Where are the jobs in Northern San Joaquin Valley?

Experts: Region ripe for new businesses, but it will take decades

April 8, 2010 

DN Aerials Riverbank 2

DEBBIE NODA/dnoda@modbee.com - Aerials taken April 1, 2010. Rainbow Fields Sports Complex, and the former Riverbank Army Ammunitions Plant near Claribel and Claus Rds.

DEBBIE NODA — Modesto Bee

With nearly one in five people in Stanislaus County out of work, the question has never been simpler.

When are the jobs coming back?

The Northern San Joaquin Valley's unemployment rate, while historically higher than the rest of the state, has skyrocketed. It's 19.1 percent in the county.

Across Stanislaus, San Joaquin and Merced counties 124,800 people were looking for work in February alone.

Compare that with the recession of the early 1990s when the annual unemployment rate hovered in the mid- to high teens for four years, hitting its peak in February 1993 at 19.7 percent. The rate stabilized by mid-decade and then descended to historic lows thanks to the construction boom of the early 2000s.

But economists and experts caution that without a similar boom on the horizon, the road to recovery will be as long, if not longer, than the previous decade's recession.

"It'll take years, years for this area," said Jeff Michael, director of the Business Forecasting Center at the University of the Pacific. "I don't see any prospects of breaking out of the teens for at least three years, probably longer."

Michael said he expects to see incremental improvements in the area's employment picture. The rapid population growth in the past decade and its resulting impact on construction, retail, government and health care helped lead the area out of its last recession.

"The population is not driven by migration now, but more just natural growth," Michael said, "which doesn't give you the same jolt as all the moving vans coming in to town. You can look forward to a slower pace of growth."

Those looking for work need no reminder about the area's pathetic job market. Job fairs once brimming with options are largely filled with booths offering military enrollment or continuing education classes.

Online applications seemingly disappear into an Internet black hole and job seekers report getting only a few leads for dozens, even hundreds, of applications.

"I get the feeling sometimes like I'm hitting a brick wall," said Modesto resident Charles Byrd, as he browsed the openings at a recent job fair. "You try not to get too discouraged, but it's a jungle out there."

The 32-year-old has put in more than three dozen résumés in the past few months and received two calls back and no job offers.

Employers, meanwhile, have become overwhelmed by the interest in each available job.

A new Red Robin restaurant in Manteca received 650 applications for 100 spots its first day. By the time it had finished hiring, close to 2,000 people had applied. In the fall, Modesto soy milk production and packaging manufacturer SunOpta Inc. received 980 applications for 30 openings.

The coming year could offer little relief. While the seasonal hiring upswing should kick in during the next few months, several factors could mute it, including the recent closure of the New United Motor Manufacturing Inc. in Fremont and pending government and education layoffs.

"We're looking for another real tough year," said Bill Watkins, executive director for the Center for Economic Research and Forecasting at California Lutheran University in Thousand Oaks.

The center puts out quarterly state and national economic forecasts. Its most recent report, released last month, predicts a slow and uneven recovery, with more job losses.

"California both started the recession before the United States and is going to last longer," he said. "We're forecasting double-digit unemployment for California for the next two years at least. But it's much more permanent and lasting (in the Central Valley). You are talking a very long time -- decades, I'm sorry to say."

That's not to say the area doesn't have potential.

The Boyd Co. Inc., a Princeton, N.J.-based corporate location consultant, listed Riverbank and Merced among the top-ranked small cities for the region.

The study compared the cost of operating a high-tech manufacturing facility in 45 small-market cities across the United States.

It found that a company could run a 250,000-square-foot, 300-worker plant in Riverbank or Merced for an annual operating cost of about $26 million.

John Boyd Jr., principal partner with The Boyd Co., said both cities have positives that could attract new business.

Riverbank just got the keys to the Army's former ammunition manufacturing complex in an enterprise zone, adding attractive industrial space to Stanislaus County's inventory. Merced has a burgeoning University of California campus.

"The base closing in Riverbank is an opportunity, it really, really is," Boyd said. "And Merced has intellectual capital."

In addition, both areas have ready access to rail, which Boyd said is a critical transportation factor, and the high unemployment -- 22.1 percent in Merced -- means there is a ready and available work force.

"It's actually a positive," he said. "It allows greater flexibility to hire people. It also keeps wages down."

But, he said, despite the area's upsides, the state's economic climate and governmental regulations make moving a tough sell to corporations. Washington state has emerged as one of California's biggest rivals in attracting businesses because of its hydro-electric power and pro-business regulations.

"You'd be surprised how many companies regularly look at Modesto, Riverbank, Merced and have them on their short list," Boyd said. "But it ends up being cost, regulations and tort climates that decides it. It's an uphill battle."

Yet for businesses that need to locate or stay in California, the valley can position itself as a lower-cost alternative to the Bay Area or other metropolitan locations. The area's deflated real estate market offers comparably lower housing and property taxes.

"California in general is a market that people want to be in," said Ryan Sharp, director of the Center for Strategic Economic Research in Sacramento. "It's not like our economy is shutting down because we're not competitive. That perception of California is just that, a perception."

Sharp said the valley is poised to continue to be the new growth area in the state. But that forecast is through a long lens -- one that looks to the next 20, 30, even 50 years.

"The next 10 years is a tough picture to paint, you have the effects of the economy driving the next five years. When will you recover to where you were before and what will you do after that is difficult to pin down in the next 10 years," he said.

Until then, Sharp said, it will be bumpy as the unemployment rate starts to right itself. The numbers will be further suppressed, he said, by the pool of underemployed and workers who have quit trying to find a job. Those groups could double the jobless rate statewide.

"As employers start to hire, they might first create full-time out of part-time workers," Sharp said. "People will move around in the work force. So the overall unemployment rate won't drop at first."

That number includes people such as Rachel Alejandro, a 25-year-old Modesto resident who works part time as a substitute teacher.

She goes on four to five jobs a month and wants to find full-time work. But with the job market as tight as it is, her plan is to go to school this fall to earn her master's degree.

"Looking around, it can seem pointless," she said surveying a recent job fair. "I'm trying to be realistic."

Bee staff writer Marijke Rowland can be reached at mrowland@modbee.com and 578-2284.

Modesto Bee is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service