The San Joaquin Valley as a whole has reached its peak in regards to employment growth and is currently in a slowdown, according to Gökçe Soydemir, the Foster Farms Endowed Professor of Business Economics at California State University, Stanislaus.
Along with evidence pointing to a slowdown in almost all categories of employment, inflation (staying above 3 percent for three consecutive months, similar to what occurred just prior to the Great Recession) and rising interest rates (foreclosures are already climbing back up) are areas of concern noted in the report.
“For the first time since the Great Recession, the growth rate came in below the bench mark rate,” said Soydemir.
A decline in total employment is not likely to begin soon, said Soydemir, but there is evidence pointing to this slowdown in almost all categories of employment.
On a positive note, Stanislaus County led the region in job growth in 2017 at 1.93 percent, followed by Madera and Fresno counties at 1.82 and 1.16 percent, respectively.
Stanislaus County employment normally grows at about the same rate as the Valley average, but for the first time since 2001, Stanislaus is in the lead. Total employment growth was slower in 2017 than in 2016 for all other counties.
Construction was the fastest growing category of employment in 2017, followed by manufacturing employment. Information employment was the only category that posted a decline in 2017.
At this slower pace of growth, total employment in the San Joaquin Valley is still projected to reach 1,750,000 in the second half of 2020.
Employment growth across California continues to outpace the Valley, according to the report. In the first half of 2017, the slowdown in growth was very visible in the Valley, while state employment growth continued to gain some speed. In the latter part of 2017, the Valley’s employment growth caught up with the state.
In the coming months, however, growth in the two series is expected to slow, particularly in the Valley, as categories of employment such as retail and leisure and hospitality services begin to feel the continued effects of rising rates.
Another factor that Soydemir says will negatively affect Valley employment is the “tariff war.”
On March 8, the Trump administration announced global steel and aluminum tariffs to protect U.S. producers, exempting many nations – but not China. The country fired back at America by levying 12 to 25 percent tariffs on $3 billion worth of American goods, including scrap aluminum, frozen pork, dried fruits, nuts and wine.
“Tariffs, along with retaliatory effects, will have a disproportionate impact on Valley’s farm-related exports, such as almonds, and worsen the purchasing power of the region’s consumers due to higher prices of retail goods related to the steel industry,” states the report.
Soydemir said tariff wars are “very dangerous things in the long run.”
“These were lessons learned in after the first and second World Wars…if currency wars aren’t resolved, they lead to tariffs wars. If tariff wars aren’t resolved, they lead to physical wars.”
Other highlights of the report include:
— The yearly percentage increase in home prices in the Valley continued at 8.27 percent, higher than in 2016 and 2015.
— Purchasing power of the Valley consumer declined in 2017 as inflation took away wage gains, the trend is expected to continue into 2019.
— Slowing of growth in bank deposits and net loans and leases from community banks in the Valley appears to be consistent with the slowing employment growth valley wide.
— Non-accruals and accruals of bank assets began to tick upward along with the rising costs of borrowing due to continuing rate hikes.
The biannual San Joaquin Valley Business Forecast provides projections for the Valley’s labor market; regional housing conditions; prices and inflation; banks and other depositary institutions; and capital markets. Soydemir and his team use a unique forecasting model that produces lower and upper statistical confidence bands, with results that are expected to fall within this range.
Read the full report at: https://www.csustan.edu/sjvbf