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Report: Economic recovery continues in Valley
Interest rates could impact local rebound
building houses
According to the report, home values in the Valley registered a 14.43% increase in the second quarter of 2021, and building permits increased at a “phenomenal” rate of 35.65%.

Unlike the unpredictability of the coronavirus, economic recovery in the midst of the pandemic is steady and continues to improve throughout the Central Valley according to a report released recently by Stanislaus State. 

The university published its biannual San Joaquin Valley Business Forecast on Monday, which is produced by Foster Farms Endowed Professor of Business Economics Gökçe Soydemir and details the region’s economic outlook for the upcoming year.

This is the fourth forecast Soydemir has released since the pandemic began; he first called the global spread of COVID-19 a “Black Swan” in June 2020 due to the pandemic’s rare and devastating nature, noting then that wearing masks would be critical to the region’s ability to bounce back from a statewide shutdown. 

“It’s definitely been an experience,” Soydemir said of forecasting the region’s economy during such a turbulent time. “It’s uncharted waters, right? Nobody knows what’s going to happen, so it’s hard to navigate. But there are certain indicators you can count on.”

The new report shows that while recovery from the brunt of the pandemic is well underway, falling interest rates, easy monetary policy and low tax rates are reversing course as COVID booster vaccines are administered and oral medications for the virus make headway.

Just how those key indicators impact the San Joaquin Valley depends on how quickly and how high interest rates rise, Soydemir said. 

“The Federal Reserve has signaled no rate hikes in 2022, so if it sticks to that, it's good,” Soydemir said. “One of the criticisms faced in the last recession, in 2008, was that interest rates increased too quickly, and that puts a lot of pressure on the construction housing sector.”

According to the report, home values in the Valley registered a 14.43% increase in the second quarter of 2021, and building permits increased at a “phenomenal” rate of 35.65%. The report points out that this is similar to the pace observed in 2018, reflecting the supply side trying to catch up with excess demand caused by a shortage of inventory. 

Because of the extension of the Biden administration’s relief package and the Federal Reserve’s continued deployed tools to mitigate the negative effects of the pandemic, there were basically no foreclosures in 2021, comparable to 2020. Freddie Mac 30-year rates continued to fall in the third quarter of 2021 after the Federal Reserve’s signal of no rate hikes. 

Every category of employment in the Valley continued to recover, with the exception of government employment. Total employment grew in all counties, except Kings County, in 2021 and Merced County employment grew at a rate of 3.56%, the fastest of the Valley’s eight counties. In Stanislaus County, total employment grew at the third-fastest rate of 3.04%. 

Retail trade, at an average annual rate of 5.93%, was the fastest-growing category of employment in 2021, followed by trade, transportation and utilities employment growing at 5.56%.

When it comes to banks, Valley bank deposits and net loans/leases increased significantly, but the increase in net loans and leases lagged behind the increase in bank deposits. This discrepancy indicates community banks extended fewer loans in 2021, Soydemir said.

Valley residents are also starting to see the impact of “enormous liquidity injections” into the economy as part of the nation’s pandemic response, the report states, manifesting as high inflation rates which are also impacted by high oil prices and high labor costs. 

In 2021, the average yearly inflation was 3.66%, well above the long-term benchmark of 2.34%. The economic expert added that those who are concerned about the economy would do best to keep an eye on interest rates, increase cash holdings and refinance while those rates remain low. 

“Inflation is a global phenomenon. We don't see that only in the U.S., you see it all around the world,” Soydemir said. “It’s clearly because of the pandemic since these are rates of inflation never seen before, particularly in the Valley.”

To view the San Joaquin Valley Business Forecast in its entirety, visit