Recession was a Boom Time for Hispanic-Owned Businesses in the Inland Empire

A study by UC Riverside shows that Hispanic-owned businesses grew dramatically in the two-county region during the worst of the economic slowdown. Many of them have only a handful of employees, but the trend was still positive for the region.

Everyone agrees that the Inland Empire took a major hit during the recession, far worse than most other markets in California.

What’s not so well known is that one ethnic group within the two-county region thrived during that time, even as the Inland Empire all but collapsed.

Between 2007 and 2012, Hispanic-owned businesses in Riverside and San Bernardino counties grew by 50.6 percent, eventually accounting for nearly 37 percent of all businesses in the region, according to a report by the Center for Economic Forecasting and Development at UC Riverside.

That growth rate, which the report called “whopping,” outpaced the growth rate of Hispanic-owned businesses in California and the United States, which was 43.9 percent and 46.3 percent respectively.

To put those numbers in perspective, the growth of “all businesses” during the period covered in the report – generally regarded as the worst economic crisis in the United States since the Great Depression – was eight percent in the Inland Empire, five percent in California and 3.4 percent nationwide, the report stated.

In other words, while most other businesses were shutting down or fighting to stay alive, a good number of Hispanics decided to become entrepreneurs and managed to establish a foothold in the business community despite a terrible economy.

“Hispanic-owned businesses in the [Inland] region bucked a strong local and national trend and kept on growing throughout the national downturn,” the report stated.

Meanwhile, the Inland Empire’s Hispanic population continues to get stronger economically: as of 2012, 46.2 percent of the employable workforce was Hispanic, compared with 35.3 percent in California and 15.5 percent nationwide, the report stated.

As the Hispanic population continues to grow, it’s important to strike a balance between Hispanic business owners and Hispanic workers, said Christopher Thornberg, director of the forecasting center and one of the report’s lead authors.

The report was based on data from the U.S. Census Bureau’s most recent Survey of Business Owners, which was completed four years ago but not released until last December. Its findings regarding the Inland Empire weren’t a surprise to the researchers at UCR, said Robert Kleinhenz, an economist with the forecasting center.

“I think the numbers were about what we expected to find, mostly because of the Hispanic population in this area,” said Kleinhenz, a co-author of the study. “They’ve established a population growth rate and they’ve moved forward from there, so you would expect to see more Hispanic-owned businesses.

Much of the growth in Hispanic-owned businesses in the Inland Empire happened in logistics, one of the region’s two most important industries, along with housing.

Administrative service also accounted for much of that growth: by 2012, 16.8 percent of the the jobs in that sector in the Inland Empire were Hispanic owned. Health care jobs accounted for 11.8 percent, the report stated.

Revenues among Hispanic-owned businesses in the Inland Empire grew by 5.8 percent, to $11 billion, during the five-year period covered in the report, well below the growth recorded throughout California and nationwide. Hiring among local Hispanic-owned businesses also declined during that time.

In both instances, the decline can probably be attributed to those businesses being smaller entities that often have a hard time getting started.

“In most cases, Hispanic-owned businesses have fewer revenues and smaller staffs compared to other businesses,” the report stated.

The question remains, what drove so many members of the local Hispanic community to start their own businesses during such a bad economic downturn?

The most obvious explanation is that a lot of Hispanics, like every other ethnic group, lost their jobs in the recession. Faced with the worst job market since the 1930s, they decided to start their own business, often with only one or two employees besides themselves.

That scenario can happen with or without a recession, Inland Empire economist John Husing said.

Husing, who has been analyzing the Inland Empire economy since the mid-1960s, was a college professor and worked in the casino industry before striking out on his own. Today he runs a consulting firm, Economics & Politics Inc., and is recognized as a top authority on the Inland Empire economy.

“That’s exactly what happened to me,” Husing said. “My casino job went away and I had to do something, so I became an entrepreneur.”

While some might argue that it’s not important which ethnic group owns a business, the growth of Hispanic-owned businesses in the Inland Empire is a major development for the region, Husing said.

“It’s extraordinarily important,” he said. “The local Hispanic population is growing, and as you get more business ownership you get more leadership within the community. Not just in business but in non-profits, government, across the board.”

Even during a recession, the growth in Hispanic-owned businesses was probably to be expected, Husing said.

“They’re just in the process of catching up with everyone else,” Husing said. “The fact that they grew the way they did doesn’t surprise me at all.”

One reason a lot of Hispanic-owned businesses are growing is that they’re doing a better job of appealing to non-Hispanics, said Mike Stull, director of the Inland Empire Center for Entrepreneurship at Cal State San Bernardino.

“Cardenas is a good example,” Stull said in reference to the popular grocery store chain. “They started marketing to the Hispanic market, but now they have a smorgasbord of stuff and everyone shops there. I shop there.”

Regardless of the state of the economy, much of the Hispanic community does have an entrepreneurial bent, said Emilio Ramirez, vice chairman of the Greater Riverside Hispanic Chamber of Commerce.

“It’s an industrious community, it’s ambitious and that’s why I think Hispanic-owned businesses will continue to grow,” Ramirez said. “If they’re big or small, or there’s a recession or not, it doesn’t matter. As long as they’re growing it’s a good thing.”