UCR School of Business Center for Economic Forecasting and Development

The Inland Empire Economy Flourished in 2022

ilseu — Wed, 21 Dec 2022 21:47:56 +0000

The Inland Empire Economy Flourished in 2022 ilseu Wed, 12/21/2022 - 13:47 More News Victoria Pike Bond | UCR News December 21, 2022

Despite the recession drumbeat getting louder in many quarters across the nation, the Inland Empire’s economy is not only showing strength, but is outstripping California’s other major metros and the state as a whole along some very key measures, according to an analysis released today by the UC Riverside School of Business Center for Economic Forecasting and Development.

From employment to the labor force to consumer spending to wages to commercial and residential real estate, the Inland Empire has been a relative standout as the COVID-19 crisis fades further into the past. In particular, the pandemic-driven surge in e-commerce has pushed the region’s transportation and warehousing sector to new heights, boosting payrolls by more than 41% since February 2020, which outpaces growth in the state by a wide margin.

“This sector has long been one of the Inland Empire’s core industries and, ultimately, has been a driving force behind the region’s better and faster recovery,” said Taner Osman, research manager at the Center for Economic Forecasting and one of the report’s authors. “Moreover, the enduring shift towards online purchasing has intensified ongoing demand for the industry’s services, which bodes well for the Inland Empire as there is such a strong base and existing infrastructure already on the ground.”

Key Findings:

• Labor Market Fully Recovered … And Growing: The Inland Empire has more than recovered the 228,700 jobs it lost due to the pandemic’s shutdowns. Since April of 2020, the region’s economy has added more than 316,000 jobs, outpacing both the state and the nation. Regionally, total non-farm employment has grown 5.5% since February 2020 compared to just 0.2% in California and 0.5% in the United States.

• IE Labor Force Growth A Standout: Unlike other areas of California, the Inland Empires’ labor force (individuals willing and able to work) has grown steadily. From February 2020 to October 2022, the region’s labor force rose by 75,800 workers, a 3.6% increase. California’s labor force, on the other hand, declined by -1.3%, or -256,900 workers.

• IE Wage Growth Besting Other Areas … Then There’s Inflation: From 1st quarter 2021 to 1st quarter 2022 (the latest data available), wage growth in the Inland Empire (4.6%) has significantly outpaced California overall (1%). Local wage growth was stronger in San Bernardino County (5.2%) compared to Riverside County (3.9%). However, importantly, real wages fell -2.9% over the last year due to high inflation.

• Consumers: Spend, Spend, Spend!: From 2nd quarter 2021 to 2nd quarter 2022 (the latest data available), taxable sales receipts in the Inland Empire jumped a hefty 9.5%. With fuel prices near record highs earlier in the year, and more people traveling for work and leisure, spending at fuel and service stations was the region’s fastest growing taxable sales category, surging 39.2%.

• IE Warehouse Space Now More Expensive Than OC and San Diego: The trends occurring in e-commerce have caused the demand for warehouse and distribution space to surge in the Inland Empire. The vacancy rate among these properties fell to 1.1% in the 3rd quarter of 2022 as asking rents ballooned 92.4%. While warehouse space in the region is still more affordable than it is in Los Angeles County, it is now more expensive than in Orange and San Diego Counties.

• Housing Market Blues Not So Blue: Although today’s elevated mortgage rates are constraining demand, home prices in the Inland Empire continue to rise. From November 2021 to November 2022, the region’s median home price rose 3.5%, stronger growth relative to Los Angeles (-0.5%) yet slower compared to Orange (10.8%) and San Diego (6.3%) Counties.

• Rental Market Surges: Demand for apartments in the Inland Empire is also booming. The apartment vacancy rate fell to 2.9% in the 3rd quarter of 2022 as asking rents jumped 7.9% to $1,854 per unit, per month. But even with that increase, the Inland Empire remains a more affordable rental market than Los Angeles ($2,358), Orange ($2,499), and San Diego ($2,247) Counties.

