Inland Empire Economy Nears Full Recovery from Pandemic Downturn

Available labor supply likely to be among 2022’s biggest restraints on growth

December 09, 2021

Although business activity in the Inland Empire continues to outpace the nation in its recovery from the COVID-19 pandemic, the rate of recovery has slowed as the regional economy draws closer to pre-pandemic levels of activity. According to the new Inland Empire Business Activity Index released today by the UCR School of Business Center for Economic Forecasting and Development, the area’s business activity should reach pre-pandemic levels by the end of this year. Over the next two quarters, local business activity is forecast to rise between 3% and 6%.

Graph showing that the Inland Empire's economy has nearly rebounded to pre-pandemic levels — The Inland Empire's economy has nearly rebounded to pre-pandemic levels. (Click to expand image. Credit: UCR School of Business Center for Economic Forecasting and Development)

Business activity in the region expanded by 4.5% in the third quarter compared to a 2.1% growth rate in U.S. GDP over the same period. The IE’s growth rate has declined from 8% in the second quarter of this year and 7% in the first.

“This slowdown is to be expected as we move closer to pre-pandemic conditions with respect to economic output,” said Taner Osman, Research Manager at the Center for Forecasting. “The bigger issue for the coming year is likely to be the labor market, which still has some way to go before reaching pre-COVID levels and is going to continue to struggle with an adequate supply of workers.”

According to the report, the effects of the pandemic will likely be more muted next year, with far fewer business closures. The impact on labor supply will come largely from California’s notoriously expensive housing costs. “While the Inland Empire is less costly than many parts of the state, compared to the national average, home prices here are pretty sky high, which will exacerbate labor supply issues and restrain needed growth in the workforce,” said Osman.

The Inland Empire’s labor market has added back 185,600 jobs since hitting bottom in April 2020, regaining roughly 83% of the total jobs lost in the region due to the pandemic. Total payroll employment remains 2.3% (or 36,700 jobs) below its pre-pandemic peak from February 2020. Comparatively, California employment is still 5.6% below peak and the nation remains 3.3% below its February 2020 peak.

View the new Inland Empire Business Activity Index.