Madison Aument
With 91.9 KVCR News, I'm Madison Aument. This is Economics IE, where we talk to an economist from the Inland Empire to help take the temperature of the region's economic situation. Today I'm speaking to Dr. Manfred Keil, who's an associate director with the Law Institute at Claremont McKenna College. Thanks for being here today, Manfred.
Manfred Keil
Oh, it's wonderful that you have me again.
Madison Aument
Well, I want to discuss your recent report in the San Bernardino Sun newspaper called “The Inland Empire is a puzzle when it comes to recent economic growth.” First, what does economic growth look like in the Inland Empire right now?
Mandfred Keil
So there are two statistics that are calculated on employment one is a household survey where I would call you up and I would say, “Have you been working over the last six months?” And you would say, “yes.” And so therefore you would count as employed. Had you said no then I would say, “Have you been looking for work?” Now, as you can see, that's a very subjective sort of answer, right? You could say, “Yeah, I've been looking occasionally into the newspaper” or “Yeah, up and out every day.” Right? So if you say you've been looking for work, then you count as unemployed. And if you say you haven't been looking for work, then you're out of the labor force. So there's sort of three states that you can be in according to this survey. So the number that we typically see in the newspaper is the unemployment rate. But the unemployment rate can change either because the percent of people who are in the labor force grows, or because if employment grows. So let's say there are 100 people and 98 are employed and two are unemployed. And now all of a sudden, more people join the labor force. Maybe because you know, they were on maternity leave before or because they came out of school. So all of a sudden, you have 102 people in the labor force, but there is no more employment generated. Well, then the unemployment rate goes up. Because you know, now you've got four unemployed people, right? So what I'm trying to say is, it's not only employment, that determines the unemployment rate, it's also the labor force in and here it comes. If we look back at 2020… February, and we compare the labor force and employment in the Inland Empire to that date, then, compared to that date, both the labor force and employment have grown at the same time. The unemployment rate has gone up somewhat. If you go to any other region in southern California, not a single one of them has come back in terms of labor force where they were in February 2020.
Madison Aument
So can you kind of explain why this growth is such a puzzle?
Manfred Keil
Since 2020, we have created 16,800 jobs. And here's your temptation, your temptation is to say, Yeah, I know that because of logistics has been doing so well. It turns out yes, logistics did initially did very well until the middle of 2022. But since then, logistics has lost jobs at a rate of 12,000. Over the last year, so then who is generating the jobs? Is this sort of across the board? Everyone generates jobs? No, it is done by two sectors. And the two sectors are basically health and their government. So between those two sectors, they created 16,800 jobs. So if it hadn't been for those two sectors, we would have done poorly. And I guess Here comes the surprise the puzzle. We always think of the Inland Empire as being the warehouse capital of the world. Hence, logistic matters more than anything. Turns out over the last year, that's not true. Over the last year, it has been health, and it has been government.
Madison Aument
So in the report, you say you're sounding an alarm bell, can you explain what you mean by that?
Manfred Keil
So the alarm bell thing to me is that we are completely relying on two sectors at the moment. And those two sectors, if you look at the underlying situation for them, is not as rosy as as it has been. So the government sector obviously will be affected by cutbacks. So I don't expect government hiring to continue at the pace as it has. And the second sector is health… while in general, it will be expanding. But in many ways, as I just pointed out with minimum wages, there is a strong connection between the government spending and the health sector. So I expect both of those sectors not to be able to drive employment in the Inland Empire as it has in the past. And if that happens, then the region could be in trouble because as I said, to my great surprise the other side combined last jobs compared to the gains in these two sectors.
Madison Aument
Thanks for joining me today, Manfred.
Manfred Keil
You're welcome. A pleasure as always.
Madison Aument
Join us again next Monday for Economics IE. You can find this segment and others on our website at kvcrnews.org/econie. Support for this segment comes from the Nowak Family. For KVCR News, I'm Madison Aument.