Not So Down in the Valley

For years, California’s San Joaquin Valley has been the hard-luck center of the Golden State.

While Northern and Southern California prospered through the 1990s, the state’s sprawling agricultural middle was beset by chronic unemployment, alarming teenage pregnancy rates and bad air. Before that, its backwater image was the butt of countless Johnny Carson jokes.

Although many economic and social woes persist, folks in Central California finally have at least one statistic pointing in the right direction: Their region is showing employment growth.

In the last two years, nonfarm payrolls have risen 2.7%, while the Bay Area and Southern California have failed to add a single net new job.

The upturn is being fed by cheap land and low interest rates. These have triggered a development spree that is drawing young families, retirees, retailers and manufacturers alike, all searching for a more affordable slice of the California dream.

“We’ve been in a growth spurt while the rest of California has been faltering,” said Dave Spaur, president and chief executive of the Fresno County Economic Development Corp.

To be sure, Central California’s employment growth comes with plenty of caveats.

One reason the region’s numbers look so good is because they look so awful most everywhere else. The eight-county San Joaquin Valley, which stretches more than 200 miles from Bakersfield to Stockton, was largely bypassed by the technology boom. But that means it has been insulated from the bust as well.

Meanwhile, many of the jobs being created are low-paying positions in big-box stores, warehouses and construction sites. What’s more, in a farming area where the jobless rate routinely stands in double digits -- last year it ranged from 9.9% to 15.1% -- employment had nowhere to go but up.

Although thrilled to be creating jobs, officials acknowledge that their region’s recent solid nonfarm payroll performance says more about the temporary weakness of its neighbors than the San Joaquin Valley’s long-term strengths or competitive advantages. The big issue is how to build an economy for the 21st century in a region where about one-third of adults lack a high school education.

“We have been the beneficiaries of the downturn,” said Pete Weber, a member of a group of Fresno business and civic leaders working to bring more economic diversity to California’s top agricultural county. “We picked up some of those jobs because of our low costs. But we need to move up the value chain if we’re really going to prosper.”

Still, any job growth is welcome when the state and nation are struggling to create employment. And at the moment, much of it is coming from second-tier regions such as the San Joaquin Valley, said Perry Wong, senior research economist at the Milken Institute.

The Santa Monica-based economic think tank annually compiles a ranking of the nation’s 200 best-performing metropolitan areas based largely on growth in jobs and income. Last year’s list was dominated by medium-size cities, from Fayetteville, Ark., to Anchorage, Alaska, that racked up gains in unsexy sectors such as retail, construction and services.

Stockton, Fresno and Bakersfield all placed in the top 50, well ahead of former technology hotbeds such as San Francisco and San Jose.

“These middle-of-the-road-type American towns are all of a sudden looking pretty good,” Wong said. “They’re experiencing some internal growth as well as attracting new people.”

Indeed, Central California is one of the fastest-growing regions of the state, with cities such as Bakersfield adding residents at nearly twice the statewide growth rate.

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Housing an Attraction

Much of the draw is affordable housing. Priced out of much of Southern California, the Bay Area and coastal communities, people are heading for the San Joaquin Valley, where the median home price of $169,500 is about half the statewide figure.

Some are retirees who have traded that aging split-level ranch house for spacious new digs on a golf course. Others are commuters willing to make the drive south to Los Angeles or west to the Bay Area in exchange for more square footage and a proper backyard for the barbecue grill. Still others just want to escape the congestion and hassle of big-city living.

Nancy Lerma returned to the San Joaquin Valley six years ago to rediscover the slower, smaller and friendlier California that she knew as a girl. A native of Bakersfield, she fled that city to attend college in Long Beach, with no intention of returning. She and her husband, Ron, a self-employed computer broker, lived for years in an 800-square-foot cottage in Huntington Beach, enjoying the good life in Southern California.

Three children altered the equation. The once-cozy beach house became cramped, and the family wound up in a sterile rental in Costa Mesa. Ron’s job kept him working 12 hours a day, while Nancy ran herself ragged caring for the children and chauffeuring them to activities through hellish traffic. The Lermas didn’t know their neighbors. They rarely sat down for a meal together.

“We knew this wasn’t quality family life,” said Nancy, now 42. “We had to make a change.”

After considering a number of places, the family chose Bakersfield, where Nancy’s parents still live. There they bought a 3,700-square-foot Craftsman-style bungalow for $169,000 that has since doubled in value. The couple had a fourth child and have felt secure letting their brood roam their leafy neighborhood to play. Ron has found time to help with the kids in the morning and still make it home for dinner most nights from his office just 10 minutes away. The couple cook and entertain again just as in the old days at the beach house -- only without the beach.

