By Manfred Keil and Suchen Hou | Inland Empire Economic Partnership
The Inland Empire, like other Metropolitan Statistical Areas, was heavily impacted by the coronavirus pandemic, both with the health aspects and its economy. Policy makers had a choice of accepting higher mortality rates versus reduced growth and employment due to policy stringency. In California, the choice was made in favor of keeping mortality rates lower, placing more restrictions on the economy.
The COVID-19 downturn had most of its reduced employment effects on five industries: Leisure and Hospitality, Health (and Private Education), Retail Sales, Other Services, and Professional and Business Services, in that order.
The Health industry was, perhaps surprisingly, negatively impacted as a result of people avoiding hospital and doctor visits other than for coronavirus-related problems. Many did not see a dentist for two years and did not schedule regular check-ups and blood tests. Other Services, which includes spas, hairdressers, and nail salons, was actually the most affected, but the industry simply does not have that many people working in it to have a stronger overall impact. You can explain much of the differences in increases in the regional unemployment rates from February to May 2020 by focusing on labor market developments in these sectors.
In the Inland Empire, the unemployment rate increased by 11.8 percentage points from 3.4% in February 2020 to 15.2% in May 2020. By comparison, Los Angeles County experienced a jump of 14 percentage points from 4.9% to 18.9%, while the Golden State as a whole showed a change of 12.5 percentage points from 3.3% to 15.8%.
Due to the rise of the Logistics industry during the downturn and the subsequent recovery, the Riverside-San Bernardino-Ontario MSA performed relatively well. As a result of the increases in unemployment over such a short time period, many decided to drop out of the labor force completely, hence the “great resignation.” Note that if you were born in 1950 (a boomer), you turned 65 in 2015, and by 2020, many boomers had reached retirement age or were close to it. This would result in lower participation rates (labor force share in population), and indeed, that is what we observed.
Here we are interested in analyzing shifts in employment within the Inland Empire for industries and the major cities in the area. The 12th most populous MSA in the U.S. added 106,500 jobs over the five-year period since May 2020. This does not count additional employment generated from commuters.
The three sectors that primarily contributed to this job creation were Health (42,300), Logistics (41,600), and Government (8.900). These three sectors happened to be the three biggest employers in the Inland Empire prior to the pandemic. Note that between the three industries, 88% of all new jobs were created since February 2020. There are three sectors in the Inland Empire where employment has not returned to pre-pandemic levels: Manufacturing (-4,700), Financial Activities (-1,600) and Information (-1,100). The three sectors saw their employment shares decline slightly from 10% to 9%. These sectors do not play a significant role in the Inland Empire, although, and perhaps sadly, average pay in these industries is relatively high. Great Reshuffling? Yes, if you mean more concentration among the already most important sectors and away from the remaining sectors, then the term is correct.
Next we want to see how these changes are reflected in employment shifts within the Inland Empire’s major cities. Employment data by city and establishment are not easy to obtain. To find these numbers, we purchased access to the National Establishment Time Series database. This database contains historical data back to 1990 (9.7 million observations for California alone) on establishments. Here we will focus on the five most populous cities in Riverside County (Riverside, Moreno Valley, Corona, Menifee, Murrieta) and San Bernardino County (San Bernardino, Fontana, Ontario, Rancho Cucamonga, Victorville). If city employment was already dominated by the Health and Logistics industry, or by Government employment, then there should not be much change at the top.
Next we will focus on non-farm employment for these 10 cities, and the top 10 employers of 2019 and 2022 to see the changes. There are some caveats to our analysis: first, we are looking at establishments, not firms; a firm can have more than one establishment. This may explain why Amazon does not show up as the biggest employer. Second, for almost all of the cities, the local school district was the biggest employer. The school district is classified as (Local) Government. We will exclude local school district employment from the analysis below.
For starters, we find that the 2022 employment levels of the top firms had not generally returned to 2019 levels with a few exceptions. The Healthcare Sector employers that appear in the top 10 have generally risen in rank within the three years for which data is available, making them the more significant employers in the region. The structure of the health industry has diversified post-pandemic, as we see the growth of medical care and support industries. Despite the rise in rankings, the health sector industries on the list have not significantly increased their number of employees, and many have even faced small declines relative to 2019 levels. The increase must come from newly established healthcare institutions that are smaller in scale, while the larger, existing companies are closer to capacity limits. The logistics industries have become more significant employers while expanding. Although the short-term boom was followed by a contraction in logistics employment after mid-2022, data indicates that logistics is still significantly above its pre-pandemic level. Whether it is the strengthening and long-term trends of the Healthcare and Logistics industries, or the continued outflow of the previously weaker industries, there is no Reshuffle phenomenon visible in the Inland Empire.
Here are some interesting numbers :
Riverside County
Both the U.S. Air Force and the Riverside University Health System are no longer in the top employer category, replaced by UC Riverside and the city of Riverside.
Access Information Management, an information sector company, has moved into second place in Moreno Valley.
Two medical firms, UHS and Kaiser have replaced a financial company, VSM, and a retailer, Walmart, as top employers in Corona.
There was little change in Menifee, and a Health sector company, My Kids, a pediatric dentist, replaced the city of Murrieta in the top three.
San Bernardino County
Loma Linda University Health has replaced Caltrans in the top three for the city of San Bernardino.
The U.S. Postal Service and Kaiser are now on top in Fontana, replacing a warehouse operator World Class Distribution.
Damao Luggage still has the most employees in Ontario, but UPS has now been replaced by the city of Ontario in the top three.
A Leisure and Hospitality company, SAS Restaurants, remains the top employer in Rancho Cucamonga.
Boeing and Walmart have replaced UPS and the city of Victorville as the top employers in the largest high desert city.
While there has been much talk about the “great resignation” and the “great reshuffling” inlabor markets from the pandemic, in the Inland Empire we have not noticed anything significant along those lines. Different from the state economy along with LA County and Orange County, the labor force and employment in the Inland Empire have actually increased compared to February 2020.
The three largest industrial sectors (Private Education and Health, Government, Logistics), which in February 2020 generated 47% of the Inland Empire employment, now have reached an employment share of almost 50%. It is not surprising, top employers in the counties have not changed their employment shares and rank significantly over the last five years. Simply looking at the top three employers (top four if you consider the school district) while focusing on the largest cities, and not finding a significant amount of churn, does not necessarily mean there is no evidence of reshuffling if we looked at more establishments. We’ll leave that for another piece and simply state at this point that our analysis, so far at least, suggests there was no large variation among firms and their employment that we could see by the end of 2022.
Manfred Keil is chief economist, Inland Empire Economic Partnership, Associate Director, Lowe Institute of Political Economy, Robert Day School of Economics and Finance, Claremont McKenna College.
Suchen Hou is research analyst, Lowe Institute.
The Inland Empire Economic Partnership’s mission is to help create a regional voice for business and quality of life in Riverside and San Bernardino counties. Its membership includes organizations in the private and public sector.
