All in all, the Inland Empire turned in a strong economic performance in 2018 as the population expanded, local job gains outpaced the state and nation, home prices jumped, and consumer spending rose, according to an analysis released today by the UC Riverside School of Business Center for Economic Forecasting and Development. Moreover, the region is expected to continue along a similar trajectory this year.
While a lack of workers has slowed both job gains and labor force growth across the state and nation, the Inland Empire’s affordability advantage over its surrounding neighbors has been a key factor in helping the region avoid much of the slowdown. In year-to-date terms, from October 2017 to October 2018, the Inland Empire’s labor force expanded by 1.2% compared to 0.4% in California as a whole. According to the new analysis, the IE accounts for over 25% of the net increase in the state’s labor force during the past year.
Worker scarcity is having an effect, however, including putting upward pressure on wages. Across the region, earnings grew by 2.8% from the first half of 2017 to the first half of 2018. This is a modest jump compared to wage growth in the state overall (4.5%) although appreciable local wage gains are expected in 2019.
“The Inland Empire has grown at a faster pace than other areas in Southern California because it enjoys both a lower cost of living and proximity to major job markets,” said Robert Kleinhenz, executive director of research at the Center for Economic Forecasting. “The wage gains we’ve been seeing are slow moving, but should continue as the job market tightens further and worker scarcity intensifies across the nation.” The bad news is that Inland Empire employers must often compete with employers elsewhere in Southern California for workers – a situation that won’t improve anytime soon, said Kleinhenz.
The Inland Empire’s affordability advantage is also expected to buffer the region’s residential real estate market from the slowdown in sales that has been occurring across Southern California as prices surge further out of reach for most buyers in coastal locations.
Despite year-to-year home price gains that, as of the 3rd quarter of 2018, have outpaced neighboring regions (7% increase in the IE, 5.6% in Los Angeles County, 4.2% in Orange County, 5.9% in state as a whole), the Inland Empire remains one of the last bastions of affordable real estate in the southern part of the state and will continue to attract buyers. And while sales of existing homes decreased in 2018, according to Kleinhenz, the region’s relative affordablity will remain a strong selling point.
The new Inland Empire Regional Intelligence Report examines employment, consumer and business spending, and residential and commercial real estate. The complete analysis is available here.