Inland Has Those Unemployment Blues

Posted December 3, 2008 in News

Residents of the Inland Empire have a lot of terrible economic concerns keeping them up at night: Scary-high unemployment, woeful foreclosure rates, cratering housing values, bone-dry city coffers, etc. But according to one Southern California economists, IE residents shouldn’t fret over all those bad stuff.


Just worry about that scary-high unemployment, because it affects everything and will only get worse before it gets better.    


“Inland’s unemployment rate is driving everything down,” says Brad Kemp, director of regional research at Beacon Economics in Los Angeles. “It means more defaulted mortgages, more businesses closing down, much less tax revenue for the cities. I’ve spoken with city officials who say they’re really concerned about neighborhood blight. The higher the unemployment, the worse it gets for everybody.”


Riverside County’s jobless rate stands at 10 percent, according to the latest figures by the state Employment Development Department. One in 10 residents of the county, or 93,000 out of 930,000 available workers, are looking for a job—and that doesn’t include the number of people who have stopped looking. The EDD doesn’t count workers who have given up on finding work. 


San Bernardino County’s rate is nine percent.  


Of course, it could be worse: Imperial County’s jobless rate is 27.6 percent. But Imperial County is an agricultural center with a seasonal workforce. In the IE, jobs—or the lack of them—tend to be year-round affairs. 


Kemp’s two-year economic forecast for the region doesn’t provide much hope that things will get better any time soon. He predicts the region’s unemployment rate to hit 12.4 percent by the third quarter of 2010.  


To put that number in perspective: Governments start to worry about civil unrest when unemployment pushes 15 percent. 


“People who don’t have an income can’t pay their mortgages,” he says. “Mortgage defaults will increasingly spread from sub-prime mortgages to mortgages considering much less risky. Joblessness also means people have less money to buy goods from local businesses, and this affects the warehousing industry.”


The Inland Empire’s pain is a direct result of its excesses during the housing boom: Housing values jumped nearly 200 percent from 2000 to about the middle of 2005, while at the same time, the region experienced record population growth. Municipal and regional governments failed to plan for the population increase, neglecting infrastructure and transportation improvements. Worse, they assumed all the healthy sales and property tax revenue would continue to flow indefinitely, and failed to plan for leaner times. This same dynamic occurred on a microcosmic level: Individuals and families went bananas during the boom years, spending their savings and assuming more debt than they could handle when the economy went sour. 


The good news, and there is some good news to be had here, is that the forces that made the IE so attractive during the boom are still in play, says Kemp. The region continues to be rich in cheap land and ideally situated in the path of potential expansion from the west. When unemployment peaks in 2010 and the housing market bottoms out, possibly around the fourth quarter of 2011 after a further decline in home values of between 28 and 31.6 percent, things should start to get better. Kemp anticipates the unemployment rate to drop 9.8 percent by the first quarter of 2011. 


But we all had better learn the lessons we’ll have received by then, or it will all happen again.


 “Your government will simply have to plan better,” he says. “More attention has to be paid to diversifying the region’s economic base. Three years ago, they were sitting on top of the world. They should have assumed something bad was coming. This isn’t to be fatalistic, but realistic: Business cycles happen. Nothing goes up forever. It wasn’t just city planners, of course. The financial and business sectors also needed to plan better.


“When they start to bring employees back, the region should consider things like zoning land differently, building a strong infrastructure investment. For example, they should think about mixed residential and employment centers, which are better than having two delineated residential and employment areas, where you now have massive traffic problems in between. Right now the only public transportation you have there is a train that takes you into LA. We need to think about improved bus systems, and—who knows? Maybe even a subway for San Bernardino.”

–David Silva



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