U.S, California, Inland Empire Economies Growing Despite Weak Global Outlook

New economic forecast shows continued expansion of national, state, and local economies

Yunzeng Wang talks to students at the regional economic forecast conference in Oct. 2013

Yunzeng Wang, dean of the School of Business Administration, talks to students at the regional economic forecast conference in 2013.

RIVERSIDE, Calif. (www.ucr.edu) — A new forecast for the U.S., California, and Inland Empire economies finds that the recovery at the national, state, and regional level is continuing despite the weakening global situation.

The forecast, authored by Beacon Economics and released in partnership with the University of California, Riverside’s School of Business Administration as part of the 2014 Riverside/San Bernardino Economic Forecast Conference, reports that unlike the U.S.-led recession of 2008, this time, the U.S. economy will be an important source of strength globally as the world works to get back onto a growth trajectory.

Moreover, the new forecast does not find anything on the international front that could seriously derail the nation’s economy, projecting it to expand at an annual pace of modestly over 3 percent in 2015, and improving even further the following year. “Nearly every part of the U.S. economy is showing signs of slow but steady improvement,” says Beacon Economics’ founding partner and one of the forecast’s lead authors Christopher Thornberg. “The only thing acting as a drain currently is the export sector, due to the global slowdown, but there is actually enough momentum in the U.S. economy to push us past these broader international troubles.”

Virtually every economic indicator in California’s enormous economy has also continued on a growth path and events at the international level have not significantly affected the Inland Empire’s economy, according to the analysis. In fact, the local logistics sector is expected to expand in the near future with widespread developments of warehouses and distribution centers appearing across the inland region. Statewide, growth is forecast for employment (2.5 percent annual growth by 2016), home sales (up by double-digit percentages in 2015), residential construction (190,000 new units over the next two years), and most other leading indicators.

One of the structural problems identified in the analysis, however, is that while California continues to have a relatively educated population base, over the past decade or so, that advantage has slowly been reduced as other states have raised their levels of educational attainment faster. The analysis points to the importance of maintaining an educated workforce in California, where highly skilled tech sectors drive so much of the state’s economic growth.

Yunzeng Wang, dean of the School of Business Administration at UC Riverside, says there has never been a more critical time to focus on building and educating a workforce that is prepared to drive California’s economy forward. “This state is home to some of the greatest innovators and strongest companies in the world. But from the data, we can see we won’t have the workforce we need to maintain our leading position in the future,” says Wang. “As educators, we can’t diminish or veer from the critical role we play in teaching and building leaders who have the skill sets and training needed to become successful – for themselves and for their communities.”

This is the fifth year the School of Business Administration, the only research-based business school in Inland Southern California, has partnered with Beacon Economics to release an economic forecast. The forecast event will include a panel discussion of entrepreneurship and company building in the Inland Empire.

Key U.S., California, and Riverside/San Bernardino findings from the forecast include:

  • Riverside/San Bernardino Counties: Compared to the last economic recovery, from 2001 to 2005, the current recovery has lacked support from the construction (added just 0.1 percentage points to gross metropolitan product growth from 2009-2013) and retail trade (added 0.4 percentage points to gross metropolitan product growth from 2009-2013) industries. However, both industries are starting to heat up, a good omen for the economy at large.
  • California: Home prices will continue to grow in California over the next two years, although growth will cool to the 4 percent to 6 percent range. The recent, rapid home price expansion in the state is not sustainable in the long run and it is a healthy sign to see price increases slowing to a level more consistent with income growth.
  • United States: While the U.S economy is doing relatively well and expected to be a leader in the global recovery, the nation continues to face some major imbalances that keep the economy from growing even faster. These include construction investments, the still too-large-to-be-sustainable trade deficit, and public direct spending – which is 13% of the economy today, down from 15.5 percent in 2000. Additionally, the potential for inflation and rising interest rates have raised concerns although the forecast is relatively benign on both and finds little that will change the current path of Federal Reserve policy or price growth. The outlook has the Fed’s rate up to possibly 2 percent by the end of 2015. Long-term rates will respond, but only modestly.

An copy of the 2014 Riverside/San Bernardino Economic Forecast Book can be downloaded in its entirety at www.beaconecon.com/Misc/IE_Print.pdf. To attend the event, please contact Victoria Pike Bond for a press pass.

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