Inland Empire:

2021 Economic Recovery Will be Unique, Just Like Local Region

Aided by its unique geography and period in history, the Inland Empire’s economy will outrun other regions in 2021 as jobs are added, businesses reopen or start for the first time, and households and workers continue recovering from last year’s COVID-19 recession.

That’s according to the most recent forecast and trends presented on San Bernardino and Riverside counties by Chapman University and UC Riverside. These experts’ opinions spotlight intriguing viewpoints and projections so your credit union can plan appropriately.

Chapman University
Presented on Jan. 26 by the A. Gary Anderson Center for Economic Research (“2021 Inland Empire Economic Forecast”) — an event hosted by Orco Block and Hardscape:

The 43,000 non-farm company payroll jobs that the Inland Empire’s economy will add in 2021 is nothing compared to the 104,000 positions lost in 2020 — but it’s a solid start. By late 2020, the region’s economy was already adding thousands of new jobs as its recovery from the COVID-19 recession earlier in that year kept plodding along. However, the region’s 2020 jobs market will still go down in history as employing 1.44 million workers, a major decline (-7 percent) from the 1.54 million local individuals with jobs in late 2019. Total non-farm payroll employment in the region will climb from 1.44 million workers in 2020 to 1.48 million workers by late 2021 — a 3 percent increase, yet still a far cry from 2019’s figure. The Inland Empire’s difficulty in climbing out of the COVID-19 recession from spring of 2020 to late 2021 is actually not as tough as other regions (Orange County and Los Angeles County) due to those regions’ much heavier concentration of jobs in the leisure, hospitality, tourism, entertainment, and accommodation industries.

Inland Empire industries that will recover the fastest in 2021 (annual growth rates) due to their significant downfall in 2020 (and their local robust activity before COVID-19 arrived) are as follows: mining/natural resources (9 percent), leisure/hospitality (8 percent), retail trade (7 percent), and construction (6 percent). Industries recovering in-the-middle in 2021 are “other” services (5 percent), trade/transportation/utilities (5 percent), wholesale trade (5 percent), professional/business services (4 percent), and transportation/warehousing (4 percent). Industries barely growing in 2021 since they weren’t as negatively impacted in 2020 are education/health services (2 percent), manufacturing (2 percent), financial activities (2 percent), information/technology (0 percent), utilities (0 percent — it gained jobs from 2019 to 2020 and won’t lose any in 2021), and federal/civilian government (0 percent since it gained jobs from 2019 to 2020 and won’t lose any in 2021).

All Inland Empire industries lost jobs in 2020 to varying degrees, but with three exceptions (and one sector hit very hard from late 2019 to late 2021). Those three exceptions actually stayed flat or added jobs — transportation/warehousing, utilities, and federal/civilian government. Also, nearly all local industries will gain jobs in 2021, a few will remain flat, and only one will lose jobs — state/local government at -4 percent. Total employment in this sector (state/local government) will go from 239,000 in 2019 to 226,000 in 2020, then even lower to 218,000 in 2021 — a significant two-year drop of -9 percent.

The Inland Empire’s current and forecasted combined/total personal income seems like an anomaly compared to local workers' job losses and what transpired in the 2020 economy. After hitting $196 million in 2019, local personal income reached a record $206 million in 2020 and will arrive at $218 million in 2021 (another new record high). The 2020 and 2021 increases are indicative of approximately 5.5 percent annualized growth for both years — not seen in a long time. This most likely points to congressional/government transfers of money to individuals through regular unemployment insurance benefits, extended and extra relief benefits, additional COVID-19 pandemic financial emergency assistance, and even direct-payment "stimulus" to all individuals/households.

Total local taxable sales in the Inland Empire will rebound by 10 percent in 2021 (surpassing $87 million) after falling -3.5 percent in 2020 (stooping to almost $79 million). For context, this total taxable sales number had hit almost $82.4 million in 2019. The specific areas under-pacing the current local economic recovery are service/fuel stations (-26 percent in 2020 versus a forecasted 9 percent in 2021) and food/drink taxable sales (-11 percent in 2020 versus 10 percent in 2021). Other taxable sales categories are as follows: general merchandise/clothing (-17 percent in 2020 versus a forecasted 14 percent in 2021); motor vehicles and parts (-1 percent in 2020 versus 13 percent in 2021); and “all other” (6 percent in 2020 versus 8 percent in 2021 — unaffected by 2020’s recession). For context, this compares to increases (or decreases) of -1 to 6 percent in 2019 for all categories (a much simpler range).

Existing sales of total/combined single-family and multi-family homes in the Inland Empire will increase 14 percent in 2021 (more than 71,000 existing properties sold) after staying flat in 2020 from the year prior (about 62,600 in 2019 and 2020). For context, this figure ranged between 62,500 to 66,800 annually from 2016 to 2019. Additionally, the median price of a single-family home in the county rose 5 percent in 2019 (reaching $378,000), 10 percent in 2020 (reaching $414,000), and is projected to increase 6 percent in 2021 (due to low inventory of housing stock, record-low interest rates, and high buyer demand) and hit $440,000. The local affordability index for single-family homes (local median worker/household income compared to the local median home price) hit “121” in 2020, slowly rising from 105 in 2018 as low interest rates remain a positive foundation for first-time and reoccurring buyers (and took on local annual price growth head-to-head). In 2021, this affordability index will most likely barely drop to 120, meaning homes will have about the same affordability due to a combination of lingering lower mortgage interest rates and worker wage growth (not home prices).

