Riverside, Calif. – The economy may be ticking along at a steady pace, but a labor shortage is brewing, according to a new forecast released today at the 8th annual Inland Empire Economic Forecast Conference in Riverside.
Despite a slowing job market and stock prices that are showing signs of froth, the new outlook projects that the U.S. economy will expand in the 2.5 percent range in the fourth quarter and that 2017 will ultimately see stronger growth than the past two years.
Select Key Findings:
- The Inland Empire’s job growth is forecast to hold steady over the next couple of years and taper to the 2 percent to 2.5 percent range beyond that, as the supply of available labor diminishes.
- After years of stagnation, the tightening labor market has finally given way to wage increases. For the Inland Empire, average annual wages grew 6.5 percent from the first quarter of 2016 to the first quarter of 2017.
- One of the best signs in the national economy has been the solid recovery in business spending. U.S. consumers, on the other hand, are expected to rebalance through the rest of 2017 after spending paced ahead of income in recent years. The nation’s consumer savings rate has dropped below 4 percent of disposable income for the first time since before the Great Recession.
- California and its regions should experience continued growth in economic activity and jobs throughout 2017 and 2018. Most of the job gains will occur in Healthcare, Leisure and Hospitality, and Construction.
- Home prices in the Inland Empire are forecast to appreciate in the 5 percent to 6 percent range over the next two years, driven by tight supply and a renter population that is consuming a greater share of single-family dwellings.
- The 8th annual Inland Empire Economic Forecast Conference will be held Oct. 25 at the Riverside Convention Center. California Speaker of the House Anthony Rendon will deliver the keynote address. In addition to the economic forecast, there will be an in-depth discussion about the Inland Empire’s ongoing urbanization and how the region should grow to serve its population and businesses.
“Short of some major change in government policy, there’s nothing on the near-term horizon that has the capacity to knock the nation’s economy off its steady, upward trajectory,” said Christopher Thornberg, director of the Center for Economic Forecasting at the UC Riverside School of Business and one of the authors. “But there are burgeoning trends that could hold back the economy like the shortage of workers, which is something that will limit employment as well as business profits and growth.”
California faces a double whammy in the labor market. It is a state where robust job growth has pushed the unemployment rate below 5 percent. Furthermore, pricey housing costs have already slowed labor force growth, and the effect of the shortage will be felt even more sharply. “The state’s economic expansion is not stalling out, but its future gains will be constrained by a lack of available workers,” said Robert Kleinhenz, executive director of research for the Center and one of the authors. “There’s an easy answer to what’s holding back growth, but a much more difficult one to what can be done about it.”
Both Thornberg and Kleninhenz say addressing the supply side of California’s housing shortage and building more single and multi-family units, including in growth areas like the Inland Empire, is critical to the long-term health of the economy.
Related Story:
- Urban Inland Empire: California’s Next Metropolis?
- California Speaker of the House Anthony Rendon Keynotes The IE Economic Forecast
About UC Riverside
The University of California, Riverside (www.ucr.edu) is a doctoral research university, a living laboratory for groundbreaking exploration of issues critical to Inland Southern California, the state and communities around the world. Reflecting California’s diverse culture, UCR’s enrollment is now nearly 23,000 students. The campus opened a medical school in 2013 and has reached the heart of the Coachella Valley by way of the UCR Palm Desert Center. The campus has an annual statewide economic impact of more than $1 billion. To learn more, call (951) UCR-NEWS.
