‘2022 Southwest Regional Economic Forecast’ Sees Continued Economic Growth

Dr. Christopher Thornberg walks to the stage as he is introduced for his presentation at the 2022 Southwest Regional Economic Forecast at South Coast Winery.

Shane Gibson photos

Dr. Christopher Thornberg, Director of the UC Riverside School of Business Center for Economic Forecasting gives a presentation about local and the national economy during the 2022 Southwest Regional Economic Forecast at South Coast Winery.

by Tony Ault

The Temecula Valley Chamber of Commerce in partnership with the University of California Riverside School of Business Center for Economic Forecasting presented their annual economic forecast for Southwest Riverside County Aug. 18 providing the good news of continued economic growth for the region.

Hundreds were in attendance at the event at South Coast Winery Resort and Spa which included video presentations from the city managers of Temecula, Murrieta, Lake Elsinore, Wildomar and Menifee, touting the successes of each of their cities, before hearing from keynote speaker, Christopher Thornberg, PhD, and director of the UC Riverside School of Business for Economic Forecasting and Development.

Thornberg saw the main need for continued prosperity in the region as housing with the secondary need to take measures to increase the labor force. He did warn, however, things will be changing in the next few years because of continuing inflation, supply chain problems and the “very false narrative” by much of the media headlines spelling recession and depression.

“That false narrative that continues to be there,” Thornberg said, “is the most dangerous thing our economy is actually facing.... Be aware of the narrative, you know.”

He said he saw himself somewhat of a historian, but as an economist he pointed out that people should look at the world’s history of booming and failing economies. He said there have always been ups and downs.

Southwest Riverside County

Thornberg urged the audience to take a closer look at reality, particularly in the Inland Empire and southwest Riverside County as he used graphs and other visual aids, showing that since the end of COVID-19 everything in the area, from housing to jobs, has moved continuously upward, despite the record-breaking national inflation rate reaching almost 10%. The reason for the inflation

Dr. Christopher Thornber’s presentation urged the audience to question the narrative of a grim outlook about the economy that has been widely reported in mainstream media. Members of the community from various industries and dignitaries listen to Dr. Christopher Thornberg give a presentation at the 2022 Southwest Regional Economic Forecast.

rate record increases since COVID was because more money has been pumped into the nation, mainly by the U.S. government, he said

Thornberg looked at the region which saw a drop in the unemployment rate to just over 3.5%, something that has never been seen before as he cited higher wages and a job market that is now screaming for more laborers, skilled and unskilled.

He saw the housing sales up to just the last month breaking records with more demand than supply.

With the housing demand on the rise, costs are increasing in the area, he said, adding the trend was good for those who own their home due to the increase in home values, but not so good for those aspiring to buy a new home.

“In Riverside County, it’s only 3.6%,” he said of interest rates. “It has never been below 4% in the Inland Empire. Clearly, it is not a recession. This economy is operating at full capacity.”

Inflation cooling off?

The Federal Reserve has reported that as interest rates increase, inflation should decrease.

Thornberg discussed southwest Riverside County where new homes are still selling at almost record rates until just the last month, when there was a slight drop in sales.

“You’re going to have good years because there is a lot of pentup demand… but there are not enough people to meet these demands,” he said, adding that was the problem being faced by many today. “That is the problem we are facing right now. There is a problem out there much like it was in 2004 but it didn’t reveal itself.

“The ultimate answer is very simple, don’t jump into your bunker. It’s way too early,” he said, citing the supply and demand problems amid the economy remaining in “good shape.”

Thornberg said he saw two courses of action for continued growth of the local economy suggesting the need for more laborers to be hired to meet the demand and more housing, not necessarily single family homes but multi-family homes to attract more of those laborers and service people with lower incomes. He pointed out the desperation that the local schools are facing with the need for more qualified teachers as part of that needed labor force, calling them “critical jobs.”

Thornberg said the housing market is sustaining the region’s economy.

“The most important thing out here is to keep the housing going,” he said.

Thornberg said he saw it as the upside to the local economy, but with it came a 30% increase in the cost of homes. The rental market also increased, but people are still renting because the new home prices for many are now out of reach with higher interest rates, he said.

He noted these things show a demand problem exists, not a supply problem. He said the most critical problem now in southwest Riverside County is the lack of multifamily housing that is affordable for lower income families, families most in demand in the job market.

“If you need more laborers here now, you need more multifamily homes,” he said as he cautioned that bringing in more multi-family homes and increasing the labor force will take more water. “Water doesn’t cost any more than it did years ago.”

Most water usage in the area goes to agriculture, but that industry is exporting more of its products out of the country than in the country, he said and he discussed Imperial Valley, where crops like hay are grown, only to be sent overseas to countries like Saudi Arabia. Thornberg questioned growing “grass in the desert,” when water is still needed to meet local demands and future economic growth.

Thornberg said he saw that inflation, though decreasing slightly over the summer months, will still be a problem in the future for the local economy. Even with that he encouraged people not to look at the narrative of a diminishing economy and look at where we are economically compared to 10, 20 or 30 years ago.

“It may be weird,” he said, “but it’s all in our heads.”

Thornberg called attention to the trend pushing toward more politically partisan views instead of economic views, looking very critically at the recent Federal Reserve actions increasing the interest rates to record highs, fueling the negative politics that are “ignoring the data,” and encouraged all attending to continue to work to resolve today’s economic problems that are not as bad as the narrative concludes.