Economic challenges lay ahead for the Inland Empire, with its primary growth drivers — construction, logistics and manufacturing — still in a slump, though some bright spots are popping up on the region’s horizon, according to a veteran economist.
In his quarterly economic forecast, Redlands-based John Husing, who has been studying the region for more than four decades, noted that more affordable housing in Riverside and San Bernardino counties has taken some of the slack out of inventories.
In Riverside County, sales of new and existing homes declined by double digits between the third quarters of 2009 and 2010. However, Husing pointed out that 64 percent of area families can now afford to purchase a median-priced property, compared to only 15 percent three years ago.
The median price of an existing home is $199,000 and $270,000 for a new one.
“The fact that the Inland Empire’s home prices have roughly stabilized indicates that near record affordability has provided sufficient demand to offset supply, despite the fear still in the market,” Husing wrote.
Construction, logistics and manufacturing traditionally comprise roughly 80 percent of the Inland region’s job creation. Husing said that while the construction and manufacturing sectors continued to shrink over the last year, logistics perked up, adding 3,100 jobs thanks to “rising strength at the ports” of Los Angeles and Long Beach, where import/export activity increased.
Health care providers, leisure and hospitality, the technology and defense industries also boosted hiring — modestly — throughout Riverside and San Bernardino counties in 2010, according to the economist.
Husing said the construction and manufacturing sectors are at a disadvantage in California because of the ever-tightening regulatory noose. He highlighted the California Environmental Quality Act, automatic family leave and overtime mandates as examples.
“California’s legal environment creates an untenable situation,” Husing wrote. “It seeks to discourage jobs in `dirty’ sectors … for the sake of public health.”
The economist spotlighted additional burdens on businesses, such as utility costs. California has the fourth-highest energy rates in the nation, averaging 12.4 cents per kilowatt hour. By comparison, Texas’ rates average 6.1 cents per KWH.
According to Husing, energy costs and other disincentives drove 2,565 businesses out of California between 2007 and last year.
“Approximately 109,000 jobs left with these employers,” he said.
According to Husing, although the combined unemployment rate for Riverside and San Bernardino counties remains stubbornly high, around 14 percent, the labor market was nearing balance by the end of 2010.
He predicted an “end of the down cycle,” but cautioned that “several years of upward growth (are) needed to restore the job losses of the past three years.”
The economic report was sponsored by the Ontario-based commercial real estate brokerage Lee & Associates, the Western Riverside Council of Governments and the Inland Empire Economic Partnership.