The Inland Empire economy has withstood COVID-19, and then some

 A report released last month found that the Inland region has reclaimed many of the jobs it lost after the pandemic hit in March 2020, and that its strongest sector – warehouse/logistics – got stronger during that time. A solid recovery appears on the horizon.

The Inland Empire economy has done more than survive the pandemic.

In one sector it’s flourished, and it’s stayed up in other areas in the face of the worst public health crisis in a century.

That’s the conclusion of the most recent quarterly report published by the UC Riverside School of Business Center for Economic Forecasting & Development.

Released April 29, the 12-page study paints a rosy picture of the Inland economy 14 months into COVID 19, which as of last week had claimed 3.2 million lives worldwide, including 580,000 in the United States.

In Riverside and San Bernardino Counties, those numbers were 4,585 and 4,67, respectively, according to published accounts.

The Center for Economic Forecasting notes that, since hitting its lowest ebb in April 2020, the Inland Empire labor market has reclaimed slightly more than 145,000 jobs.

“Employment growth in the Inland Empire is outpacing the state (-8.6% below its pre-pandemic peak) yet has trailed the nation (-5.5%) over this period,” the report states.

The report was released several days before it was announced that COVID-19 cases had dropped to about 49,000 cases a day nationwide, the lowest rate since early October and a step closer to public restrictions that have hurt businesses, especially restaurants and retail.

Once those restrictions are gone, the report predicts that strong consumer demand will power a quick economic recovery in the two-county region.

The Inland economy, like the U.S. economy, couldn’t have been performing much better than it was when pandemic hit in March 2020, said Robert Kleinhenz, an economic consultant in Long Beach with a long history of studying the Inland Empire.

“I thought when the pandemic hit, and things slowed down, that the Inland Empire was just hitting the pause button,” Kleinhenz said. “Things would be back to normal soon enough. I think that’s what has ended up happening.”

A co-author of the report agrees with that assessment.

Consumer demand has built up steadily in the last 14 months, so even the sectors that experienced the most losses – leisure and hospitality being at the top of the list – should see some job gains as the economy reopens, said Taner Osman, research manager at the Center for Economic Forecasting.

“This was a recession driven by the pandemic, not by anything fundamentally wrong or off-balance in the economy,” Osman wrote in the report. “When the virus recedes, there is really nothing to hold back a quick recovery.”

The Biden Administration’s stimulus programs, along with the vaccine rollout, has helped the local economy tremendously,  according to Osman.

“It’s important to remember that a lot of the spending we’ve been seeing is because of the stimulus,” Osman said. “It’s one of the things that has kept the economy up.”

The Inland Empire’s economy might be in better position to return to normal after the pandemic passes then other California submarkets because of several factors.

First, because so many people began shopping online, demand for warehouse space went up. That meant the Inland region’s top job creator, logistics, has been helped by the pandemic, having added 34,000 jobs during that time, according to the UCR study.

Second, leisure and hospitality has been hit the hardest by COVID-19, with 44,600 fewer jobs now than there were in February 2020 according to the study.

“But the Inland Empire isn’t the tourist market that Los Angeles and Orange County and some other places are,” Kleinhenz said. “Yes, a lot of restaurants closed, and leisure and hospitality took a hit, but it didn’t take as big a hit as other parts of the state.”

Whatever hit it did take isn’t likely to last long.

“While the local economy has experienced a fallout within various industries, the declines are not as severe as headlines would have you believe,” the report states. “More importantly, the declines are likely to be temporary. The majority of declines have been driven by the response to COVID-19, whether public health mandates or changes in consumer behavior to help mitigate the pandemic’s impact.”

Wages in the Inland Empire rose 5.7 percent between the third quarter of 2019 and the third quarter of 2020, well into the pandemic. That was one point below the state’s wage growth during that time.

Some of that growth can be attributed to the loss of jobs in lower-paying sectors like retail and leisure-hospitality, according to the report.

On the negative side, rents in the Inland Empire grew 2.5 percent during the past year to $1,467 per-unit per month, while retail vacancy rose to 10 percent during the fourth quarter.

Housing, a vital part of the local economy, remains a seller’s market. The median price of a single-family home in the Riverside and San Bernardino Counties rose 16.3 percent between the fourth quarter of 2019 and the fourth quarter of 2020.

The Inland Empire’s unemployment rate is 7.4 percent, well below the four percent recorded in February 2020, but lower than California’s 8.3 percent.

Those numbers might be artificially low because some people stopped looking for work during the past year, but the job market has still held up surprisingly well during the pandemic.

“The [Inland] unemployment number will be lower at the end of the year than it is now,” Osman said. “I can’t predict an exact number, but it will be lower. I will be very surprised if that’s not the case.”