The new Inland Empire Regional Intelligence Report (PDF) was authored by Osman and Senior Research Associate Brian Vanderplas. The analysis examines how the Inland Empire’s labor market, real estate markets, and other areas of the economy have recovered from the COVID-19 pandemic and their outlook for the remainder of the year.

Inland Empire Regional Intelligence Report, Winter 2023

View the Winter 2023 report (PDF)

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California Worker Shortage Constrains Job Growth

ilseu — Fri, 16 Dec 2022 22:31:17 +0000

California Worker Shortage Constrains Job Growth ilseu Fri, 12/16/2022 - 14:31 More News Victoria Pike Bond December 16, 2022

26,800 Jobs Added

California’s labor market expanded steadily in November, with total nonfarm employment in the state growing by 26,800 positions, according to an analysis released jointly by Beacon Economics and the UCR School of Business Center for Economic Forecasting and Development. October’s gains were also revised up to 59,800 in the latest numbers, a 3,100 increase from the preliminary estimate of 56,700.

California has added jobs at a healthy pace in 2021 and 2022. As of November 2022, the state had recovered all of the jobs that were lost in March and April 2020, and there are now 60,700 more people employed in California compared to February 2020. Over this time, total nonfarm employment in the state has grown 0.3% compared to a 0.7% increase nationally. The state increased payrolls by 4.0% from November 2021 to November 2022, outpacing the 3.3% increase nationally during the same period.

60,700 More People Employed

California’s unemployment rate grew to 4.1% in the latest numbers, a 0.1 percentage-point increase over the previous month. While this is near historic lows, the unemployment rate remains elevated relative to the nation’s 3.7% rate. California continues to struggle with its labor supply, which fell by 21,000 in November. Since February 2020, the state’s labor force has contracted by 282,000 workers, a 1.4% decline. This lack of workers is making it difficult for some employers to hire the additional staff they typically bring on during the holiday season.

4.1% Unemployment Rate

“While the state’s payrolls are now in expansion mode, many communities continue to struggle to find workers, especially in coastal areas of the state,” said Taner Osman, Research Manager at Beacon Economics and the Center for Economic Forecasting. “The lack of affordable housing along the coast is the primary constraint holding back job expansion.”

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Impacts of Black Friday and Holiday Shopping

ilseu — Thu, 15 Dec 2022 22:47:09 +0000

Impacts of Black Friday and Holiday Shopping ilseu Thu, 12/15/2022 - 14:47 More News UCR News November 22, 2022

Christopher Thornberg, director of the UC Riverside School of Business Center for Economic Forecasting and Development

The founder of Beacon Economics LLC and an adjunct professor, Thornberg is an expert in economic and revenue forecasting, regional economics, economic policy, and labor and real estate markets. Thornberg has consulted for private industry, cities, counties, and public agencies in Los Angeles, San Francisco and the Bay Area, San Diego, the Inland Empire, New York, Seattle, Orange County, Sacramento, Arizona, Nevada, and other geographies across the nation.

Contact: chris.thornberg@ucr.edu

Subramanian “Bala” Balachander, professor of business

Balachander’s research studies include competitive marketing strategy, pricing, bundling, sales promotions and market signaling, and uses methods of game theory and structural econometric models. His teaching interests are in pricing, marketing strategy and marketing models. Balachander serves on the editorial board of the journal Marketing Science and is a senior editor of Production and Operations Management.

Contact: subramanian.balachander@ucr.edu

Ellen Reese, professor of sociology

Professor of sociology and chair of labor studies at UCR, Reese’s research focuses on gender, race, and class, welfare state development, social movements, poverty, and work. She has published extensively on warehouse and labor economies within the Inland Empire and Southern California. Reese is the co-author (with Juliann Emmons Allison) of “Unsustainable: Amazon, Warehousing, and the Politics of Exploitation” (forthcoming [2023], University of California Press).

