Fresno and the San Joaquin Valley could experience more turbulence than more populous and affluent urban and coastal areas of California as a result of Trump administration policies, according to an economic forecast issued this week by the University of the Pacific in Stockton.
“The surprising election of President Trump will have disparate effects across different regions of the state,” economist Jeffrey Michael, director of the Center for Business and Policy Research at UOP’s Eberhardt School of Business, wrote in the first California and Metro Forecast for 2017 that was published on Jan. 31. Michael and the business center issue the economic forecasts three times a year.
“The Bay Area is better positioned to benefit from tax cuts and reduced financial regulation,” the business center said in a statement accompanying the forecast, “while the Central Valley has benefited greatly from expanded health-care spending under Obamacare and will be disproportionately harmed by its expected repeal.”
In Fresno County, Michael anticipates that the annual unemployment rate – which in 2016 dipped below 10 percent for the first time since 2007 – should stabilize at about 9.5 percent through 2017 and 2018 before ticking up slightly and rising above 10 percent again by 2020.
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In 2017, the forecast predicts that the two industry sectors poised for the the greatest employment growth through the year are construction, at 7.6 percent, and leisure/hospitality – which includes many typically low-wage occupations in hotels, motels, restaurants and fast-food outlets – at about 7.1 percent.
Heavy rains across Northern California will provide relief for areas where the drought constrained agricultural production in recent years, especially near Fresno.
Jeffrey Michael, economist with UOP’s Center for Business and Policy Research
A wet winter is expected to pay dividends for the Valley’s agriculture industry after a drought that has hampered farm production in recent years.
“However, the news for agriculture is not all good. High prices pushed agricultural revenue to record levels in recent years despite drought-related production losses, but price declines are now leading to revenue declines,” Michael said. “Farmers are also facing rapidly rising costs, particularly for labor, and a stronger dollar that discourages exports.”
Ongoing construction of the state’s high-speed rail project in Fresno, Madera, Kings and Tulare counties likely will continue to provide some economic stimulus to the region, contributing to job growth of about 2 percent in Fresno County, according to the forecast. “However, we project Fresno to slow significantly to 0.5 percent growth in 2020, the slowest of any of our metro areas,” Michael wrote.
Fresno is hoping to land a pair of major retail distribution centers to bolster its own job fortunes. The city is competing vigorously by offering millions of dollars of economic incentives, such as tax rebates and other assistance, to Ulta Inc. and Amazon.com.
Ulta Inc. is part of Ulta Salon, Cosmetics & Fragrance, a major retailer of cosmetics and beauty aids that is eying Fresno as a possible site for a warehouse to fulfill orders from its growing online sales business, potentially employing as many as 1,200 workers.
Online giant Amazon and its wholly owned subsidiary, Golden State FC LLC, have identified Fresno as their “preferred site” for an order-fulfillment center that could eventually hire 2,000 or more employees.
But there is considerable uncertainty over what the new president’s policies ultimately will mean to the region. The forecast was prepared before the Jan. 20 inauguration, and “as such it does not fully incorporate the new administration’s evolving economic policies, and also does not fully capture an elevated risk of recession – most likely spurred by disruptions to the global economy,” Michael wrote. “After the first full week of the Trump administration, our concern of recession spurred by global conflict and disruption of the movement of goods and people has increased.”
The forecast anticipates a scaling back of health care spending by about two-thirds as the administration and Congress roll back Obamacare – formally known as the Affordable Care Act – starting in 2018. Statewide growth in health care jobs exceeded 3 percent a year over the past five years; Michael’s forecast indicates that would fall to below 1 percent job growth.
“It is clear that Central Valley regions will feel macroeconomic effects of a reduction in federal health care spending combined with growing pension costs that will reduce new hiring in state and local governments,” the forecast states.
Government support payments, including Social Security benefits and other federal payments to residents, as well as wages from government and health-care jobs, accounted for more than 54 percent income growth in Fresno from 2013 through 2015. That compares to less than 20 percent in the San Francisco/Oakland and San Jose metro areas.