Keeping An Eye On The IE

It sometimes seems like the Inland Empire is the Rodney Dangerfield economy—it just doesn’t get any respect. It’s tough being the blue collar sibling to the gigantic Los Angeles economy and the glitzy resorts of Orange County. But given the region’s ascendency as an economic engine, that will likely change. The fact is the Inland Empire is one of the fastest growing, most dynamic large economies in the United States—a truth that is too often missed in the media. But anyone thinking about the future of Southern California needs to look east to get a full picture of where things are heading.

Disclosure: One of the newest hats I wear is as Director of the new Center for Economic Forecasting and Development housed at UC Riverside’s School of Business. By definition this role means I spend a lot of time thinking about the economy that sprawls across Riverside and San Bernardino Counties. But my interest in the area started many years ago when Beacon Economics was just beginning. One of the first forecast conferences we ever hosted was in the Inland Empire, in 2007, on the eve of the ‘Great Recession’ and during a time when the region was already sliding into a terrible downturn.

The news at that first event was grim, but what I said then—and continue to say—is that the Inland Empire’s economy is much larger than the housing market, and ultimately the long-run prospects for growth remained strong. It was a matter of working through those bad years. Now, almost a decade later and the region has proven its mettle.

How big is the economy? Consider a few stats. As of July 2016, there were 1.85 million employed residents in the Inland Empire (U.S. Bureau of Labor Statistics household estimate). This makes the region the 16th largest MSA in the nation, just smaller than Seattle and larger than San Diego, Denver or Minneapolis. By itself it has a larger workforce than 23 states including Kentucky, Oklahoma, and Nevada.

The Inland Empire still has aspects of being a bedroom community to the coastal economies it borders. A significant portion of the population, almost 20%, is employed outside the region—filling the highways going south and west in the morning commute. But even with this daily exodus the local job market is very large. Almost 1.37 million payroll workers are employed in Riverside and San Bernardino Counties—that’s more than in San Jose, Cleveland, or Pittsburgh. And the local workforce has been averaging 3% growth per year since 2011. That is twice the national average and one of the faster growth rates in California—faster than better-known neighbors Los Angeles, San Diego, and Orange Counties.

But you’d hardly believe this description of the region given some of the press it gets. A classic example involved the closing of Ashley Furniture HomeStore’s two Inland Empire production facilities. The news wasn’t good, particularly not for the 840 workers and their families who will need to look for new sources of income. But the closing inspired an absurdly hyperbolic headline in the Los Angeles Times, “California’s Inland Empire reels after losing hundreds of blue-collar jobs” (August 29th), followed by an article that described the move as a “gigantic blow” to the region.

Seriously? Gigantic blow? The 840 jobs that will be lost from the move by Ashley Furniture represent 1/20th of 1% of all jobs in the Inland Empire—significantly smaller than even the sample error on the labor force estimate. The region has been adding over 4,000 new employed residents per month for years, five times the loss from this one company’s departure.

Of course there are the worries about manufacturing—a sector that provides decently paying jobs to blue collar workers. But in this particular region, the loss of Ashley Furniture is the exception rather than the rule. The Inland Empire has been a hot spot for new manufacturing jobs, not a place suffering from a loss of them. Over the past 5 years, employment in this sector has grown by 2.8% per year in the Inland Empire—one of the fastest paces of growth in the state. As for Wisconsin and North Carolina, locations Ashley Furniture has named as possible places the company will move their operations to, they are anything but hot manufacturing centers. Both areas have seen manufacturing jobs grow by a paltry 1% per year since 2011.

The Inland Empire has seen faster growth rates in other industries as well. The region is a well-known center of the logistics sector, but is also a hub for the wholesale trade, healthcare, and construction industries.  While many of the jobs in the Inland Empire are lower paid than the glitzy tech jobs of the San Francisco Bay Area or the professional services jobs in Orange County and Los Angeles, the region is home to some very wealthy communities. These include Temecula and Corona where the median household incomes are well above the state average. The fact is there is a little bit of everything in the Inland Empire.

And in the end, anti-growth efforts along the coast imply that the region will be one of the fastest growing locations in the state and nation over the next two decades. The California Department of Finance projects that almost 1.3 million more people will be living in the Inland Empire in two decades, roughly the same number as now lives in the entire San Francisco Bay Area. In other words, there is going to be a whole lot more of ‘a little bit of everything’ down the road.

Unfortunately, more often than not discussion and publicity about the region, such the coverage of Ashley Furniture’s departure, miss the boat completely. And this is a shame since the Inland Empire deserves credit for being as strong and dynamic an economy as it is.

The 7th annual Inland Empire Economic Forecast Conference is being held September 29th at the Riverside Convention Center.