Contact: ellen.reese@ucr.edu

Cathy Gudis, associate professor of history

Gudis is an associate professor of history at UCR, with her research focused on the history of Southern California and its people. She is expert in the labor, social and cultural impacts stemming from the rise of warehousing in inland Southern California, including the large-scale fulfillment centers operated by Amazon. Gudis is also a historian-in-residence at Los Angeles Poverty Department’s Skid Row History Museum & Archives, where she has helped enhance archival and public humanities projects and funding.

Contact: catherine.gudis@ucr.edu

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Growth Will Continue Despite Turbulence

ilseu — Thu, 15 Dec 2022 21:43:58 +0000

Growth Will Continue Despite Turbulence ilseu Thu, 12/15/2022 - 13:43 More News Victoria Pike Bond | UCR News December 15, 2022

Business activity in the Inland Empire has continued to rise and despite the turbulence in today’s macroeconomy, is forecast to continue its upward climb in the near-term future.

Inland Empire Business Activity Index, Winter 2022

According to the new Inland Empire Business Activity Index released today by the UCR School of Business Center for Economic Forecasting and Development, business activity in the region increased at a 2.8% annualized rate during the 3rd quarter of 2022 (the latest data available) and is forecast to grow between 2% and 3% over the next 12 months. The current increase in the region’s business activity represents a solid jump over growth in the 2nd quarter (1.6%) but a significant decline in growth from previous quarters (4.7% in the 1st quarter and 6.4% in the 4th quarter of 2021).

According to the authors of the analysis, the longer term decline in the IE’s growth rate is to be expected as the region’s economy has transitioned firmly back to pre-pandemic conditions.

“Since the pandemic’s lows, the Inland Empire has experienced a very steady economic recovery, outpacing coastal California along many key measures,” said Taner Osman, research manager at the Center for Economic Forecasting and one of the Index authors. “While we are now seeing some weakness in the residential real estate market, that has been largely offset by impressive growth in employment, the labor force, consumer spending, building permits, and commercial real estate.”

Local commercial real estate construction is indeed experiencing a boom with virtually every non-residential building permit category growing in value in 2022. Surprisingly, given the pandemic-driven shift towards remote work, the category enjoying the largest growth is office property. Building permits for new office space in the Inland Empire surged nearly 380%, pushing the total year-to-date value for new commercial real estate in the region 205.7% above 2021 levels. Moreover, many existing firms have opted to improve or expand their space as illustrated by a 46% annual jump in non-residential alterations and additions.

In terms of vacancy, some segments of the local commercial real estate market are doing better than others. Office properties continue to surprise with vacancies increasing only 0.2 percentage points since the 1st quarter of 2020. Retail property, on the other hand, has exhibited the effects of being disrupted by the rise in e-commerce spending and experienced the largest jump in vacancies (0.6 percentage points). Unsurprisingly, given the escalation in e-commerce, warehouse and distribution property has watched its vacancy rate decline a massive 9.1 percentage points since the 1st quarter of 2020 despite nearly 35 million square feet of new space coming online over the same period.

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California Recovers All Jobs Lost During Pandemic

ilseu — Sat, 19 Nov 2022 00:54:34 +0000

California Recovers All Jobs Lost During Pandemic ilseu Fri, 11/18/2022 - 16:54 More News Victoria Pike Bond November 19, 2022

56,700 Jobs Added

California’s labor market expanded nicely in October (the latest numbers), according to an analysis released jointly with Beacon Economics. Total nonfarm employment in the state grew by 56,700 positions during the month, and with these gains, California has now fully recovered from the large job losses sustained during the COVID-19 pandemic.

“October 2022 marks a significant milestone for California with employment in the state reaching full recovery from the pandemic driven losses.” said Taner Osman, Research Manager at Beacon Economics and the Center for Economic Forecasting. “This feat is particularly impressive since the state’s labor force has about one-quarter of a million fewer workers than it did prior to the crisis. The lowest unemployment rate on record has helped to offset the contraction in the state’s labor force.”

