Central Valley:

Economy Growing, but Local Issues Weigh on Leaders’ Minds

The Central Valley economy remains in growth mode and no recession is in sight. However, the Coronavirus pandemic is raising fears of a slowdown and adding to the local issues the region already deals with — agricultural fluctuations, commodity prices, water-supply issues, and global trade tension.

That’s according to the most recent forecast presented and published by experts from the Craig School of Business at Fresno State University (Cal State Fresno). The keynote speaker’s opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Central Valley
Released Feb. 20 in the 2020 Central California Business Review: Emerging Trends in Central California's Economy report:

Consumer sentiment in the Central Valley is generally positive, with more than 70 percent of respondents indicating they are the same or better off financially compared to one year ago. Of those surveyed, 46 percent anticipate their household income will increase in the next year. Consumers anticipate an increase in income of 3 percent for the coming year. About 24 percent of respondents expect their working wages/income to increase more than prices over the next year, and 31 percent expect their working wages/income will increase about the same as prices. A large majority of respondents expect that regional business conditions will improve (32 percent) or stay the same over the next year (55 percent). Compared to national data, regional respondents are less positive about the improvements in their current personal finances and economic conditions compared to the past year, but they are more optimistic regarding the future.

The Central Valley’s latest “Fall 2019 Overall Real Estate Sentiment Index” shows a slight improvement in current and future expectations relative to last year’s performance. All real estate sectors follow similar increasing current sentiment expectations, yet future expectations are still lower. Once again, growing concerns over the national and state economies may be blighting future expectations. The agricultural sector has been a “hot” topic in the last few years with news of the potential impact of the Sustainable Groundwater Management Act.

Central Valley banks and credit unions (combined) have slowed down since last year’s impressive 20.2 percent loan growth, with loan growth of only 5.5 percent for the year ending Sept. 30, 2019. Loan growth decreased from last year in every segment, with the worst performing category (residential lending) growing at a negative 8.6 percent. Central Valley banks’ loan growth decreased from 22.8 percent last year to 5.9 percent this year, while their peers in the San Francisco FDIC Region (Federal Deposit Insurance Corp.) and nationwide continue to experience negative growth. Central Valley credit unions’ loan growth decreased from 7.8 percent last year to 3.3 percent this year, driven by negative growth in vehicle loans (negative 1.3 percent), which represent 53 percent of all Central Valley credit union loans. Commercial real estate continued as the largest segment for Central Valley banks at 40.6 percent of all loans, and commercial loan volume decreased significantly from the last two years. Trade uncertainty, the unresolved “Brexit” issue, simmering geo-political issues, and a dysfunctional government all remain risks to the economy and are likely to make it more challenging for Central Valley banks and credit unions to return to the impressive growth rates they have seen in the recent past.

Over the past 60 years, the level of groundwater in the San Joaquin Valley has dropped 60 feet on average as aquifers have been drawn down for agricultural irrigation and public water supplies. The San Joaquin Valley’s water system infrastructure is currently being stressed by “aging facilities, climate change, and the Sustainable Groundwater Management Act (SGMA),” the forecast report states. It is estimated that SGMA compliance, without alternative water supply sources, will result in a water deficiency that will remove 20 percent of the valley’s agricultural land (1 million acres) from production and result in $6 billion in lost farm revenue. Fresno State University researchers have been working with stakeholders in the San Joaquin Valley to identify alternative financing strategies for a regionally coordinated, local funding source to finance the repair, expansion, and modernization of the water system infrastructure and propose a Water Resilience Investment Special Tax.

Recent figures show that the Fresno metropolitan area leads Central California in exports, with a 43 percent share. Of the 50 states, California ranked No. 1 in imports and No. 2 in exports in 2018. The Madera metropolitan area has increased exports 167 percent over the past eight years. Approximately 95 percent of companies exporting goods from California are small and medium-sized exporters with fewer than 500 employees.

In the Central Valley, visitors spent $4.5 billion on hospitality and tourism, supported 46,600 jobs, and contributed $258 million in state and local tax revenue in 2018. While the Central Valley’s tourism revenue has experienced both negative and positive growth rates over the past six years, year-over-year growth was nearly 9 percent in 2017, and in 2018 it was 7.5 percent. More than 6 million people visited the three national parks in or near the six-county region, spending nearly $650 million in 2018. The Fresno-Yosemite International Airport experienced a record number of travelers in 2018, serving 1.7 million passengers.

Fresno has the third-highest number of homes in California with rooftop solar panels. California reached a milestone of 1 million installed solar systems in 2019 and accounts for nearly half of all solar installations in the United States. A solar panels/lithium-ion batteries complex — to be located in Kern County — was recently approved by the Los Angeles Department of Water and Power. The project would meet 6 – 7 percent of Los Angeles’s annual electricity needs. California has the largest number of commercial solar customers in the nation. The low cost of reliable solar energy storage systems (batteries) in the long-term will secure a more flexible and adjustable energy supply and has the potential to mitigate high peak-time demand charges.

