With no sign of a recession on the horizon the local economy is expected to stay strong for awhile, although not enough houses being built will remain an issue, according to a UC Riverside report.
There’s much good news in a recent study that takes an in-depth look at the Inland Empire’s job market, particularly regarding wage growth.
The question is, how long will that good news last?
Wages in Riverside and San Bernardino County have been increasing, albeit at a slightly slower pace than wage growth statewide, according to the First Quarter Inland Empire Regional Intelligence Report, published last month by the UC Riverside School of Business Center for Economic Forecasting and Development.
Earnings in the Inland region were up 2.8 percent between the first three quarters of 2017 and the first three quarters of 2018, the most recent data available. There was virtually no difference between Riverside and San Bernardino counties, which recorded wage expansion of 2.7 percent and 2.8 percent, respectively.
California’s wage growth was 4.3 percent during that time.
The eight-page report finds a silver lining in the fact that state wage growth outpaced Inland job growth by 1.5 percent.
It predicts that continued upward pressure on wages will cause job markets to tighten throughout Southern California between now and the end of the year. That dynamic will help the two-county region because, as those labor markets condense, the Inland Empire’s more affordable housing will attract more residents.
That will allow the local job market “to expand more robustly than is the case in other regions,” according to the report.
The study, based mainly on data compiled by the U.S. Bureau of Labor Statistics, paints an optimistic picture of the Inland Empire’s economic future, said Robert Kleinhenz, executive director of research at the center for economic forecasting.
“Wages are growing, and at the moment there is no sign of a recession in the immediate future,” said Kleinhenz, who helped write the report. “We should see mostly good things [in the Inland economy] between now and the rest of the year.”
The Inland Empire’s wage growth is even more impressive because its labor force is growing faster than nearby submarkets.
From January 2018 to January of this year, the Inland region’s labor force grew by 2.3 percent. During the same period, Los Angeles County’s labor force – meaning the total number of people within a market who are able to work – grew 0.7 percent, Orange County 1.7 percent and San Diego County 2.2 percent.
California’s job force grew by 1.5 percent in that time.
Much of the reason why the Inland Empire’s labor force outperforming its neighbors, and California, is because housing prices are lower here than they are in other places. In February, the most recent available data, the median price of a single-family home was $381,000 in Riverside County and $335,000 in San Bernardino County.
The median price of a single-family home in Southern California – the Inland Empire plus Los Angeles, Orange, San Diego and Ventura counties – was $512,500, according to CoreLogic in Irvine.
“The healthier growth we’re seeing in the Inland Empire’s work force is being driven in part by the region’s greater home affordability relative to surrounding areas, and this represents a significant competitive advantage into the future,” Kleinhenz said in the study.
That tight regional market means wages in the two-county region should continue to grow as businesses throughout Southern California compete to fill jobs, Kleinhenz said.
The report’s other major findings include:
- Job growth and wage gains in the Inland Empire have led to an “impressive” surge in local taxable sales, which rose 7.3 percent in 2018 compared to 2017. Statewide, taxable sales were up 5.2 percent during that time.
- Like almost every other submarket in California, the Inland region needs more new houses. Slightly more than 55,200 single-family homes were sold here in 2018, a decline of 6.7 percent from 2017. Some of that drop can be attributed to the fallout from the 30-year mortgage peaking at nearly five percent in November, but Inland home prices have risen faster during the past year than they have neighboring markets, the report stated.
- Inland rental rates rose 4.4 percent between the fourth quarter of 2017 and the fourth quarter of 2018, to average of $1,365 per month. Despite that, the Inland Empire remains a good place to rent an apartment compared with other Southern California submarkets. At the end of last year, average monthly rents were $2,004 in Los Angeles County, $1,948 in Orange County and $1,822 in San Diego County.
One local economist called the report an accurate assessment of Inland wage growth, and the overall Inland economy.
“I agree with it, and I think the job growth is interesting because there have been so many middle-class jobs lost in California lately,” said Jay Prag, professor of economics at Claremont Graduate University’s Drucker School of Management. “California really isn’t business friendly.”