These latest figures highlight the strength and resilience of California’s economy following an unprecedented period of disruption. The pandemic triggered historic job losses, with sectors such as hospitality, retail, and leisure particularly hard hit. The ability of the state to regain all those jobs while continuing to expand in critical industries demonstrates the adaptability of both employers and workers. Sectors that had to pause or reinvent operations during the pandemic have reopened or transformed, creating opportunities for workers to re-enter the labor force in new roles.

September’s gains were revised down to 5,300 in the latest numbers, a 1,200 decrease from the preliminary estimate of 6,500. Revisions such as these are common, as more complete data become available and analysts refine their estimates. Even with the slight downward adjustment, the overall trajectory remains strongly positive.

30,800 More People Employed

After underperforming the national labor market in 2020, a condition driven by labor shortages, California’s healthy job gains in 2021 and 2022 mean there are now 30,800 more people employed in the state compared to February 2020, the time of the pre-pandemic peak. While total nonfarm employment in the state has grown 0.2% since the pandemic lows, compared to a 0.5% increase nationally, California’s economy is rapidly catching up to the national trend. California increased payrolls by 4.1% from October 2021 to October 2022, outpacing the 3.6% increase in the United States over the same period.

This growth underscores the importance of sustained recovery efforts and policy support, as well as the strength of California’s diverse economy. With major hubs in technology, agriculture, healthcare, and entertainment, the state continues to benefit from innovation and investment. The fact that employment numbers now surpass pre-pandemic levels shows how California has not only recovered but is also building momentum for long-term stability.

4.0% Unemployment Rate

California’s unemployment rate grew to 4.0% in October, a 0.2 percentage-point increase from the previous month. This matched the increase in the national economy during the month. The state’s 3.8% unemployment rate in September was the lowest rate on record, and the present figure remains near historic lows.

California continues to struggle with its labor supply, which fell by 5,100 in the latest numbers. Since February 2020, the state’s labor force has fallen by 256,900 workers, a 1.3% decline. A shrinking labor force can limit the pace of growth, as businesses compete for fewer available workers. Despite this challenge, employers are continuing to add jobs, and the overall employment picture remains highly favorable. The tight labor market also reflects broader national trends, where many states are navigating similar issues around workforce participation and availability.

Overall, the October data illustrates a state economy that has proven resilient in the face of historic challenges. While labor shortages and workforce contraction remain ongoing issues, California’s ability to surpass pre-pandemic employment levels, sustain job growth, and remain close to record-low unemployment demonstrates that the state’s recovery is not only complete but continuing to expand.

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California Job Expansion Slowly Continues

ilseu — Tue, 25 Oct 2022 22:16:21 +0000

California Job Expansion Slowly Continues ilseu Tue, 10/25/2022 - 15:16 More News Victoria Pike Bond October 21, 2022

6,500 Jobs Added

California’s labor market expanded slowly in September, with total nonfarm employment in the state growing by just 6,500 positions over the month, according to an analysis released jointly by the UCR Center for Economic Forecasting & Development and Beacon Economics. August’s gains were revised up to 36,000 in the latest numbers, a 16,100 increase from the preliminary estimate of 19,900. These modest additions highlight the fragile nature of the state’s current economic expansion, where progress is being made but at a slower pace than earlier in the year. The upward revision for August underscores how labor market data is often adjusted as more information becomes available, yet the contrast between a strong August and a weaker September shows that conditions remain uneven.

24,700 Fewer People Employed

While California added jobs at a healthy pace in 2021 and 2022, as of September 2022, the state’s economy had not yet recovered all the jobs that were lost during the onset of the pandemic. There are still 24,700 fewer people employed in California compared to pre-pandemic February 2020. Overall, total nonfarm employment in the state has contracted 0.1% since that time compared to a 0.3% increase nationally. By contrast, the nation as a whole has managed to not only recover its lost jobs but expand employment slightly above its pre-pandemic level. California’s payrolls increased by 4.2% from September 2021 to September 2022, outpacing the 3.0% increase nationally over the same period. This indicates that although the state has been behind in its overall recovery, the past year has seen relatively strong momentum, with California businesses hiring at a faster clip than those across the country.

