Forecast predicts economic growth in 2016 for Merced, San Joaquin Valley

Forces from within Merced County and around the state will continue to improve the county’s economy in the coming years, according to a recently released report.

The Center for Business and Policy Research at Stockton’s University of the Pacific predicts the unemployment rate will continue to drop while construction trends upward. Much of the improvement is related to continued expansion of UC Merced, according to Director Jeff Michael, as well as those Merced County residents who travel out of the area for work.

In his California and Metro Forecast released late last week, Michael estimates construction jobs will grow this year and for the industry to hit its stride in the spring with an 11.2 percent increase from the same time the previous year. After that and into next year, the improvements will hover around an 8 percent or 9 percent increase.

“That’s been a beaten-down industry,” he said. “We expect to see that starting to pick up as the remnants of the foreclosure crisis are behind us.”

Construction job growth in the region has been “impressive” in exceeding prior forecasts, he said.

The report also expects personal income and wages in Merced will be on the rise, fueled in part by an increase in the state’s minimum wage. Real personal income in Merced is forecast to be $7.9 million this year, a 2.8 percent increase from 2015.

Merced County is the smallest metropolitan statistical area tracked in the report, Michael noted. The county has lagged in growth behind others in the state, but also benefits from improving markets in Southern California and the Bay Area, he said.

The plan from the University of California to pour about $1 billion into UC Merced will continue to help the economy in the region, he said. The school’s growth also attracts businesses and homebuilding.

“(UC Merced) certainly has been a big factor in the area’s economy in the past five or 10 years,” Michael said. “The expansion plans out to 2020 will represent a significant investment and a lot of jobs for the Merced community.”

It’s not all good news as farmers are likely to feel the sting of a decline in commodity prices. The prices are expected to “come back to earth” but remain profitable, he said.

Government jobs are also expected to see healthy growth at 5.9 percent this year. Other indicators include a 1.5 percent increase in county population to 274,600, and an overall 0.6 percent increase in the labor force. Manufacturing, which has been sprinting in growth in recent years, is forecast to level off or even decrease.

The forecast says the unemployment rate for the year will be 10.5 percent, down from last year’s 11 percent. Peering further into the future, Michael said Merced County could see a 9 percent jobless rate by 2020.

The forecast is released three times a year, Michael noted, and the center is constantly tweaking its data. He said the report has been relatively accurate.

“We’ve been projecting growth for the past five years, but the county’s outpaced our predictions in recent years,” he said.

In the more immediate future, the city of Merced is looking at improved growth. David Gonzalves, director of Development Services for the city, echoed the expectation Michael has for construction to pick up.

Home construction is typically lax in the winter, but Merced is positioning to see an improved year. There were 85 single-family home permits pulled in 2015 compared with zero three years earlier, he said.

“There’s a great improvement on residential construction,” Gonzalves said. “For 2016, I’m anticipating between 125 and 150 single-family dwellings. That’s also going to spill over into the multifamily.”

Commercial construction is ongoing, he said, pointing to projects such as the 15,000-square-foot call center finished in the fall on Park Avenue. Then there are two more buildings of roughly the same size going up – one a Les Schwab Tire Center on 16th Street and the other an office space on M Street.

“The new construction is finally coming back,” he said.

A 97-bed hotel is planned at Parsons and Childs avenues, he said, and a 3,000-square-foot Starbucks is planned at 16th Street and Martin Luther King Jr. Way.

“(UC Merced) is obviously a very big influence,” he said, “but also the economy’s general health is getting better.”

This story was originally published February 7, 2016 at 5:34 PM with the headline "Forecast predicts economic growth in 2016 for Merced, San Joaquin Valley."