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Unskilled labor force holding Valley back
Ag industry employment trails other sectors, finds business report
economic forecast pic
The ongoing drought has negatively impacted agricultural employment in the Central Valley, as well as industries dependent on ag like manufacturing. - photo by Journal file photo

Where do people hire unskilled laborers? Not in the United States, at least according to Professor Gokce Soydemir of California State University, Stanislaus.

“There are more than 70 percent unskilled workers in the valley,” said Foster Farms Endowed Professor of Business Economics Soydemir, noting that this statistic is indicative of a “mismatch” in the national economy with more American companies outsourcing labor to foreign countries.

“We need to ensure our labor force matches the need,” explained Soydemir.

Soydemir compiles a Business Forecast Report by utilizing data from January 2001 through August 2014 to assess past, current, and future business developments in the San Joaquin Valley relative to state and national trends.

The need to motive and educate Valley residents was also a topic of conversation at the Chamber of Commerce’s Economic Trends breakfast last month when CEO of PMZ Real Estate Mike Zagaris who, in sensing a shift towards a knowledge-based economy, vocalized concerns about the region’s ability to cope with impending change.

“There is nowhere in America where people are less prepared for change in the 21st century than here,” said Zagaris.  “If you don’t have a degree or the skills commensurate with the economy’s needs you won’t have a job.”

Zagaris also highlighted the ironic juxtaposition of the Turlock to the Bay Area, a region frothing with innovation particularly in the technology sector. Tapping into his expertise in the real estate industry, Zagaris noted that Turlock’s high rate of uneducated and unskilled work force could potentially compromise the town’s own economic development and in turn make Turlock a bedroom community to the more cutting edge culture just two hours away.

While Stanislaus County witnessed an increase in home values in the last year, Soydemir forecasts a turning point in housing prices in 2014.

“Too much appreciation in value is not healthy in the long run,” explained Soydemir, noting that a more balanced level of home value increase is instrumental in preventing the formation of a destructive housing market bubble.

While the value of homes appreciated less in 2014 than in 2013, this is a positive indicator of “more balanced growth.” Valley home values are projected to increase at an average annual rate of 15.81 percent in 2015 and 8.30 percent in 2016.

Wages are also on the uptick as findings from recent national surveys suggest that a greater number of firms are planning to raise compensation in 2015, despite the fact that wages have remained consistent in the past few years. However, with the rate of inflation anticipated to rise above the long-term average of 2.32 percent in the next two years, individuals may not experience an increase in their purchasing power.

“You have to look at past dynamics of wages, which have been stagnant for a long while even in the recovery post-recession phase,” said Soydemir.

Consequently, while wages are slated to increase compared to recent years, the concurrent increase in the rate of inflation could potentially level out whatever influence higher wages may have in locals’ lives.

The ongoing drought has also influenced various economic factors from farmers’ harvest to employment, one setback for the region as more diversified economies typically fare better in poor economic periods. The lack of water has also influenced employment growth in other parts of the region such as manufacturing which has witnessed a slight decline thus far in 2014. Manufacturing has an indirect relation to the farm sector as many local manufacturing companies are responsible for packaging or determining the quality of agricultural products.

While agriculture-related industries are in a more precarious position than others, the construction industry, which Soydemir called “the epicenter of the crisis” in 2008, is proving to be the fastest-growing category of employment in the Valley with other industries following the trend.

“For the first time since the end of the recession, non-farm-related categories of employment such as leisure and hospitality services, and retail trade performed better than farm-related categories such as wholesale and manufacturing,” said Soydemir. “The San Joaquin Valley’s economy is different from many other parts of the state, with a significant farming component being just one part of a larger, complex picture.”