The driving factor behind California’s slower recovery is the state’s chronic labor market shortage. California’s labor supply fell by 57,700 in September alone, and since February 2020, the state’s labor force has fallen by 246,000 workers, a 1.3% decline. This ongoing shortage makes it harder for businesses to expand and fill open positions, slowing down the overall recovery. The data illustrates a mismatch between labor demand and labor supply: while employers are looking for workers, many individuals are either leaving the labor force or not returning in the same numbers seen before the pandemic.

3.9% Unemployment Rate

“This is a weaker month than we’ve come to expect this year, with a surprising drop in the state’s labor force,” said Taner Osman, Research Manager at the Center for Economic Forecasting and Beacon Economics. “This suggests that employers will continue to struggle to find workers this year.” His remarks capture the dual challenge facing the state: even as job creation continues, the pool of available workers is shrinking, putting strain on employers and limiting growth.

California’s unemployment rate dropped to 3.9% in September, a 0.2 percentage-point decrease from the previous month. This matches the lowest level for the series on record, which dates back to 1976. However, California’s unemployment rate remains elevated relative to the 3.5% rate in the United States overall. The record-low rate indicates that many Californians who want jobs are able to find them, but the higher level compared to the national average reveals persistent structural challenges. These include regional disparities, cost-of-living pressures, and the fact that certain industries in California were disproportionately impacted by the pandemic. Taken together, the data paints a picture of an economy that is moving forward, but one where recovery is incomplete and employers continue to navigate a very tight labor market.

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No Evidence California's Rental Caps Violated

ilseu — Fri, 21 Oct 2022 05:25:49 +0000

No Evidence California's Rental Caps Violated ilseu Thu, 10/20/2022 - 22:25 More Blog Posts Victoria Pike Bond October 19, 2022

A recently published report that alleges there may be widespread violations of a California law capping rent increases on tenants critically fails to support its allegations and, in light of available public data, the allegations themselves are unlikely to be true, according to a response released today by the UCR School of Business Center for Economic Forecasting and Development. The response also finds that the recent rise in rents across the state (and beyond) is being driven primarily by increases in tenant incomes and is not the broad crisis that the report attempts to paint.

The law, the California Tenant Protection Act of 2019 (Assembly Bill 1482), places a 5% plus consumer price index (CPI) inflation cap on rent increases for existing tenants in the state, or a 10% cap, whichever is smaller. The report, released by the UC Berkeley Terner Center for Housing Innovation in collaboration with TechEquity Collaborative, claims there may be pervasive violations of this cap, but its analysis only examines asking rents for vacant units, something the law does not apply to.

According to the UCR response, a high-level look at data from the U.S. Census’s American Community Survey suggests a contradictory conclusion: that increases in rent being paid by California tenants appear to largely adhere to AB 1482’s limits. The data, on median rent paid by tenants in California’s 11 largest counties in 2019 and 2021, show that San Bernardino County experienced the fastest annual growth at 6.4% while Santa Clara and Alameda Counties came in at just 1.6% and 1.4% growth, respectively. AB 1482 limited rent growth to approximately 6% from 2019 to 2020 and 10% from 2020 to 2021. If rents moved at the maximum allowed pace, the average growth rate per year for existing renters over this two year period would be 8%.

“Housing affordability is clearly one of California’s most urgent and long-term challenges, but reports like this one, which allege actual legal malfeasance using entirely inapplicable data, represent a step backwards in discussing this critical and complex issue,” said Christopher Thornberg, Director of the Center for Economic Forecasting and the author of the response. “Sadly, the report, seems designed more for stoking political outrage than for helping to guide California towards better solutions.”

