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December 13, 2013

San Joaquin Valley’s economy is improving, but wages aren’t keeping pace with inflation

San Joaquin Valley’s economy is improving, but wages aren’t keeping pace with inflation

The San Joaquin Valley’s economy improved this year and is on track to continue making gains in 2014 and 2015, but worker salaries are not keeping up with inflation, according to a business forecast.

California State University, Stanislaus, business economics professor Gökçe Soydemir said employment rose in every Valley county during 2013. The Valley’s aggregate employment grew 2.56 percent this year, and Soydemir projects it will grow roughly the same from 2014 to 2015.

Merced and San Joaquin County jobs grew the most, but Stanislaus County’s employment opportunities trailed the Valley and California as a whole.

“Particularly in the second quarter of 2013, employment growth in the valley lagged behind state employment growth,” the report noted. But Soydemir expects that to change. “Because the valley economy is a region of growth with relatively abundant land, labor and capital, one would expect employment growth in the coming months to exceed that of the state.”

More troubling, however, are Soydemir’s findings that Valley workers are losing ground economically because inflation is rising faster than incomes. “Valley residents realized a decline in their purchasing power when inflation registered more than the growth in average weekly wages,” he wrote in his San Joaquin Valley 2014 Business Forecast Report.

During the past year, Valley wages increased a “very negligible” 0.08 percent, while inflation pushed up prices 1.59 percent, Soydemir calculated. His projections for the future aren’t much brighter, as he expects Valley wages to increase 0.82 percent from 2014 to 2015.

“Lagging wages is a sign of lingering excess supply in the labor market, leading to depressed wages and salaries relative to the state and the nation,” Soydemir explained.

Some parts of the Valley’s economy are doing better than others.

Farm-related employment – particularly in the wholesale sector – has grown the fastest. Soydemir projects wholesale jobs will grow at a strong annual rate of 4.84 percent in 2014 and 2015.

News also is good on the construction and housing front.

“One of the most significant developments in 2013 was the improvement in housing prices in the valley,” the report stated. Home prices rose by nearly 10 percent valleywide, but they increased about 25 percent in parts of the Northern San Joaquin Valley.

“Consumer wealth is driven by rising home values,” Soydemir wrote. “Rising consumer confidence and wealth help improve consumption expenditure, which ultimately culminates in greater national demand for wholesale, manufacturing and farm-related goods from the valley.”

He projects continued increases in Valley home prices next year “given that the increase in housing supply is falling behind the increase in demand.”

To meet that demand, home building and construction jobs are picking up again. Soydemir expects construction jobs to increase by 4 percent each of the next two years.

Valley manufacturing employment, by contrast, is projected to grow by only 1.2 percent per year in 2014 and 2015.

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