IE Business Daily Business news for the Inland Empire.
Heading into 2026, the Southern California Association of Governments is less than bullish on the Inland Empire economy.
In its 2025 Southern California Economic Update, published in December, the metropolitan planning agency that represents six of the 10 counties Southern California predicts rough economic waters in Riverside and San Bernardino counties during the next 12 months.
The report is mostly an assessment of how each county’s economy performed in 2025, and whether those numbers are a reasonably good indicator for 2026, which they usually are.
Regarding the Inland region, SCAG predicts that unemployment will continue to edge up, while job growth will remain weak, in both municipalities.
SCAG also sees a slowdown in logistics development if the Trump Administration’s tariffs cause less cargo to move through the ports of Los Angeles and Long Beach. Some sectors that rely heavily on immigrant labor, including logistics, construction and manufacturing, may have to cope with a shortage of workers in 2026.
“Based on data for the Inland Empire region as a whole, non-farm job growth slowed (in 2025) compared to the last two years, with most job creation occurring in a handful industries,” the report states. “Job counts in most industries were flat or down. Inflation in the Inland Empire has generally fallen over the past year, although a recent pickup in activity may indicate what is coming.”
Housing starts in both counties improved between 2024 and 2025. Prices moved up slightly thanks to sales responding to lower mortgage rates, and both inventory and new home production were up, according to SCAG.
In August, unemployment was up slightly in both counties year-over-year: 6.3 percent from 6.2 percent in Riverside County, 5.9 percent from 5.9 percent in San Bernardino County. Unfortunately, those numbers aren’t likely to improve much during the next year, according to one of the co-authors of the Inland Empire study.
“Throughout 2025, the Inland Empire economy was being propped up by job creation in a handful on industries, notably healthcare, local government and logistics,” said Robert Kleinhenz, principal economist with Kleinhenz Economics in Long Beach. “We didn’t see much job growth in other segments of the local economy, and our concern is that that trend will continue into 2026.”
The threat to job growth in the Inland Empire in 2026 will not come from Sacramento but from Washington, D.C., according to Kleinhenz.
“All three of the sectors that created jobs in the Inland Empire last year are at risk because of what’s happening on the policy front in Washington, D.C.,” said Kleinhenz, who compiled the SCAG report with Manfred Keil, chief economist with the Inland Empire Economic Partnership and an economics professor at Claremont McKenna College.
“They’re at risk of losing federal funding that has always gone to local programs. “Because of that, I think we’re looking at a bumpy ride in the Inland Empire in 2026.”
While he doesn’t expect a recession in 2026, Kleinhenz does believe the economy to continue the “jobless growth” pattern that it established in 2025, a trend he fears could filter down to Riverside and San Bernardino counties.
“The best way to describe the national economy now is its producing economic growth, but its not producing job growth, and that is not typical,” Kleinhenz said. “The biggest concern is that middle and lower-income households aren’t seeing the gains they would see with the fast GDP growth we’ve been experiencing.”
If the Inland economy has a bright spot, it’s that its labor force continues to grow, a sign that the market has the potential for economic growth, according to Kleinhenz.
In another look ahead to 2026, the UCLA Anderson Forecast, predicts the Inland economy, like all of California, will “muddle through” the first quarter, and then undergo a “two-speed recovery” driven primarily by investments in AI technology. That trend will help offset difficulties happening in other sectors, including construction and retail.
Some of the Inland region’s core economic sectors, including logistics and leisure/hospitality, face “significant headwinds” in 2026 because of labor shortages from potential deportations and cost increases caused by the Trump Administration’s tariff policy, according to the Anderson Forecast.
“I’m not concerned about the Inland Empire economy, because I think it has plenty of momentum going into 2026,” said Justin Niakamal, research manager with Beacon Economics in Los Angeles. “If you look at the metrics across the board, it’s doing pretty well.”
Employment will go up in the Inland Empire this year, inflation will only rise slightly, and logistics and healthcare will continue to drive much of the region’s economy, Niakamal predicts.
“It’s true that things are slowing down a little, but that’s just a natural progression,” Niakamal said. “Employment in the Inland Empire is up 1.2 percent, as of the end of 2025, which is not great, but if you look at the state as a whole, that number is 0.4 percent. Based on those kinds of numbers, I think you have to be optimistic.”