You can read more. View all the latest Central Valley economic trends in the 2020 Central California Business Review: Emerging Trends in Central California's Economy report by clicking here.

Allen Matkins/UCLA Anderson Forecast
View the latest Allen Matkins/UCLA Anderson Forecast Commercial Real Estate Survey for trends and projections across all local California commercial real estate markets (office, industrial, retail, and multi-family apartments).

Local Home Affordability Vs. Job Growth
The National Association of Realtors recently released a study (“Home Affordability Index Ranking and Payroll Job Growth") showing trends in how local housing affordability can contribute to slower local job growth by employers. View the data table for local metropolitan information in California.

Local Migration and Population Change’s Impact
Within one of Harvard University Joint Center for Housing Studies' latest research endeavors — "Losing Residents but Still Growing” — you can understand how the components of population change differ by county, as well as exactly how each community is evolving and where people are drawn to when they move. As the county-by-county map shows, many large central metro counties are attracting numerous international migrants, while many nearby suburban areas (referred to as “large fringe metros”) are attracting sizable numbers of domestic migrants. Counties in many high-cost metropolitan areas are losing more domestic migrants than they are gaining. Indeed, of the 100 most populous US metros, four of the five with the highest rates of renter cost burdens also have negative domestic migration.

Local County-Level Perspectives
The California Department of Transportation (Caltrans) has released its updated 2019 – 2050 demographic forecast for all counties in California regarding local jobs, wages, home prices, population, personal income, taxable sales, net migration, wildfire issues, public policy implications, legal cannabis, industries, workforce, and more. For forecasting purposes, the shorter-term economic projections for 2019 – 2024 within this annual county-wide report by Caltrans do not factor in an economic recession into its local scenarios. They are only highlights stemming from a baseline projection (view the report above for more information).

Central Valley Occupational/Industry Trends
Additionally, download Chmura Economics and Analytics’ latest Central Valley Economic Overview to see 10-year future trends in worker occupations, employment, wages, cost of living, and industries.

Your Local Region’s GDP: 2001 - 2018
The U.S. Bureau of Economic Analysis has released an overview and history on "Local Area Gross Domestic Product from 2001 - 2018" for individual counties in California and the entire nation. It includes highlights and trend breakdowns for large, medium and small-population size counties, as well as the U.S. dollar size of economies for each county. Tables and files are included for download and review.

Latest CA Population and Demographic Trends
The California Department of Finance has released its latest news — "State's Population Increases by 141,300 While Rate of Growth Continues to Decline" regarding 2018 to 2019 population growth, which includes highlights and snapshot trends of each county and region across the state. (You can also download the long-term 2010 to 2019 demographic tables by clicking here). Also, the department's deeper demographic breakdown (age, race, income, employment, poverty, health care, education, and social/housing characteristics) — courtesy of the American Community Survey by the U.S. Census Bureau — can be found by clicking here.

County Income and Poverty Estimates
The U.S. Census Bureau has released its "Small Area Income and Poverty Estimates (SAIPE) Program", which gives single-year estimates of income and poverty for all counties in California and the entire nation — as well as estimates of school-age children in poverty for all 13,000-plus school districts.

Demographic Profile and Projections: Central Valley*

  • Total population: 4.2 million (and will hit 4.7 million by 2025).
  • Working-age individuals (15 - 64 years old): 64 percent of total population in 2015 (and will fall to 63 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 1.87 million out of 3.24 million adult population.
  • Labor force participation rate (adults who “want” to work): 58 percent (or 1.87 million individuals).
  • Unemployment rate: 7.1 percent (versus 3.9 in CA and 3.5 in U.S.)
  • Unemployed workers: 128,300.
  • Median household income: $53,400 as of 2019 (compared to $71,800 for CA and $60,400 for U.S.)
  • Poverty rate: 23 percent (versus 15 in CA and 13 in U.S.)
  • Education of population: 17 percent have a college degree; 31 percent some college; 28 percent high school diploma; and 24 percent no high school diploma.
  • Employment sector growth: click the following links for local future growth breakdowns (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance in the counties of Kern, Tulare, Kings, Fresno, Madera, Merced, Stanislaus, and San Joaquin.
  • * The combined eight counties of Kern, Tulare, Kings, Fresno, Madera, Merced, Stanislaus, and San Joaquin
  • ** Data as of January 2020 from the California Center for Jobs and the Economy; California Employment Development Department; California Department of Finance; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; and U.S. Census Bureau

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