Local business forecast shows state of Stanislaus economy

Stanislaus County had good job growth in 2021 but needs to add more housing stock and brace for the potential impact of inflation, according to an end-of-year San Joaquin Valley Business Forecast produced by researchers at Stanislaus State University.

The report, authored by Gökçe Soydemir, the Foster Farms endowed professor of business economics, and a team of researchers, puts forward predictions for the Valley’s future in areas such as housing, employment, inflation and banking, among others.

According to Soydemir and his colleagues, the Valley’s “structurally disadvantaged” economy, drought conditions throughout the past year and lingering effects of the COVID-19 pandemic all combine into a disproportional impact on the region’s businesses and people.

Employment numbers in Stanislaus picked up pace in 2021, Soydemir said, increasing by 3.04%, the third-fastest of the region’s eight counties. This kind of growth is a good sign, he added, because typically the county lags behind the rest of the state in terms of job growth.

But because Stanislaus County’s economy doesn’t rely as heavily on two of the industries hit hardest by the pandemic — leisure/hospitality and retail — as other counties in the region, the local labor force had “a leg up when it came to that category of employment.”

Soydemir said he expects this growth to be a more permanent trend in Stanislaus as the country moves into further stages of recovery from the economic effects of the pandemic.

“Overall, (Stanislaus is) going to have a bigger and faster growth,” he said. “After we reach our steady state equilibrium level of growth, I certainly expect this to be not a temporary phenomenon, but more of a permanent phenomenon.”

Stanislaus also was fortunate in its geographical location, Soydemir said, because the county wasn’t as impacted by the 2021 drought conditions as other parts of the state were. That is crucial when a bulk of the local economy is made up of agriculture and food processing.

On the housing front, Soydemir noted that Modesto had among the lowest numbers of accepted housing permits in 2021, issuing just 26. Fresno led the region’s housing permits, with 2,220 issued, followed by 1,749 in Stockton. Madera and Merced issued 778 and 93, respectively.

Developers have spoken about the difficulty in developing houses in Modesto, where the land entitlement process can sometimes take decades to complete. To combat this, the city is putting together a Housing Plan to identify possible development sites and help streamline the development process.

“It has been like that (in Modesto for) several years,” Soydemir said. “And that’s why we’re seeing one of the fastest increases in the Valley when it comes to housing price values.”

Current median home prices in Stanislaus County are around $449,000, according to data from Realtor.com. Rising prices, along with a nationwide home inventory shortage, have made the local market even more fast-paced. Though local real estate agents said prices are softening over the winter months, competition is likely to increase again in the new year as sales pick back up.

Looking forward to 2022, Soydemir warned that rising inflation rates will likely hit Stanislaus County harder than other areas because there is a higher percentage of lower-income earners.

“When prices go up, then they take a greater percentage of that income than other areas like coastal regions,” Soydemir said. “So the inflation (results in) a bigger decline in purchasing power.”

This story was produced with financial support from the Stanislaus Community Foundation, along with the GroundTruth Project’s Report for America initiative. The Modesto Bee maintains full editorial control of this work.

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