Report forecasts slower growth in Valley economy

Changing agriculture-related legislation is expected to have a slowing effect on the central San Joaquin Valley economy in the near future, according to a report released this week.

Proposed water flow restrictions by the state, the adoption of overtime pay for farmworkers and new restrictions on greenhouse gas emissions from cattle are likely to increase production costs and food prices locally and at the national level, according to the San Joaquin Valley Business Forecast Report.

The annual report from Gökçe Soydemir, a business economics professor at California State University, Stanislaus, projects out to 2018.

“It’s like driving a car. If you look too far ahead, you’re not actually going to see what’s going to happen, so you’re going to crash,” he said on Thursday. “If you look too near, again, you’re not going to see.”

The changes coming to agriculture regulation don’t bode well for the farm-heavy Valley economy, he said. On top of those new regulations, the rising value of the dollar means exports likely will drop for farmers.

That said, job growth in the eight counties has persisted. All counties and categories of employment grew through this point in 2016, “displaying resilient economic activity even under the lingering effects of drought,” the report says. “With the influx of population increasing in the Valley, it becomes ever important to increase water storage.”

Madera County posted the fastest employment growth in 2016, ending the streak of the typical growth leaders in San Joaquin and Fresno, which were second- and third-fastest, the report says. Kern and Kings counties posted the slowest growth, while Stanislaus, Merced and Tulare counties grew at about the same pace as the Valley average.

Projections point to a yearly average growth of 1.43 percent in 2017 and 2018, according to the report.

Interest rates are expected to rise as the national and state economies continue to improve, he said. After the housing market crash and Great Recession of about a decade ago, the housing market is returning to healthier levels.

For homeowners, Soydemir recommends switching to a fixed-rate mortgage as opposed to an adjustable mortgage. “You don’t want to get caught up in an environment where it’s rising and your mortgage ends up increasing as a result,” he said.

There is a housing shortage in much of the Valley, he said, which is putting pressure on prices, though it is tapering off. The report projects increases of about 6 percent in each of the next two years, which is about half of the rate of increase in 2014.

“It leveled off two years ago, and now it’s increasing at a slower pace than before,” he said. “We’re going to see that slowing even more.”

Housing permits Valley-wide decreased this year from the same time last year, he said, which marks the first year-over-year drop since the Great Recession ended. The northern part of the Valley saw more permits during that time, but the total was dragged down by a permit drought in the south Valley.

The spending power of Valley workers has kept up with inflation, according to the report.

“Overall, the Valley economy will grow at more cautious rates, facing several challenges such as new farmworker overtime pay, lingering effects of the drought, new regulations on cow emissions and future rate hikes,” he wrote. “However, despite these strong headwinds in the months ahead, the Valley’s resilient economy will continue to grow.”

This story was originally published November 10, 2016 at 4:57 PM with the headline "Report forecasts slower growth in Valley economy."