In addition to poorly supported allegations about AB 1482, an underlying implication of the Terner Center’s report is that any rental price increase necessarily reduces the wellbeing of tenants, something that simply isn’t true, according to Thornberg. “You have to understand what drives a rent increase before you can determine if it is harmful to the overall welfare of renters,” he said.

In responding, the analysis conducted by the Center for Economic Forecasting presents evidence from the American Community Survey that suggests recent rental price increases in California have been mainly driven by growth in tenant incomes, and as such, rent-to-income ratios have remained remarkably steady. Median rent paid in California rose from $1,375 to $1,750 between 2016 and 2021, roughly a 5% increase per year. Yet the data on rent-to-income ratios show little change over this time. In the aggregate, the average rent-to-income ratio for the state was 23.9% in 2016 and 24.1% in 2021, statistically speaking, unchanged.

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Will U.S. Economy Fall into Recession in 2023?

ilseu — Fri, 07 Oct 2022 04:58:34 +0000

Will U.S. Economy Fall into Recession in 2023? ilseu Thu, 10/06/2022 - 21:58 More News Victoria Pike Bond | UCR News October 07, 2022

The U.S. economy has little chance of falling into a recession this year or next unless the Federal Reserve raises interest rates more than they are currently projecting, according to a new forecast released yesterday at the 13th annual Inland Empire Economic Forecast Conference, hosted by the UC Riverside School of Business.

“Although there are signs of stress in parts of the economy, the wealth created by the excessive fiscal stimulus enacted in 2020 and 2021 continues to drive a consumer consumption binge that will propel the economy forward,” said Christoper Thornberg, director of the UC Riverside School of Business Center for Economic Forecasting and one of the forecast authors. “The only possible thing that could tip things downward in the near-term is if the Fed applies even more aggressive quantitative tightening to control inflation than they’re now projecting.”

If the Fed stamps out inflation in the near-term by forcefully reducing its balance sheet, it will drive up interest rates, cool financial markets sharply, and possibly create a modest recession next year led by consumer cutbacks, according to the new outlook. However, in the longer term, if Fed action is inadequate, the United States may be looking at several years of very weak growth, with consumers in a relatively poor financial position at the end.

“This is now a balancing act,” said Thornberg. “Functionally speaking, policymakers went from maximum acceleration – the stimulus – to maximum braking – tightening by the Fed – over a single year, something that would create turbulence in even the healthiest economy.”

Although the new forecast is predicting economic growth to continue in the nation, California, and the Inland Empire in the short run, albeit at a slower pace (“we’ve cooled from white-hot to red-hot”), in the longer term, the major economic wildcard comes from the growing Federal deficit. According to the new forecast, much will depend on how long bond markets are willing to tolerate the excessive level of today’s U.S. government debt.

In California, the state is on the brink of a milestone: recovering all the jobs it lost during the pandemic-driven downturn and mass retirement. While many states have already reached full recovery, as of this writing, California still has a 47,300 job deficit. However, it’s increasingly likely that the state’s job count will be above water by the end of this year, according to the forecast.

Key Findings:

