IE Business Daily Business news for the Inland Empire.
The local economy will grow six to 10 percent between now and the end of the year, according to the economic forecasting center at UC Riverside. It’s a bold prediction, and there’s reason to expect a strong turnaround locally and statewide, but some economists say there could be fallout from COVID-19 that no one is anticipating.
The Inland Empire economy will be back to pre-pandemic levels by the end of this year.
That’s the prediction made in a report released last week by the UC Riverside School of Business Center for Economic Forecasting and Development, which expects six to 10 percent growth for Riverside and San Bernardino Counties during the next six months.
“The Inland Empire, and California overall, are primed for growth,” said Taner Osman, research manager at the UCR Center for Forecasting, in a statement accompanying the quarterly study. “The economic fallout the region suffered throughout the pandemic recession, while considerable, has been erased from many parts of the economy.
“Lagging areas, such as the labor market, are not recovering as quickly as we would like, but they should be boosted by the accelerated rate of vaccinations.”
The recovery is already underway, according to the study.
During the first quarter of this year, business activity in the two-county region expanded at an annualized rate of seven percent, compared with 6.4 percent nationally.
The Inland economy probably will continue to outperform the national economy for at least the next six months, partly because its output took a bigger hit during the state-mandated closures and restrictions. That means it has more ground to make up.
As the second half of 2021 begins, the softest spot in the Inland Empire remains its labor market. So far, the region has recovered 67 percent of the jobs it lost beginning in March 2020, when the Coronavirus began impacting the economy.
The Inland Empire is still performing better than some other major Southern California submarkets, including Los Angeles [36 percent of jobs recovered] and Orange County [47 percent of jobs recovered].
Except for January, the Inland Empire has enjoyed relatively strong employment growth every month this year, the report notes. However, the region still has a long way to go in that area: in April, the Inland labor market added 5,800 jobs. That marked the third consecutive month that the Inland region posted a solid job growth number, but it was still 4.6 percent below its job count in February, 2020.
“While there has been some economic fallout in the region, particularly for the labor market, the declines are not as severe as headlines would have you believe,” the quarterly report states in its conclusion. “More importantly, the majority of the declines in employment levels have been driven by the response to COVID-19, whether through public health mandates or changes in consumer behavior.”
As vaccinations increase statewide, residents will continue to return to normal activities. That will lead to the lifting of more business and social restrictions, which will speed up the economic recovery, statewide and in the Inland Empire.
“Given the underlying strength in the economy, unprecedented consumer savings, and the high level of fiscal and monetary support from the government, the pandemic’s economic effects will increasingly diminish,” the report predicts. “If it has not already, public discourse will soon turn towards the state’s long-standing challenges [of] housing affordability, inequality, population growth, and tight labor markets.”
The report’s predictions probably will hold up, but the pandemic is likely to change the economy, both locally and nationally, in ways that can’t be predicted now, according to one Inland economist.
“Six to 10 percent growth in the next six months is probably accurate, but if I were making the prediction I would probably come in on the low end of that prediction,” said Jay Prag, professor of economics at the Drucker School of Management at Claremont Graduate University. “I agree that we will continue to add jobs and that the [local] economy will get stronger. But I still think the pandemic has changed things. The question is, how much?”
Movie theaters and gyms are two industries that could have a difficult time adjusting to life after the pandemic, according to Prag.
Streaming has the potential to upend the theater industry, and lot of people have found that they can work out at home.
“A lot of people bought a big-screen television and a lot of people bought an exercise bike,” Prag said. “Both of those industries will have to adjust. I think there’s a lot of economic rearrangement that has to be worked out. I also think that a lot of people are still skittish, and they aren’t ready to go out yet. I think that will be around for a while.”
How quickly the labor market will recover is impossible to say because the pandemic affected each sector differently, said Gene Valdez, a former banker who now runs a consulting business that helps businesses improve their performance.
Restaurants, for example, will probably hire more people because they had to let more people go when the pandemic hit.
But a battle is heating up between people who, during the pandemic, worked out of their home for the first time and their employers, many of whom expect those workers to return to the office now that social restrictions are being lifted.
“I think employers are trying to meet people halfway, but it will be very interesting to see how that works out,” Valdez said. “It could change the workplace, because there are a lot of advantages to working out of your house. Also, there are some people who would rather collect unemployment than work. That’s not good. They need to work.”
