The Inland Empire is leading California in job creation

California is outperforming the nation in job growth, and the state’s inland regions are leading the way, according to the latest UCLA Anderson Forecast.

In a turnaround from the norm, the report shows that the Inland Empire, San Joaquin Valley and Sacramento are outpacing some of California’s tech-heavy regions, which traditionally see the bigger job gains. And that’s not necessarily a bad thing, according to the report.

More balanced growth

“Growth is now more balanced and the diversification of employment makes the state less vulnerable to one sector imploding,” the report said. “To be sure, if tech imploded as in 2001, it would be a serious blow to the state, but unlike 2001, the more balanced growth of today would focus the pain in one region rather than more generally.”

California employment hit an all-time high in January with more than 16 million nonfarm payroll jobs, the forecast said. That was 9.9 percent higher than the state’s pre-recession peak and 20.2 percent higher than at the depth of the last recession.

The biggest job creator

The study’s charts show that the Inland Empire is the state’s biggest job creator.

In December, the two-county region posted year-over-year job growth of 3.4 percent. The Silicon Valley grew by 2.2 percent during the same period, followed by the Sacramento Delta (2 percent), San Francisco (1.9 percent) and the San Joaquin Valley (1.7 percent). The nation’s job growth was 1.5 percent.

Orange County also expanded its payrolls by 1.5 percent and Los Angeles County ranked second to the bottom on the list with a gain of just 1.2 percent. All of those numbers are subject to revision, however, when new figures are released Wednesday from the state Employment Development Department.

California’s biggest employment gains have come in health care and social services, as well as leisure and hospitality. Technology and administrative services, which in past combined to be a major contributor to job growth, have now become only minor ones, the report said. And temporary workers are no longer being added in significant numbers, adding further confirmation that job markets are tight.

Why the shift occurred

Jerry Nickelsburg, director and senior economist for the Anderson Forecast, explained the shift in job creation:

“Back in 2008, we characterized the California economy as a bifurcated economy, where the coastal economy was beginning to grow and grew rapidly, leading the U.S. in the recovery,” he said. “The inland parts of the state were mired in recession for a very long time.”

The latest report shows that California is “in a time of convergence,” according to Nickelsburg.

“The inland parts of the state are growing more rapidly and are leading the state to outperform the U.S. economy,” he said. “The fact that the inland parts of the state are growing faster than most coastal regions suggests that the inland areas have room to continue to grow.”

The report ties the turnaround in job creation to a number of factors. San Francisco’s job growth has been hampered by the high cost of housing and limited office space, the study said, while a similar trend has been seen in the Silicon Valley, although to a lesser extent. The North Bay region of the San Francisco area has likewise been impacted by devastating wildfires. All of those areas are technology centers which typically fuel some of California’s stronger employment growth.

Playing catch-up

Nickelsburg said it’s largely a matter of playing catch-up after the last recession.

“The Inland Empire lost a lot of jobs in manufacturing and housing,” he said. “Manufacturing is not rebounding, but we’re seeing continued growth in construction, and housing is a big part of that.”

Inland Empire economist John Husing said much of the region’s construction activity involves the building of roadways, other transportation projects and massive e-commerce centers.

“Almost all of the e-commerce centers in Southern California have been built out here because they are big and require a lot of land,” he said. “Amazon has more than 16,000 employees in the Inland Empire. They have 10 e-commerce centers out here now and they’re in the process of building two more.”

Husing said the region’s logistics sector — which includes wholesale trade, transportation and warehousing — is the Inland Empire’s biggest job creator.

“About 20 percent of all our direct job gains have been in logistics,” he said. “And that doesn’t include the multipliers. When someone works for Amazon, they go to places like Stater Bros., so some of the jobs at Stater Bros. are indirectly supported by Amazon. And there are also commercial laundry companies where workers pick up their uniforms. All of that brings more money and jobs into the region.”

Future growth

The forecast predicts that California’s employment base will expand by 2.2 percent this year, 1.7 percent in 2019 and 0.9 percent in 2020. Home building is expected to accelerate to about 138,000 units per year by the end of 2020.

The study additionally notes that the ongoing increase in the federal deficit will put pressure on international trade, increasing the likelihood of trade actions that would depress California’s logistics and export industries.

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