Inland Empire economy should stay strong for awhile
Despite some rough spots, most notably in the housing market, the two-county region should stay relatively strong at least through the end of next year, according to a recent forecast.
Let’s all hope a recent economic forecast about the Inland Empire is accurate, particularly its prediction regarding job growth.
Non-agricultural employment in Riverside and San Bernardino counties is expected to grow between 2.5 percent and three percent in the near future, according to the 2018 Inland Empire Economic Forecast, which was released last month.
The report, which was compiled by the UC Riverside School of Business Center for Economic Forecasting, is as much an assessment how the two-county region has recovered from that crisis as it is a prediction of the future.
It notes that the Inland region has experienced the strongest job growth in Southern California since its job market sank to its lowest depths during the Great Recession.
Since losing approximately 150,000 non-farming jobs the region has made a remarkable comeback, having added more than 350,000 jobs while seeing its non-farm employment increase by 31 percent.
That’s a stronger recovery than Los Angeles, Orange and San Diego counties, which had employment increases of 5.6 percent, 6.6 percent and 10.6 percent, respectively. Also during that time, the U.S. employment rate rose by 7.7 percent.
The report was also optimistic about the national economy, albeit with several qualifiers.
Despite labor shortages in some areas, questionable federal trade policies and the expanding national debt, the U.S. economy is expected to keep growing through the end of this year and into early 2019.
Locally, job growth is expected to continue at least through the end of 2019, said Robert Kleinhenz, chief economist and director of research with the economic forecasting center.
Kleinhenz addressed local business and academic dignitaries last month when the forecast was released during a conference at the Fox Theater in Riverside.
“The Inland economy will continue to grow, and it will outgrow the state of California as a whole in a lot of areas,” Kleinhenz said during an interview last week. “As for the labor force, more people are moving into the Inland Empire than other parts of the state, which is a big reason why employment is going up.
“Twenty eighteen should finish strong, and 2019 looks like it will also be strong.”
Along with housing, logistics makes up the backbone of the Inland economy, and that sector has been driving force behind the region’s recovery during the past 10 years. The sector has nearly doubled during that time, with its employment 90 percent higher than it was at its pre-recession peak.
The Inland Empire has also experienced job gains in other sectors, notably construction, health care and retail since the recovery officially began in February 2010, according to the forecast.
Unfortunately, the Inland housing market isn’t likely to recover as quickly.
As of the second quarter of this year, median nominal prices of single-family homes and condominiums – meaning their dollar value at the time they were produced – were lagging well behind their pre-recession levels: down 17.2 percent in San Bernardino County and 9.7 percent in Riverside County.
If the present market trends continue, nominal median home prices in both counties won’t pass their pre-recession peak until sometime in 2020, according to the forecast.
One local economist says he agrees with that assessment.
“I think that’s about right,” said Jay Prag, professor of economics at Claremont Graduate University’s Drucker School of Management. “Housing costs keep going up, the price of building houses keeps going up and a lot of land that could be used for housing is being used up by distribution and logistics centers.”
California’s housing crisis – prices are skyrocketing because not enough houses are being built – has been well documented, and housing is the one area where the forecast is pessimistic. It predicts that high housing costs will harm California’s economy long enough that they will keep the state’s labor force from expanding. It also notes that California’s labor force was essentially static – only 0.2 percent growth between July and last fall.
“The housing issue is a real one, and unless we do something about it’s going to hurt the economy,” Inland Empire economist John Husing said. “And there are a lot of possible solutions to that problem. But on the overall, absolutely I’m optimistic about where the [Inland] economy is going.”
The forecast also notes that, while there are no signs of a recession, the national economy is likely hit a slight slowdown sometime next year.
Much of the forecast shows that, despite its problems, the Inland region’s economy is outperforming much of the state.
“Yes, housing prices are high in the Inland Empire, but they’re a lot higher in other markets,” Kleinhenz said. “Locally, they’re not even close to hitting rock bottom.”