks, is the most improved among the major surrounding metros of Los Angeles, San Diego, and Orange Counties.
From peak to trough, the Inland Empire lost 150,000 jobs and nonfarm employment fell 11.6%. Since bottoming out, however, the region has gained well over 350,000 jobs and nonfarm employment has increased 31%.
“When an economy falls further during a downturn, it generally experiences a stronger relative recovery, but economic growth in the Inland Empire has been gaining momentum in recent years and is being strongly driven by its sharp affordability advantage, which has led to significant population gains,” said Christopher Thornberg Director of the UC Riverside School of Business Center for Economic Forecasting and one of the report authors. “And although there are longer term threats to the economy that stem from labor shortages, Federal trade policies, and our hugely expanded national debt, growth is expected to continue through the next year at the local, state, and national level.“
The Inland Empire also stands out because it is the most improved Southern California economy, according to the analysis. Compared to its pre-recession peak, the Inland Empire today has 16.1% more jobs; this surpasses Los Angeles (+5.6%), Orange (+6.6%), and San Diego (+11.0%) Counties, as well as the state (+10.6%) and nation (+7.7%).
“The progress the Inland Empire economy has made over the past couple of years is the latest phase in a years-long growth wave that has included broad-based employment gains across most industries, higher income and more local spending, rising home prices, and, as of late, increased construction activity,” said Robert Kleinhenz Executive Director of Research at the Center and one of the report authors. “But growth is going to moderate in the relatively near future as a limited supply of workers will put a check on the region’s expansion.”
According to both Kleinhenz and Thornberg, there is a critical need to address California’s high housing costs and its labor shortages across skill levels in order to ensure healthy economic growth in the Inland Empire and beyond. The new forecast delivers current outlooks for the U.S., California, and Inland Empire economies.
Select Key Findings:
- The jobs forecast in the Inland Empire calls for continued gains, with total nonfarm employment expected to grow between 2.5% and 3.0% in the near term, while the unemployment rate will drop to less than 4% in 2019.
- The Inland Empire’s renowned Logistics industry is the region’s most improved, having nearly doubled in size over the past decade and with employment 90% above its pre-recession peak. The effects from the current trade tariffs, however, are yet to be seen.
- The region has also enjoyed gains elsewhere, notably in Construction, Health Care, and Retail Trade, responding to continued growth in the region’s population and business activity.
- As of the second quarter of 2018, the median nominal price of an existing single-family home in San Bernardino County was 17.2% below its pre-recession peak, while in Riverside County it was 9.7% less. If current trends continue, the forecast has nominal home prices in the region surpassing their pre-recession peak in 2020.
- Growth in the U.S. economy looks solid for the rest of this year but will slow in 2019. Additionally, while there is no reason to expect a recession anytime soon, the long term stressors of heavy Federal borrowing, rising interest rates, and policy uncertainties, substantially diminish the nation’s capacity to absorb a blow to its economy; it won’t take much to end the current expansion.
- High housing costs will impede California’s economic growth over the long-term to the extent they deter the state’s labor force from expanding. California’s labor force growth rate has slowed significantly since the fall of 2017, with year-to-year growth at just 0.2% as of July 2018.
The 9th annual Inland Empire Economic Forecast Conference is being held on October 11th at the Fox Performing Arts Center in Riverside, CA. In addition to forecasts for the nation, state, and region, the event includes a drilled down outlook for commercial real estate markets in the Inland Empire, illuminating current and future trends in retail, office, and industrial properties.
An embargoed copy of the forecast book can be downloaded in its entirety here. To attend the event, please contact Victoria Pike Bond (see above) for a press pass.
The UC Riverside School of Business Center for Economic Forecasting and Development is the first major university forecasting center in Inland Southern California. The Center is dedicated to economic forecasting and policy research focused on the region, state, and nation. Learn more at UCREconomicForecast.org.