Two separate economic reports for Fresno and the central San Joaquin Valley foresee continuing growth in employment and other factors during the coming months.
Jeff Michael, director of the Center for Business and Policy Research at Stockton’s University of the Pacific, predicts that the increasing pace of work on the first Valley segments of California’s high-speed train project will provide a boost to construction employment in Fresno and the surrounding area.
In his California and Metro Forecast issued late last week, Michael said he anticipates that jobs in construction will grow by about 15.2 percent this year in the Fresno area, “when 6 to 8 percent is more typical.”
The UOP report also anticipates that personal income and wages will be on the rise, fueled in part by an increase in the state’s minimum wage.
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While the UOP report tries to read economic tea leaves looking out four to five years, the monthly San Joaquin Valley Business Conditions Index, prepared for Fresno State’s Craig School of Business, points to economic growth over the next three to six months months. The January index issued on Monday climbed to 58.8, up from the prior month’s index of 55.6. A score of 50 on the index is considered neutral; anything higher points toward growth, while a score below 50 represents a forecast for decline.
We’re still seeing very positive growth in the San Joaquin Valley, much stronger than what we’re seeing in the U.S. economy.
Economist Ernie Goss, Fresno State’s Craig School of Business
Economist Ernie Goss, a research faculty member at Fresno State, said January is the 26th consecutive month in which the index – based on a survey of corporate purchasing executives in Fresno, Madera, Kings and Tulare counties – has been above 50. “We’re still seeing very positive growth in the San Joaquin Valley, much stronger than what we’re seeing in the U.S. economy, and our survey is picking that up,” Goss said.
Michael said the data he is examining points to considerably more activity this year in the construction industry, which was hammered when the housing market collapsed in the recession. At least part of that is anticipated from a pickup in work on high-speed rail. “Work on that system has been a little slower to develop than expected, but we’re supposed to see more activity in 2016 with work at multiple sites,” Michael said.
Construction employment has been on the uptick anyway because of incremental recovery from the housing bust. “Every year is a little bit better than the previous year,” he said. “But in Fresno, an extra boost from this surge in high-speed rail-related construction is certainly a factor in helping keep it up.”
If you look back at where we were four years ago, we certainly didn’t predict this much progress in unemployment.
Economist Jeff Michael, University of the Pacific’s Center for Business and Policy Research
Other sectors forecast by Michael to see significant employment gains are the leisure/hospitality industry, with 5.4 percent growth this year, and private-sector education/health services, at 5.3 percent growth.
The UOP forecast anticipates that the unemployment rate, which last year dipped to 10% for only the fourth time since 1990, will continue to fall over the next few years, reaching 8.4% by 2020, even as the labor force grows at a rate of 1.0 percent to 1.4 percent per year. “If you look back at where we were four years ago, we certainly didn’t predict this much progress in unemployment,” Michael said.
California’s $10-per-hour minimum wage that took effect Jan. 1 “is going to have a big impact in places like Fresno and the Central Valley” with higher concentrations of low-wage workers in agriculture, retail and hospitality businesses. While the potential exists for businesses to either raise prices or cut hours to cope with higher labor costs, Michael said, “a higher minimum wage puts money into consumers’ pockets to spend in the economy, they’re better able to afford rent and more likely to form households.”
Low fuel prices also are adding to families’ discretionary income, Michael said. “We’re seeing a shift in where consumers are spending their dollars from retail to restaurants and hospitality,” Michael said. “Savings from low gas prices are going more toward a meal out with the family than to buying clothes or other retail purchases.”
For agriculture, retail, hospitality and lower-wage health care workers, “the near-term effects (of a higher minimum wage) are significant.” The UOP forecast predicts that the average annual wage for a worker in the Fresno area will climb 2.3 percent this year to about $50,600 and continue rising through 2020 to about $57,900.
The monthly business conditions index compiled for Fresno State by Goss also shows that purchasing managers anticipate hiring improving throughout the Valley. “The employment gauge (in January) was up to 58.3 from 55.0” a month earlier, Goss said.
Goss said the businesses in the region that do considerable export business could be vulnerable to changes in the value of the dollar and its strength relative to other world currencies.
“The Japanese have moved into negative interest-rate territory, and their central bank is now charging to keep bank deposits,” he said. “That has increased the value of the dollar against the yen. That’s tough for our companies that are selling abroad (because) it makes them less competitive.”
An economic forecast from the Center for Business and Policy Research at the University of the Pacific anticipates continued growth in a number of areas for the Fresno metropolitan area through 2020.
All nonfarm employment
Annual average wage (for workers)
* Real per capita income (all people, all sources)
* Real per capita income reflects adjustments for inflation and regional purchasing power. Source: University of the Pacific’s Center for Business and Policy Research