More diversified employment base needed in IE

The Inland Empire’s emergence as a global supply chain hub has been one of its greatest strengths over the past five years, but shifts in consumption patterns post-pandemic will challenge the two-county region to further diversify its employment base, according to a new economic report.

The report, released Thursday by the Southern California Association of Governments (SCAG) as part of its 14th Annual Southern California Economic Summit, notes that 45 percent of annual job growth in Riverside and San Bernardino counties from 2018-2022 was in the transportation and warehousing sector. Those 16,200 new logistics industry jobs each year were the main reason the Inland Empire led the six-county SCAG region’s post-COVID labor market recovery.

But employment levels peaked in late 2022 as consumption patterns shifted from goods to services, which, combined with a rebalancing of the labor force, will likely result in a modest increase in these two counties' unemployment rate in 2024.

Dr. Manfred Keil, Chief Economist for the Inland Empire Economic Partnership, who prepared the IE analysis for SCAG, said continued job growth in healthcare, public administration and professional, scientific and technical services will be a mitigating factor over the near term, particularly in the event of a mild recession or no recession.

“The long-term outlook for the Inland Empire is less obvious,” Keil said. “The region has a relatively large number of residents but when measured by per capita gross domestic product, it ranks near the bottom of U.S. metropolitan areas. The region has a chicken-and-egg problem: To attract higher value-added industries, it must make a significant investment in human capital. But it needs to retain newly minted graduates with both jobs and attractive communities to entice them to stay in the region. Without it, trends toward higher educational qualification requirements will likely lead to job vacancies that cannot be filled due to the lack of qualified workers, resulting in further automation.”

Another challenge facing the Inland Empire is a leveling of the labor force, which peaked in December 2022 at 2.2 million and has shrunk by close to 37,000 since then. This contrasts with the Inland Empire’s three decades of rapid population gain and labor force growth – a big contributor to economic growth during that time.

Keil is part of an Economic Roundtable convened by the SCAG to provide both a snapshot of the region now as well as a preview of economic opportunities and challenges ahead. Their research was compiled in a report that offered a mostly optimistic forecast for the coming year, though cautioned that continued inflation and high interest rates will likely slow the rate of growth during the second half of 2024.

“Southern California has remained resilient, despite global economic pressures that have threatened a recession for more than a year,” said Gigi Moreno, SCAG Senior Economist. “Most of our key industries are performing significantly above pre-pandemic levels, and with the resolution of labor disputes at the ports and in Hollywood, we’re going to enter the new year with economic momentum.”

Among the industry sectors that continue to grow across the six-county SCAG region, hospitality and tourism, arts and entertainment and healthcare stand out. Advanced manufacturing, software development and scientific and technical consulting also are on a steady growth path.

Click here for the complete Southern California Economic Update.