Rising prices are having a disproportionate impact on the San Joaquin Valley economy, according to the new Valley Business Forecast report prepared by Gokse Soidemir, Adoption Farms Professor of Business Economics at Stanislaus State.
“In our previous report, we stated that the weight of the support will depend on how fast and how fast the Federal Reserve raises interest rates. It takes time for rate hikes to affect the economy, and there is growing concern that the Federal Reserve is raising rates too quickly without waiting for changes in the economy,” Soydmir said.
It says the yield curve on two-year and 10-year bond yields has been forecast to fall for some time since late March.
“Now there is increased concern that the Federal Reserve’s increased pace to bring down inflation will lead to a hard landing in the economy,” Soydmir said.
Soidemir offers these tips: “Valley businesses and residents can take precautions by switching from variable to fixed rates, reducing debt and reducing leverage, increasing cash holdings, renting rather than owning a home, and switching to zero-introductory interest credit cards.”
It’s not all bad news. All employment categories except financial activities grew in 2022, and total employment in all provinces increased significantly above their respective long-term benchmark growth rates. However, overall employment in the Valley may decline in 2023 but show some growth in 2024.
Other report highlights include:
real estate: The most worrisome indicator to watch is the 30-year fixed interest rate, which has seen an all-time high. In the year By 2022, residential permits will increase by 18.92 percent, and home prices will increase by 21.46 percent, raising the risk of a housing market bubble. The double-digit increases in home values seen in 2022 and 2021 do not appear to be sustainable, and a correction back to rates in line with benchmark growth rates is expected.
Prices and inflation In the year In 2022, average inflation stood at 8.29 percent and average weekly wages rose by 3.28 percent, resulting in falling real wages and a loss of purchasing power expected to continue in the coming months. Other factors putting pressure on overall price levels are the Ukraine-Russia war and unresolved supply chain issues. Although inflation has been declining very slowly, the 2 percent fall predicted by the Federal Reserve is unlikely to happen in the near future.
banking and capital markets; A clear change was observed in the dynamics of Valley Community Bank’s total deposits and net loans. The Valley’s total bank deposits are projected to grow by 9.57 percent in 2022 – almost half of what was seen in 2020 and 2021. There was no further growth in Valley’s net loans and leases, reflecting the tight stance of community banks on loan extensions. Valley Community Bank’s assets started 2022 looking significantly higher than 2021, and are likely to increase if the unemployment rate continues to rise. Community bank assets in default 30 to 89 days and assets in default 90-plus days increased significantly in 2022 compared to previous years.
To read the full report, visit: https://www.csustan.edu/cba/san-joaquin-valley-business-forecast