Riverside/San Bernardino economy faces significant challenges in 2008
Despite the impact of an imploding housing market, which has caused single-family house prices to drop 16.8% — more than any of the 25 largest metropolitan statistical areas in the country — the Riverside/San Bernardino economy is generating jobs faster than all but one of them.

As with the country as whole, most of the 32,400 new jobs in Riverside/San Bernardino  over the past year were in the services sector (+31,800). Significant contributors to this increase included trade (+9,700), professional and business services (+7,100), education services (+5,100) and leisure and hospitality (+5,100).

Weakness in housing demand was responsible for a steady slowdown in employment in financial services and construction. However, compared to the rest of the country, which saw employment in goods-producing industries shrink by 2%, goods-producing industries in Riverside/San Bernardino continued to expand (albeit very slowly) in 2007.  This modest growth was due to increased exports of locally-produced manufactured goods caused by the sharp drop in the value of the U.S. dollar.

Looking forward, the near-term outlook for Riverside/San Bernardino will be severely constrained by the significant tightening of the credit market, which will hurt both household and business borrowing.

According to DataQuick, the number of mortgage default notices filed against homeowners in California hit a 20-year high in the final quarter of 2007. In Riverside/San Bernardino they were up 113.3%, on a par with the 114.5% increase for the state as a whole.

Tight credit conditions are likely to cause housing demand to remain in the doldrums for the balance of the year and cause a further pullback of employment in construction, real estate and banking. In addition, governments will be forced to rein in spending due a sharp drop in property tax revenues.

According to a recent forecast by the Los Angeles County Economic Development Corp., while Southern California  should avoid recession, “the most distress will be in the Riverside/San Bernardino area and Orange County.”

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