UOP forecast predicts continued growth for Fresno County economy

Fresno and the northern San Joaquin Valley have outperformed initial expectations for economic recovery since the nadir of a recession, and University of the Pacific economists anticipate that employment and average annual wages will continue to grow over the next few years.

Jeff Michael, director of the university’s Center for Business and Policy Research, reports in the center’s fall California & Metro Forecast that unemployment in the Fresno metropolitan area is expected to average 10 percent for 2015 and “could even fall into the single digits this year … and if you look back over the last 25 years, that’s only happened three times.”

“There are definitely some reasons to feel good,” Michael added.

In a year dominated by an ongoing statewide drought, Michael said agriculture has proved durable enough to continue to grow throughout the region, including Fresno County posting a record crop value of more than $7 billion last year even as farmers have been forced to idle acreage because of a lack of water. “The agriculture industry has been fortunate that if you’re going to be dealing with one of the worst droughts in your history, that it comes during one of the most positive markets in your history,” Michael said Thursday. “There are a lot of things going on in agriculture, and certainly almost everything has been positive except for the drought.”

The forecast states that “for most California farms, market forces are far more powerful than the weather, and the state is fortunate that prices for its most valuable commodities such as nuts and milk have grown substantially as farmers deal with water shortages.”

Michael added that much of the fallowed farmland “has focused on low-value crops … that tend to be lower labor intensity,” which has helped cushion the loss of farm jobs from being as severe as it could have been.

“Farmers have done a lot to make the best of a bad situation,” he said. “Creativity and a whole lot of ground water have kept higher value crops going. … Certainly individual farmers and households have seen their wells go dry and are dealing with hardships, but on a macro level, we’re seeing rising revenues. Costs are rising for farmers; they’re having to pay more for labor, for example. But in the overall economy, those costs are usually income in the pocket of someone else around here, so there’s still a great deal of value from agriculture in the local economy.”

The forecast notes that total wages earned by farm laborers in the Valley grew in recent years despite the drought and “after years of stagnation at very low levels.”

Overall, the report expects payroll employment to grow, and unemployment rates fall, into 2020. Growth in nonfarm jobs, forecast to be about 3.2 percent for 2015, is predicted to taper to a growth rate of 2.3 percent next year and continue to slow down.

But the construction industry, which is likely to post a job growth rate of just 1.7 percent this year, may be poised for a big bounce in 2016 and 2017. Michael said he expects the number of construction jobs to increase by 11.4 percent next year and 10.7 percent in 2017, due in part to an anticipated workload for construction of Valley segments of California’s high-speed rail project after a modest start this year. “That’s part of the reason we’re projecting nonfarm employment growth of a little over 2 percent, a modest boost,” Michael said. “Until we hear otherwise, we’re going to presume that (high-speed rail) is happening.”

Despite that anticipated two-year growth spurt, the forecast for about 17,500 construction jobs in 2017 will still lag well behind where it was 10 years ago during the height of the housing boom.

Also of importance, he said, is a general recovery of government-sector budgets. “That’s good news in the Fresno area because it’s a hub of government services” including public schools and colleges as well as state and federal agencies.

Statewide, the forecast predicts steady growth of about 3 percent a year in real gross state product over the next four years, with the unemployment rate expected to gradually shrink to 5 percent by 2019.

This story was originally published October 1, 2015 at 7:59 PM with the headline "UOP forecast predicts continued growth for Fresno County economy."