Dr. Gökçe Soydemir recently presented 2021-2023 San Joaquin Valley Business Forecast’s mid-year update to the Turlock Chamber of Commerce, painting an optimistic picture of recovery for the region as COVID restrictions continue to lift.
In June 2020, Stanislaus State’s first of two forecasts authored by Foster Farms Endowed Professor of Business Economics Gökçe Soydemir correctly predicted that economic recovery would begin during the second half of 2020 — so long as everyone adhered to COVID-19 precautions and protocols. In his May presentation to the Chamber, Soydemir said that while the recovery did begin in late 2020, it was slowed due to the region’s hesitancy to wear masks as well as the development of new, mutated forms of the virus.
This is demonstrated by the San Joaquin Valley’s total employment, which sat at about 1.75 million prior to the pandemic, Soydemir said, and fell to less than 1.5 million when shutdowns first began. The number began to creep back toward 1.65 million in late 2020/early 2021 but has since begun to trend back downward.
Now, with more people getting the vaccines, a rapid recovery is expected for the second half of 2021.
“The economy is going to catch the prevailing trend that existed before,” Soydemir said.
According to the graph he showed during his presentation, Soydemir predicts that employment levels could become greater than pre-pandemic values by the end of 2022 in the optimistic forecast.
One of the fastest-recovering sectors of the local economy has been construction employment, which fell at the pandemic’s start but shot immediately back up in the months to follow as construction was permitted during the shutdown. While the sector experienced growth of -3.01% in 2020, it is expected to increase at 5.01% in 2021-2023. The sector employed about 85,000 prior to the pandemic and Soydemir expects there to be 75,000 working in construction by the third quarter of 2022.
Another employment category which Soydemir called “interesting” was that of education and health services, which experienced a 0.79% decline in 2020. While the sector wasn’t affected at much during the Great Recession, the economic collapse caused by the pandemic adversely affected the industry. In the second half of 2021, Soydemir predicts a 2.63% growth rate which is expected to exceed 235,000 people employed.
Leisure and hospitality services were heavily impacted by the pandemic and experienced the fastest decline in employment in the Valley, Soydemir said.
“That’s not surprising, because that category employs the most unskilled workers, so they were the most vulnerable,” Soydemir said.
The category experienced a 17% decline in 2020 and likely won’t reach pre-pandemic levels until the end of 2023, with an expected growth of 7.88%.
The only category which experienced positive growth during 2020 was that of trade, transportation and utilities — the sector least impacted by COVID-19. The 0.48% growth was described by Soydemir as “significant” and was a result of continued transportation of goods throughout the pandemic. Its projected growth rate is 2.37% and will reach 310,000 employees by 2023, far above the long-term rate of 1.7%.
“It was an essential category of employment, and more so in the Valley than anywhere else,” Soydemir said.
Manufacturing, however, was struggling prior to the pandemic and continued to decline in 2020 at a rate of 2.04%. It is one of the sectors that is predicted to be slow in recovery and is anticipated to grow at a 0.96% rate.
Retail trade employment had one of the worst declines and experienced a 4.01% decline in 2020. As it recovers, the sector will have to compete with online shopping as well, Soydemir said. Retail is projected to increase at a 2.14% rate and should stay below 160,000 employees in the next two years.
There were some positives from the report, like an increase in single-family dwelling building permits and a decrease in foreclosures; the latter statistic is due to intervention from the CARES Act and the Federal Reserve, but the number is at an all-time low since 1999. Housing prices continue to rise as excess demand continues, thanks in part to Bay Area transplants.
Wages increased by 6.97% last year — the fastest-ever wage growth thanks to low labor force participation. Wages will grow slower as the recovery continues, Soydemir said, but will keep pace with inflation with projected growth at 3.29%