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Inland Empire economy faces a long road back

Poor conditions could persist for years in some sectors, forecasters say, but there are signs of life.

October 06, 2010|By Alana Semuels, Los Angeles Times

The long-suffering Inland Empire economy is going to have to suffer a little longer. Unemployment won't reach single digits until 2014 and the construction sector will remain tepid until at least 2011.

That's according to a forecast to be released Wednesday by economists from Claremont McKenna College and the UCLA Anderson School of Management.

The Inland Empire, which includes Riverside and San Bernardino counties, is suffering because key industries were hit hard during the Great Recession.

The logistics industry has slowed as consumers stopped spending. Government jobs have been lost to the state's budget woes. Manufacturers once attracted by the region's ample industrial space are closing or are replacing workers with machines. Home prices have fallen by half since 2006 and new construction has come to a virtual standstill; single-family housing starts in the region declined to 300 a month in the fourth quarter of 2009 from 5,000 per month in 2005.

"The key is that the housing sector is one of the most important areas out here," said Marc Weidenmier, associate professor of economics at Claremont McKenna. "And the housing sector is just a wreck."

Still, there are signs of life. Foreclosures in the Inland Empire are beginning to slow. Housing starts are increasing. Home prices could start to slowly increase in 2011, though it could take a decade before construction returns to pre-recession levels, forecasters said.

The job market will recover slowly as well. Forecasters said the region's unemployment rate, currently at 14.8%, could fall by as much as three percentage points within a year. The unemployment rate won't sink below 10% until 2014, however.

There is a bright side, Weidenmier said. About 20% of the workers living in the Inland Empire are employed in Los Angeles and Orange counties, and as those areas begin to recover those workers will have more disposable income to spend near home.

In addition, the Inland Empire will get a boost as U.S. imports rise and the region's logistics industry adds more workers.

Consumers are starting to spend again, even in Riverside and San Bernardino counties. Car sales in the Inland Empire are rising slightly, after reaching a low of $500 million in the second quarter of 2009. That increased to nearly $600 million in the first quarter of 2010.

Retail sales are showing slight gains too. After reaching a peak of nearly $2.3 billion in the first quarter of 2007, sales dropped for 12 quarters in a row, reaching a low point of $1.9 billion in the third quarter of 2009. Sales have increased 5% since then.

"This suggests that the Inland Empire is beginning to recover from the depth of the recession," the report said.

alana.semuels@latimes.com

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