Inland Empire Business Activity Headed for Moderate Growth

Labor shortages will be region’s key restraint on economic growth
By Victoria Pike Bond | UCR News |

Business activity in the Inland Empire jumped considerably in the latest numbers – and on an annual basis, continues to outpace the nation. According to the new Inland Empire Business Activity Index released today by the UCR School of Business Center for Economic Forecasting and Development, the region’s economy officially transitioned from recovery to expansion in the fourth quarter of 2021 (the latest data available) and growth is forecast to continue throughout 2022.

Business activity in the Inland Empire expanded by 6.4% in the fourth quarter compared to 4.5% in the third. At 7%, U.S. GDP outpaced the region in the fourth quarter but still lags the Inland Empire in total growth for the year (5.6% vs. 6.1%). Notably, the IE’s growth rate has declined from 8% in the second quarter and 7% in the first, but this is to be expected as the region’s economy moved steadily towards pre-pandemic conditions throughout 2021.

The short-term outlook for the Inland Empire remains positive, with local business activity forecast to rise between 3% and 3.5% in 2022.

“Now that the region is again in expansion mode, as opposed to recovering losses from the pandemic-driven recession, growth will moderate,” said Taner Osman, research manager at the Center for Economic Forecasting and one of the Index authors. “That isn’t a detriment; the point of concern continues to be the prospect of workforce shortages and the ability to meet the labor market’s demand.” 

According to the report, the prospect of future labor shortages, which are caused largely by California’s high cost of living relative to other parts of the nation, will continue to limit the region’s growth over the long run. 

The new report also calls out the surge in e-commerce purchases, an effect of the pandemic that shows little sign of slowing and bodes well for the Inland Empire’s economy.

“A major component of e-commerce operations is transportation and warehousing, which has long been one of this region’s mainstay industries and one that should continue to benefit from consumers’ discernable preference for online purchasing,” said Osman.

View the new Inland Empire Business Activity Index.