By allowing ads to appear on this site, you support the local businesses who, in turn, support great journalism.
Forecast has area housing market surging while tariff impacts

The Valley’s farm-based economy will continue to be affected by tariffs, trade wars and Federal Reserve rate hikes through 2018 and possibly beyond, according to the biannual San Joaquin Valley Business Forecast released recently. 

Prices in the Valley have been rising more significantly as of late, according to the report authored by Gökçe Soydemir, a professor of Business Economics at Stanislaus State. The trend, brought on by wage growth, the country’s new tariff structure — along with its resulting retaliation — and the price of oil.

Soydemir has been the lead author of the business report since 2011, and said that the state of the Valley’s economy in 2018 is slowing down after years of expansion following the Great Recession. 

“We started doing these reports at an interesting time, which was in 2011 right toward the end of the Great Recession. A lot of people were thinking the economy wasn’t going to get better then, but we forecasted that it would,” noted Soydemir. “Ever since then it’s been growing, however, recently we are seeing some slow down in growth because of Federal Reserve rate hikes disproportionately affecting the economy.”

The Federal Reserve is likely to continue increasing interest rates about every three months, and simultaneously engage in monthly balance sheet reductions of $50 billion to keep inflation under control. In the Valley, this has outweighed the impact of the Trump Administration’s tax cuts, Soydemir said, and thus, the slow-down in local total employment growth continued in 2018.

Projections point to an average yearly growth of 1.45 and 1.05 percent in Valley employment in 2019 and 2020, respectively. Stanislaus County posted a 1.20 percent average annual growth this year.

The annual rate of inflation rose to 3.36 percent and stayed above three percent for 10 consecutive months, the longest duration since the end of the Great Recession. The long-term benchmark inflation rate now stands at 2.29 percent. Valley consumers are likely to feel the further decline in their purchasing power in the coming months, with projections pointing to yearly inflation rates of 3.20 percent in 2019 and 2.87 percent in 2020, assuming the Federal Reserve’s policies achieve their objectives. The increase in wages was offset by a higher than the long-term benchmark inflation rate.

“The reason the Valley has been affected differently than the rest of the nation is because … there’s a greater balance of unskilled work here,” wrote Soydemir.

The employment category which saw the most growth this year was the construction sector, which jumped to a significantly high 7.88 percent. This is due to a spike in housing permits in the Valley, which after a very long lag following the end of the recession has registered a huge 32.84 percent growth this year. Valley home prices grew at an average annual rate of 8.50 percent, about the same rate as 2017, reflecting a shortage in inventory. 

“When you look at single family housing permits compared to previous years, there’s a big spike. That’s good, obviously, because there are more homes are being built,” Soydemir said. “Prices have gone up at same rate as last year, when in other parts of the states the market has clearly shifted.”

The nation’s trade wars began to take their toll on the Valley in terms of significantly lower exports of almonds, wine and cherries. Cement and rebar imports from China through the Port of Stockton went down considerably and are being replaced by domestic production, but at higher prices, increasing the prices of homes in the process. 

“Whenever you have an economic policy being implemented, there will always be winners and losers from that policy. What’s important is whether the nation is gaining at the end,” Soydemir said. “The Valley stands to lose from these tariffs and retaliations.”

Valley consumers are already feeling the impact of the trade wars by paying more for the same bundle of goods they bought before, such as toys and other items at retail outlets. Prices of durables like refrigerators, dishwashers and cars have also increased due to tariffs on steel. 

“Consumers feel the impact because they’re having to spend more out of pocket,” Soydemir said. 

The complete San Joaquin Valley Business Forecast can be found at