San Bernardino County

‘Untapped’ Workers on Sidelines and Lack of Housing Put Drag on Economy

There are 100,000 untapped Inland Empire residents who would boost local economic growth if they entered the job market and filled employers’ demand for workers. This issue—combined with a scarcity of homebuilding—is the biggest problem San Bernardino County’s expanding economy faces in 2020.

That’s according to the 3rd annual San Bernardino County Economic Outlook Conference hosted by the Inland Empire Regional Chamber of Commerce. The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

San Bernardino County & Inland Empire

Presented by the Center for Economic Forecasting and Development (at the UC Riverside School of Business):

  • San Bernardino County business and government leaders would do well to quell any fears of an economic “recession” and instead focus on growing the local labor force participation rate. This rate is the number of local “adults” (16 years of age and older) who are able and willing to work—about 59 percent in the Inland Empire (or 2.06 million out of 3.5 million total adults). Under this umbrella category is an even more important subset: the number of local “prime-age workers,” or those within the age range of 25 – 54. Both categories have been falling before, during and after the Great Recession of 2007 – 2009, displaying a larger demographic change taking place in the economy (baby-boomer retirements outweighing the number of new labor market entrants).

  • Putting demographic changes aside, up to 100,000 adult residents within the Inland Empire who are categorically “unemployed” have been identified as able to work and pose an economic opportunity for San Bernardino County. They might be “willing” to work with the right incentives in place, according to the forecast presentation. They should perhaps instead be defined as “untapped,” not unemployed. If they were lured into the labor force, San Bernardino County’s economy would receive a boost as local businesses would be able to generate more economic output by filling job demand. It would behoove local leaders to consider these untapped individuals and prioritize a strategy for drawing them back into the workforce as aging demographic trends continue weighing down on the economy at large.

  • The Inland Empire’s labor force growth rate is starting to perform worse over the long-term—but time will tell if this persists. The local labor force annual-average growth rates during economic expansions and recessions since the early 1990s are as follows: 3 percent (1992 – 1994); 1 percent (1995 – 1997); 3.5 percent (1996 – 2007); 0.5 percent (2008 – 2015); and 1.75 percent (2016 – 2018). Potential reasons are demographic/aging workforce trends, a mismatch of workforce skills (not enough low and middle-skilled professionals available for those jobs), and other reasons.

  • San Bernardino County’s low labor force participation (and the region’s economy) is exacerbated by a shortage of housing in the two counties—particularly “starter” homes that families can afford. As a region, the Inland Empire is building less than half the number of homes it needs to keep up with worker growth and population/family growth (as well as the entire state of California). This leaves many families renting a house or apartment, and squeezing the number of actual for-sale homes into higher demand on the marketplace. During the past few years, the “housing crisis” has been defined as an “affordability” problem, but in reality it is a housing-supply crisis, the forecast presentation argues. Local builders aren’t building enough homes for a variety of reasons (difficult to find workers, land-and-development entitlement process, local/state regulations and environmental issues, and particularly local land-use policy).

  • If more entry-level residential communities were developed in San Bernardino County (and the entire region), the two-county area’s labor force would find capacity to grow—and thus boost economic growth. Currently, this would boost the local economy more than anything else. The San Bernardino County economy used to provide an “unending” source of workers for the job markets in Los Angeles and Orange counties, but that’s changed. Today, the Inland Empire’s business community is having a hard enough time filling the jobs it has available (a variety of different positions). Local business leaders’ “worker issue” is now turning into a “worker housing issue” whether they know it or not. The two-county region’s low unemployment rate (3.7 percent) most likely isn’t changing for the foreseeable future. Quality and quantity of jobs is important, but those are not the pressing issues facing the local economy right now. Raising the low level of housing inventory is the single-most important economic issue facing local cities and businesses today.

  • Building more homes of all types of density remains a difficult conversation for cities and their managers in San Bernardino County. Depending on the city, up to 80 percent of revenue can come from businesses (retail strip malls, industrial warehouses, and office space). On the flipside, up to 80 percent of city expenses can come from residential communities since homes and residents demand a greater amount, and particular type, of services. This oftentimes incentivizes many city managers and city councils to lean toward zoning more land for businesses than homes, depending on the locality. It’s a habit that’s ripe with opportunity for change if cities start realizing that tomorrow’s economic growth is rooted in available housing for workers in close proximity to their jobs.