“I have zero regrets,” Nancy said. “Even the 100-degree summers don’t bother me. You just jump in the pool at 6 p.m. and make dinner in your bathing suit. We live in a resort.”

Not everyone would characterize Bakersfield in such charitable terms. Still, the area clearly is winning converts.

Kern County last year logged more than 5,500 housing starts. That’s as many as Orange County and double what builders around Bakersfield were doing five years ago. In fact, the San Joaquin Valley is constructing more new housing in the state than any other place outside Southern California, according to the Construction Industry Research Board.

All that hammering has yielded a windfall of hard-hat jobs. Construction employment in Kern County is up a sizzling 11.6% in the last two years, and the gains are solid throughout the valley.

“They can’t build them fast enough,” said Bakersfield developer Lee Jamieson. “We’re maxed out until we get more skilled labor. It’s growing so fast it’s hard to keep up.”

Jamieson, who has developed shopping centers in the area, said Bakersfield’s fast-growing population has made it easier for him and others to attract major retailers to their projects. Wal-Mart Stores Inc., Target Corp. and others have beefed up their presence, while new players such as Kohl’s Corp. are entering the market. National restaurant chains such as Chili’s, Red Lobster, Macaroni Grill and Krispy Kreme Doughnuts Inc. have jumped in as well.

“I used to have to beg them to come take a look or even think about Bakersfield,” Jamieson said. “Not anymore.”

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Low Cost, Big Business

Mark Evenson, founder of Baja Broiler Inc. and its Chuy’s Mesquite Broilers restaurant chain, which boasts 41 locations in California, Arizona and Nevada, is busy planning his third Bakersfield location. He said his newest store on the northwest side of town, which opened a little more than a year ago, is the biggest-volume restaurant in the chain.

That might seem surprising in a region where the median household income, at slightly less than $37,000, is 22% below that statewide and 12% less than the national median. But while surveying a Bakersfield crowd bellying up to the counter on a recent evening for tri-tip sandwiches and fish tacos, Evenson said what he cares about is disposable income.

“It’s all cost of living,” he said. “These people have money in their pockets because it’s not all going for housing, and they’re spending some of it here.”

Other statistics challenge convention as well. At a time when California has shed hundreds of thousands of factory jobs, manufacturing employment has risen in the last two years in the Fresno and Modesto metropolitan areas. Experts credit cheap land, low wages and a pro-growth business climate for attracting defectors from elsewhere in the state. Executives at Pelco, Fresno County’s largest manufacturing employer, point to a dedicated workforce and central location as well.

Pelco, a manufacturer of video security systems, has added a couple of hundred workers in recent years and now employs about 1,500 at its sprawling campus-like facility in Clovis, northeast of Fresno.

While competitors have increasingly moved their production to Asia, Pelco has concentrated on customer service, rapid repair and fast delivery -- aims that have been helped by the region’s growing logistics infrastructure.

United Parcel Service Inc.’s distribution center in nearby Visalia is the only location on the West Coast from which the company can guarantee one-day ground delivery to virtually anywhere in California and parts of Nevada. Plans are in the works for a new air cargo park at Fresno Yosemite International Airport. Target, IKEA, Gap Inc. and others have built distribution facilities in the San Joaquin Valley.

“We’re halfway between lost and found,” quipped Pelco Vice President Ron Cadle, describing Fresno’s convenient perch in the middle of California.

Whether Central California can stay on the economic development map remains to be seen. One factor is that agricultural employers -- though still hugely important in the valley -- are cutting jobs, according to state data. That’s because of mechanization and foreign competition.

Officials in Fresno are particularly attuned to their region’s challenges. Business and community leaders there formed a task force to assess their city’s budget problems and their area’s economic vulnerabilities. The report, released last year, concluded that Fresno had to evolve beyond its present role as a low-cost, low-wage center if it hoped to boost living standards and bring down an unemployment rate seemingly stuck in double digits.

To that end, hundreds of public- and private-sector leaders are involved in the Fresno Regional Jobs Initiative. In the short term, the effort seeks to create as many as 30,000 jobs in the next five years paying average salaries of $29,500 a year. In the long run, the goal is to boost educational achievement and create a diversified, more knowledge-based economy by nurturing existing but underdeveloped industries such as healthcare, logistics, water technology and tourism.

The industry cluster strategy has been used successfully in other places such as Phoenix.

San Joaquin Valley policymakers know that the area’s current role as job growth leader is fleeting -- and that a new path is needed if their area hopes to keep pace with the rest of California.

“We missed the last boom,” said Ashley Swearingen, executive director of the Central California Futures Institute, a public policy and research organization active in the jobs initiative. “We’re not going to miss the next one.”