In the United States, inflation is moderating and may have peaked, but it won’t decelerate rapidly. Expect price growth and interest rates to remain elevated in the near term.
Consumer spending now accounts for the highest share of U.S. GDP since 2006. This consumption is also apparent in the rapidly growing U.S. trade deficit, which accounts for the largest a share of GDP since the runup to the Great Recession.
There is a massive amount of equity in the current U.S. housing market driven by a decade of low mortgage debt accumulation. The industry also has very low inventories of existing homes for sale and vacancy rates are still at a record low level. This is not a market that is due for a collapse—at least not yet.
The major problem for new housing is the ultra-low mortgage rates homeowners currently enjoy. Anyone who sells now will have to go from a sub-3 rate to something in the 5+ category. That is not a move most homeowners make—unless they have to. The ‘move-up’ market is all but frozen.
California's employment recovery has been uneven, with inland communities faring better than coastal areas. The Inland Empire has 5% more jobs today than it had prior to the pandemic, while at the other end of the spectrum, there are still 3% fewer jobs in Ventura County.
California's labor force contracted during the pandemic and employers have struggled to find workers, especially in coastal communities. The primary reason behind the labor force changes is population growth. From 2019 to 2022, population grew in inland communities and declined in coastal communities, driven by affordability.
After two years in which California’s housing market went gangbusters, and home prices increased an average 43%, the rising interest rate environment, in addition to stretched prices, has led to a major slowdown in 2022. A price crash in the market is nowhere in sight, although a slowdown in price growth is expected.
The share of homes purchased by investors in the Inland Empire is at record highs. This parallels the nationwide interest by private equity in purchasing large swaths of residential real estate. This forecast expects the share of homes purchased by investors to increase.
Current sale price cuts for homes in the Inland Empire are more of a reality check than a price decline warranting concern. The rate of bidding wars has only dipped to levels seen in the early part of 2020.
The Inland Empire has experienced a tremendous boom in Transport and Logistics employment (16.6% of all jobs in the region are now in this sector). The Information sector has grown, but lags other employment categories, highlighting the relative underrepresentation of knowledge workers in the region. This forecast expects employment in the Inland Empire to continue growing, although at a tapered pace.

The 13th annual Inland Empire Economic Forecast Conference was held on October 5th. A copy of the forecast book can be downloaded in its entirety.

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Annual Inland Empire Economic Forecast Conference

ilseu — Wed, 05 Oct 2022 13:13:26 +0000

Annual Inland Empire Economic Forecast Conference ilseu Wed, 10/05/2022 - 06:13 More Publications October 05, 2022

Download the e-book (PDF)

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Inland Empire Grows While Nation Declines

ilseu — Fri, 23 Sep 2022 02:41:25 +0000

Inland Empire Grows While Nation Declines ilseu Thu, 09/22/2022 - 19:41 More News Victoria Pike Bond | UCR News September 23, 2022

Business activity in the Inland Empire continued to rise in the latest numbers, standing in stark contrast to the decline in GDP at the national level, according to the new Inland Empire Business Activity Index released today by the UCR School of Business Center for Economic Forecasting and Development. The increase in the region’s business activity in the second quarter of 2022 (the latest data available) does, however, represent a significant decline in growth from recent quarters.

Business activity in the Inland Empire expanded by 1.6% in the latest numbers compared to 4.7% in the first quarter of 2022 and 6.4% in the fourth quarter of 2021. U.S. GDP, on the other hand, contracted by 0.6% in the latest quarter. Moreover, the short-term outlook for the Inland Empire remains positive, with local business activity forecast to rise between 2% and 3% over the next 12 months.

According to the analysis, the longer term decline in the IE’s growth rate is to be expected as the region’s economy has transitioned firmly back to pre-pandemic conditions.

“The steadiness of the Inland Empire’s overall economic recovery, and its forecast for continued growth, has been partially driven by the strength of its largest industry, transportation and warehousing, which boomed during the pandemic years but is now starting to slow,” said Taner Osman, research manager at the Center for Economic Forecasting and one of the index authors. “Just as important in the slowdown we’re seeing is that the local real estate market has cooled substantially due to rising interest rates, leading overall economic and business activity to weaken.”

According to the report, even after accounting for local inflation, the real cost of owning a home in the Inland Empire has risen 24.5% since the start of this year. At the same time, average, inflation-adjusted hourly earnings for private-sector workers in the region have declined 6.1%.

The impact has been plainly evident: Sales of existing single-family homes, which comprise the lion’s share of the Inland Empire’s residential market, were down 9.3% through the first half of this year. Still, despite the drop in sales, prices increased 17.9% over the same period. “These numbers are a testament to the acute lack of housing supply in Southern California, and the pronounced demand for housing that exists across the state in general,” said Osman.

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