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Professor predicts slowdown for Valley economy
Gokce Soydemir
Gokce Soydemir

All regional and national indicators point to further slowing of economic activity in the Valley in the coming months, forecasts Stanislaus State Professor of Business Economics Gökçe Soydemir.

The biannual San Joaquin Valley Business Forecast indicates that as the longest-lasting period of expansion comes to an end, it is important for the business community to begin positioning itself to consider this change in the dynamics of the Valley economy.

Soydemir’s biannual Business Forecast provides projections for the Valley’s labor market, regional housing conditions, prices and inflation, banks and other depositary institutions and capital markets. Soydemir and his team use a unique forecasting model that produces lower and upper statistical confidence bands, with results that are expected to fall within this range. 

Here are some of the report’s highlights: 


The slowdown in the Valley’s total employment was more apparent in 2019 than in previous years. Most notably, total employment in the Valley registered a month-over-month decline for the first time since 2011. Also for the first time since 2011, total employment growth came in below par, as the average annual growth of 1.11 percent trailed the benchmark growth rate of 1.21 percent. 

Real estate

Building permits registered an 11.41 percent decline in 2019, following a very significant 32.84 percent increase in 2018, but such a correction is normal when a time series overshoots its mean by several standard deviations in the preceding year. The rate of new foreclosures continued to exhibit a flat pattern in response to the Federal Reserve discontinuing its pattern of rate hikes in its effort to maintain the pace of the national economy. Following consecutive cuts to the federal funds rate in 2019, 30-year mortgage rates fell to three-year lows. Meanwhile, the growth of home values has slowed, with a 5.75 percent average yearly increase in in 2019 registering slightly above the long-term benchmark rate of 5.14 percent and trailing the growth rates evident in 2017 and 2016. 

Prices and inflation

Following the interest rate cuts, the yearly inflation rate stayed slightly higher than the typical rate of 2.32 percent. Overall price levels are projected to stay above the typical rate of inflation and are being boosted by recent increases in the price of oil due to rising tensions in the Middle East.

Wage growth in the Valley changed very little from the preceding year, and because the rate of inflation and wage growth were about the same, there was no real wage decline in 2019. While Valley consumers were able to purchase roughly the same amount of goods and services in 2019 as in 2018, some gradual declines in real wages are expected in the coming two-year interval as rising prices outpace wage increases.

Banking and capital markets

Total bank deposits in the Valley grew slower in 2019 than the preceding years, but at about the same rate as the long-term benchmark rate. The number of loans and leases issued also grew at a slower rate than in previous years, and total deposits, net loans and leases grew at rates below the long-term benchmarks. The amount loaned exceeded the growth in bank deposits, indicating the community banks extended loans at a faster rate than the deposit rate. Valley bank non-accruals continued to trend upward in 2019, along with accruals 30-to-89 days and accruals 90-plus days, which increased at a faster rate in 2019. The projections point to a continuation of the upward trend in bank accruals in the coming years.

External sector

This section, added last year, examines activity at the Port of Stockton, which handles shipments of goods such as cement, steel, liquid fertilizer and rice — four bulk items highly susceptible to the pressures of tariffs. Forecasts will be generated for these series when the number of observations satisfies the minimum requirement. Imports of materials used in construction have decreased drastically in 2019 compared to those years during which there was no trade war. The worsening impact of trade wars can be seen from 2017 onwards.