Inland Empire’s economy will brighten slowly, forecast says

The Inland Empire has made some big job gains during the last year, but forecasters expect it will lag behind the broader California recovery, with an unemployment rate in the double digits through 2014.

The hard-hit area made up of Riverside and San Bernardino counties is expected to see its jobless rate fall to 10.6% in 2014 — above the 8.5% projected for the state as a whole, according to a report from Claremont McKenna College and UCLA released Tuesday.

There are some upbeat signs, according to the report. The rumblings of a housing recovery and an upswing in job gains from the professional and business services sector are helping fuel the regional economy.


“It’s going to be slow,” said Marc Weidenmier, director of the Lowe Institute of Political Economy at Claremont McKenna. “What happened out here was really bad, but the job growth has been coming.”

The Inland Empire is still 122,000 jobs below its 2006 peak employment level of 1.28 million. The unemployment rate is 12.3%, though the forecast projects it will fall to 11.4% in 2013.

A nascent housing market recovery has been one boost. Home prices in the Inland Empire rose 5.1% in the second quarter of 2012 compared with the same period a year earlier, the report said. The rise was largely driven by low inventories of properties for sale and high demand for low-priced homes to flip into rentals.

That has provided a modest boost to construction jobs, which grew by a few thousand in the last year. The area had lost almost 54,000 such jobs during the downturn.

An even brighter spot is the professional and business services sector, which has accounted for roughly two-thirds of the area’s job gains in the last year. Jobs in this sector tend to be white-collar jobs in such fields as architecture and legal services.

Meanwhile, the logistics sector, one of the five that added jobs in the last year, remains vulnerable to a sluggish global economy. The sector employs thousands in the Inland Empire, which is a major distribution hub for goods that arrive through the ports of Los Angeles and Long Beach.

“The logistics industry is central for economic development in the Inland Empire, and changes in employment here depend more on national economic developments than economic activity in Southern California,” wrote economist Manfred W. Keil, author of the Inland Empire forecast in the Claremont McKenna-UCLA report.

Although an earnest recovery is underway, its geographic distribution has been uneven. California coastal communities, bolstered by tech jobs in the Bay Area, have fared much better in the recovery than the Central Valley and Inland Empire have.

In the Riverside-San Bernardino area, cities bordering Los Angeles, Orange and San Diego counties tended to have lower unemployment rates, the economists found. That doesn’t necessarily mean more work is available in those cities, however: Many residents of cities such as Chino and Temecula probably commute to jobs in the neighboring counties.

In some cases, the jobless rates of more-inland cities were 5 percentage points higher than those of cities hugging the area’s western and southern borders. Inland cities bucking that trend by posting lower unemployment rates have other advantages, the economists concluded: higher median income levels and better high school graduation rates.

“Since there is nothing that a city can do about its location, our policy recommendation for cities that wish to improve their employment situation” is to invest in education and try to attract businesses that generate higher household incomes, Keil wrote.

The prospect of a new medical school at UC Riverside, Weidenmier said, could attract pharmaceutical companies and generate high-paying jobs in that field.

The forecast also estimates that the region’s gross domestic product growth was an anemic 1.2% in 2011 — the first positive reading in five years. (The government’s most recent GDP figures for the Inland Empire are for 2010.) Economists predict it will improve to 1.7% by the end of this year and jump to 3.3% in 2013.