10th Annual Inland Empire Economic Forecasting Conference:
Housing remains the greatest immediate and longer term challenge; Despite some impacts of the trade war and the consternation of the yield curve, neither will lead to a slowdown in 2020.
Riverside, California – Operating at “full employment” and with an unemployment rate tending to decline from its all-time low, the Inland Empire economy will continue to grow through 2020, albeit at a steady pace. slower than in the recent past, according to a new economic forecast released today by the UC Riverside School of Business Center for Economic Forecasting and Development at the 10th Annual Inland Empire Economic Forecasting Conference.
The local healthcare and logistics sectors are responsible for much of the region’s continued employment growth, while significant growth at the Ontario International Airport shows the growing economic presence of the Inland Empire among the most powerful economies in Southern California.
“EI’s economy has grown in recent years and although there has been a downturn, based on everything we see happening today, all the problems associated with a recession coming are just that – nothing in the foreseeable horizon would have an impact large enough or fast enough impact to plunge the region, or the nation, into a downturn, âsaid Christophehuh Thornberg, director of UC Riverside School of Business Center for Economic Forecasting and one of the forecasters. “While there is still a potential for impact that is as yet unseen at the global or national level, and there certainly are long-term threats that stem from the housing shortage throughout the state of California, which is helping to generate labor shortages, slower growth is expected to continue. “
The new forecasts call the lack of housing supply and low housing construction rates, especially in the single-family home market, as the most pressing challenge to economic growth in the Inland Empire. Even though the local housing stock is well below demand, residential building permits in the region (both single-family and multi-family) declined by 8.2% in the first half of 2019 compared to the same period ago. a year.
This isn’t unique to Southern California, where Los Angeles has seen residential permits drop 27.9% and San Diego has seen a whopping 46.6% drop. Indeed, construction fell statewide with residential permits down 17.4% in California from a year ago. Multi-family construction activity in the Inland Empire has been stronger and this is probably what moderated the relatively lower level of decline in residential permits in the region.
âThe consequence of high demand and low supply is, of course, upward pressure on house prices and rental costs,â Thornberg said. âBoth have grown dramatically in the Inland Empire over the past year as the number of home sales has declined. It is a problem today and if we do not add housing stock, it will be even more so tomorrow. “
The new forecast provides current outlook for the economies of the United States, California and the Inland Empire.
Select the main conclusions:
- Of all the industrial and commercial developments of the Inland Empire, the rapid expansion occurring at the Ontario International Airport stands out in Southern California. Year-over-year growth in passenger traffic at the airport jumped 9.6% compared to a 0.3% growth at LAX and a contraction of 3.4% at John Airport Wayne in Orange County.
- Due to the multiple ways in which employment is measured by the United States Bureau of Labor Statistics and the California EDD, and due to a lag in some of the data, the new forecast reveals that the current monthly figures may be under- estimate the true employment growth trends of the Inland Empire. . There is a good chance that the growth levels will be revised upwards when the annual benchmarking takes place in March 2020.
- Despite the ongoing trade war with some of California’s major trading partners since March 2018, the Inland Empire’s logistics sector has continued to grow at a steady pace with a 3% employment expansion in August. 2018 to August 2019.
- In the second quarter of 2019, the average rent in the Inland Empire was $ 1,390 / month, an increase of 3.8% year-over-year. Notably, rents are the most expensive in the submarkets closest to Los Angeles County, where vacancy rates are also lowest, indicating higher demand, likely from commuters who are traveling. go to the coast to work.
- Sales of existing single-family homes in the Inland Empire fell 6.4% in the first half of 2019, while they fell 7.2% statewide. The decline can in part be attributed to the sharp rise in interest rates last year and the limits on mortgage deductibility resulting from the federal law on tax cuts and employment. The good news is that the 2018 interest rate surge has been largely erased and today’s rate cut is expected to boost the market in the coming quarters.
- Yield curve, Schmield curve: The strong correlation of this data with the onset of a recession is traditionally due to the Fed’s hike in short-term interest rates to calm an overheating economy. The inverted yield curve is like the skid marks left after trying to avoid stepping over a cliff. But in this case, the United States is not facing a cliff. The national economy is stable and expansion will continue.
The 10th annual Inland Empire Economic Forecast Conference will be held on November 6 at the Riverside Convention Center in Riverside, California. In addition to forecasts for the nation, state and region, the event includes an in-depth discussion with renowned housing policy experts Dr Paavo Monkkonen and Steve PonTell on the intensifying housing affordability crisis. housing in California and possible policy prescriptions to address the lack of housing construction in the state. .