Total residential building permits in the Inland Empire will rise 16 percent in 2021 (about 16,650 new houses completed) after jumping 4 percent in 2020 (or 14,350 houses completed). For context, this figure, which includes both single-family and multi-family homes, ranged between 10,700 to 14,300 annually from 2016 to 2019. Additionally, total residential building permit value will hit $7.1 million in 2021 after stooping to $6.2 million in 2020 (and ranging between $5 million – $7.1 million annually from 2016 to 2019).

In 2017, job growth in the Inland Empire was increasing at a 4 percent rate versus 2 percent for all of California — and this growth differential narrowed over the past few years. By the end of 2019, job growth was nearly equal as the Inland Empire slowed down to California’s annual pace. Then the COVID-19 pandemic hit the economy and job growth nosedived in both the Inland Empire and California. But the decline of -11.3 percent annually in the Inland Empire was not quite as steep as California’s -12.1 percent. Also, the crash was steeper in other major counties and metropolitan areas of the state compared to the Inland Empire due to the local region’s relatively healthier/faster economic “drive” coming out of 2019.

The steeper job declines outside the Inland Empire cannot be explained on the basis of the local region’s low share of leisure and hospitality workers. In fact, the Inland Empire’s share of jobs in this severely impacted sector is roughly the same as California (11.5 percent of total non-farm payroll jobs). The structure of the Inland Empire’s economy explains its greater resilience during the COVID-19 crash. An example of this can be seen in wholesale trade jobs (transportation/warehousing and logistics). The share of these jobs in the Inland Empire of 5 percent is only marginally higher than California’s 4 percent. However, the drop in wholesale trade jobs was significantly lower in the Inland Empire in 2020 when the COVID-19 recession hit the hardest.

Because of the Inland Empire’s economic structure and composition of jobs across different sectors of the local economy, its recovery will outpace California and the entire nation. Total non-farm payroll job growth in the Inland Empire will increase in 2021 at 3 percent, about a half-percent higher than California and the United States. By the fourth quarter 2021, the total number of jobs in the Inland Empire will be lower by only 3 percent as compared to before COVID-19 hit the economy in March 2020 (as opposed to 5 percent lower for California). One factor out of several is that the residential construction industry in the Inland Empire (seeing a sharp 16 percent “pickup” in building permit activity). “Local affordability” will also be key to the local housing market since it’s projected that the local median family income will be 26 percent higher than what’s required to purchase a home in early 2021 (but the gap will narrow toward the end of 2021 as prices continue rising and mortgage interest rates probably edge slightly higher).

UC Riverside
Presented and released between early December 2020 and late January 2021 by the Center for Economic Forecasting and Development (hosted by the Inland Empire Regional Chamber of Commerce):

As the Inland Empire’s economy outpaces the recovery of other metropolitan regions across the state in 2021, its unemployment rate will fall to somewhere between 5 to 6.5 percent by year’s end. Currently the region’s unemployment rate is somewhere between 8.5 – 9.2 percent. As unemployment steadily drops, the local labor force (pool of individuals willing and able to work) will rise, which will keep the unemployment rate from falling even faster as workers “rejoin” the labor market.

You can view the entire Inland Empire forecast. Make sure to click here to see the archived video online (“2021 Inland Empire Economic Outlook: How Long Until Normal?”)

You can also see more Inland Empire trends coming out of late 2020 and going into 2021. Make sure to click here to see the “Inland Empire Regional Intelligence Report (Winter 2020/2021),” which includes trends in employment and wages, industry jobs and businesses, COVID-19 and business activity, sales tax receipts by category, residential real estate, new home building, and commercial real estate.

Additionally, business activity trends in the Inland Empire are key to understanding what may be in store for 2021. Please click here to see the “Inland Empire Business Activity Index (December 2020),” which includes the latest commentary on the Inland Empire Business Activity Index (performance of local business activity, employment, economic output, income, real estate, and other economic indicators).

Caltrans’ County-Level Economic Forecast
Released in December 2020 by Caltrans (the California Department of Transportation):

You can view Caltrans’ economic, demographic, housing, population, job, inflation, and industry breakdown forecasts for each county. Click on the following to view local trends and projections from 2021 – 2025: San Bernardino County and Riverside County. Or you can click here to view any county in California.

Inland Empire Small Business Activity
Updated routinely by Homebase, a provider of real-time digital tools for small businesses:

Small business activity across the greater Southern California region (including San Bernardino and Riverside counties) was down at varying amounts compared to pre-COVID levels as of mid-December 2020. Activity was down -28 to -32 percent depending on the measurement analyzed. In contrast, the region was down between -59 to -73 percent in April 2020 before starting to recover. Measurements include the volume of hours worked by employees, the number of businesses open, and the number of employees actually working. You can click here to learn more and pick your region.

Inland Empire: Demographics, Labor, Education & Economic Resources

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