  • The local labor-shortage problem was exemplified when the Inland Empire Business Activity Index showed a 0.8 percent gain during first-quarter 2019—much slower than the 3.2 percent first estimate of U.S. Gross Domestic Product (GDP) reported for the same period. “The slowing is consistent with what we’ve been reporting about sluggish labor force growth across Southern California—and the increasingly serious constraints this places on the ability of the economy to expand, both in the Inland Empire and beyond,” states a summary from a quarterly report that uses the local index (compiled by the center at UC Riverside). This business activity slowdown isn’t a sign the Inland Empire’s economy is taking a sharp negative turn, but rather it will remain on a positive trajectory for the rest of this year (at the very least) but advance at a slower pace. Click here to view the Inland Empire Business Activity Index report.

  • The Inland Empire’s labor force participation challenge displays what’s happening in the broader U.S. economy (especially in warehousing, e-commerce, logistics, transportation, and courier industries)—a continually tightening job market as older worker cohorts retire. “For employers, these trends signal more difficult business conditions ahead,” states a special report published by The Conference Board this month. Additionally, business’s concerns about “labor quality” rose to an all-time high over the past 12 months, making it the highest-ranked concern. “Dissatisfaction with workers’ performance seems to be more prevalent in blue-collar occupations,” the report states. “A decline in the supply of blue-collar and low-pay services workers would not have been a problem if the demand for them was shrinking. But this is not the case. The demand for these workers is continuing to grow at a solid pace.” Because of so many open positions in the job marketplace—combined with a little more available “slack” in the labor force—the national economy is still expected to add an average annual 140,000 – 180,000 jobs per month over the next 12 months (yet noticeably slower than the average 218,000 over the past 12 months).

  • To view the entire forecast conference video, click here (and scroll down). View from 0:00:00 – 51:00:00 for discussion on the economy, policy differences, financial markets, and other broader trends affecting consumers and businesses. View from 51:00:00 – 1:14:00 for commentary about San Bernardino County and the Inland Empire’s labor force, housing supply, land development issues, and other topics by the center’s director (Chris Thornberg). View from 1:14:00 – 1:33:00 for a unique presentation on the Inland Empire’s “economic participation” (or lack thereof) by local households and workers, including demographic trends, by the center’s director of research (Adam Fowler). And view from 1:33:00 – 2:00:00 for a question-and-answer session by the audience.

  • Click here for presentation slides from the conference video noted above (“San Bernardino County: Roofs, Roofs, Roofs!”).

  • View the Labor Market Intelligence Report for San Bernardino County. It includes trends on the Inland Empire, California and U.S. economies; a current snapshot of the San Bernardino County economy, its residents and businesses, and other breakdowns; local workforce trends and key indicators; integrated industry analysis of different job/employment sectors; and policy recommendations.

  • View the Regional Intelligence Report for San Bernardino County (pages 13 – 25). It includes trends on San Bernardino County’s recent economic growth; employment; labor market breakdown/snapshots; local spending, residential real estate, commercial real estate, and worker wages.

  • View the Regional Intelligence Report for the entire Inland Empire (Riverside and San Bernardino counties combined).

Local County-Level Perspectives
The California Department of Transportation (Caltrans) has released its 2018 – 2050 demographic forecast for all counties in California regarding local jobs, wages, home prices, population, personal income, taxable sales, net migration, wildfire issues, public policy implications, legal cannabis, industries, workforce, and more.

For forecasting purposes, the shorter-term economic projections for 2018 – 2023 within this county-wide report by Caltrans do not factor in an economic recession into its local scenarios. They are only highlights stemming from a baseline projection (view the report above for more information).

Demographic Profile and Projections: Inland Empire*  

  • Total population: 4.5 million (and will hit 5 million by 2025).
  • Working-age individuals (15 - 64 years old): 68 percent of total population in 2015 (and will fall to 64 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 2.06 million out of 3.5 million adult population.
  • Labor force participation rate (adults who “want” to work): 59 percent (or 2.06 million individuals).
  • Unemployment rate: 3.7 percent (versus 3.9 in CA and 3.6 in U.S.)
  • Unemployed workers: 94,000.
  • Median household income: $58,000 as of 2018 (compared to $68,000 for CA and $59,000 for U.S.)
  • Poverty rate: 16 percent (versus 14 in CA and 14 in U.S.)
  • Education of population: 20 percent have a college degree; 33 percent some college; 26 percent high school diploma; and 21 percent no high school diploma.
  • Employment sector growth: click here for a local future growth breakdown (2014 – 2024) of nonfarm job projections by industry, occupation, education, and fastest-versus-largest areas of importance in the Ontario-San Bernardino-Riverside metropolitan region.
  • * Combined counties of San Bernardino and Riverside
  • ** Data as of February 2019 from the California Center for Jobs and the Economy; California Employment Development Department; California Department of Finance; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; and U.S. Census Bureau

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