Inland Empire Business Activity Index
Quarter 1 | 2020
The Inland Empire Business Activity Index tracks performance of the Inland Empire regional economy on a quarterly basis and is adjusted for seasonal variations. The composite indicator is estimated using a wide range of economic data including employment, economic output, income, real estate, and other indicators at the national, state, and metropolitan level.
From the authors: This report predates the global COVID-19 pandemic. Please see the Center’s national and state forecast for commentary about the broad economic fallout expected as result of the outbreak and halt in economic activity.
Business activity in the Inland Empire continued to grow at a steady pace in the fourth quarter of 2019, (the latest numbers available), increasing by an annualized rate of 2.0%. This was just one percentage point below the growth rate of U.S. Real Gross Domestic Product (GDP), which advanced by 2.1% over the same period (as delineated by the U.S. Bureau of Economic Analysis’ advance estimate of GDP).
For 2019 as a whole, business activity in the region grew 1.9% compared to the real national GDP growth rate of 2.3%. The nation’s GDP growth was 0.6 percentage points slower than in 2018, about the same rate of deceleration that Inland Empire business activity experienced in 2019 as compared to the previous year. A slowdown in the first quarter of 2019 was largely responsible for the slight drag in the region’s annual business activity growth.
The region rebounded in the second and third quarters of last year and then settled to its current pace in the fourth quarter. The nation as a whole experienced a drag in the fourth quarter of 2018, followed by a strong rebound in the first quarter of 2019 and then by three consecutive quarters of steady growth.
In Focus: The Creative Economy in the IE
The ‘Creative Economy’ remains robust in California although change is evident across the state. As technology-driven fields evolve at an increasingly faster pace, the San Francisco Bay Area is beginning to rival Southern California as the state’s creative epicenter for Entertainment and Digital Media. Elsewhere in California, and particularly in the Inland Empire, the gig economy has taken root as workers in the creative industries seek contract work at increasing rates.
Slightly over 1 million wage and salary workers plus about 400,000 contract workers constitute the creative economy in California. Statewide, Entertainment and Digital Media is the largest creative sector, representing about 7 out of 10 wage and salary workers and about 8 out of 10 contractors within the Creative Economy.
The Inland Empire accounts for 3% of California’s wage and salary workers and 5% of the state’s contract workers within the creative industries. Employment in these industries accounts for 3% of total employment in the region. Due to the heavy presence of manufacturing in the Inland Empire, Creative Goods and Products (41%) is the largest creative industry sector in terms of wage and salary employment, followed by Entertainment and Digital Media (31%).
Over the past five years, every Creative Economy sector in the Inland Empire has added jobs. In fact, the Inland Empire is the only region in California in which both wage and salary employment and contract employment have grown across all creative industry sectors. Within wage and salary employment, Architecture and Related Services (46.5%) leads, followed closely by Fashion (43.7%). Fine Arts and Performing Arts (29.8%) leads in contract employment.
Architecture and Related Services is the highest-paying sector in the Inland Empire’s creative industry, with wages averaging $68,100 in 2018. That is closely followed by Entertainment and Digital Media ($63,800). Fine Arts and Performing Arts, the smallest industry sector, has the lowest average wage in the region at just $28,900 in 2018.
The Center’s near-term outlook for business activity in the Inland Empire remains positive, with gains expected to continue throughout 2020. Over the coming year, business activity in the region is forecast to rise between 1.9% and 2.3%. The Inland Empire can count on years of growth in the Logistics sector, a key regional industry. The recent tariff war truce between the United States and China is welcome news for California’s trade businesses in general as 2019 marked downward years for both imports to and exports from the state. Removing the uncertainty surrounding U.S. trade policies, if only in the short-term, should help to steady the picture in 2020. Of course, exactly how this ‘truce’ plays out, is yet to be seen, as are potential effects from the coronavirus outbreak.