For the second straight year, community members came together at the Grand Oak Banquet Hall and Event Center on Thursday for the annual Turlock Business Conference. Speakers included Stanislaus State professor of business economics and Foster Farms endowed professor Dr. Gökçe Soydemir, Somjita Mitra of the California Department of Finance and Jessica Bohlen of Retail Strategies.
Soydemir began by sharing parts of his 2024-2025 San Joaquin Valley Business Forecast, with one of the main factors in the predictions he and his team made being interest rates. The 30-year fixed interest rates are currently at 7.49% while the 10-year is 4.09% — both the highest since 2000. The Federal Reserve announced late last year that they would aim to have three cuts in 2024, but so far haven’t, thus causing the economic recovery of the nation, the state and the Valley to be slower than anticipated.
According to Soydemir, the Fed is not ready to cut rates because inflation is not at their target rate of 2%. Instead, it is at 1.64%. It’s down from 8% at this time last year, but leaves things in a gray area. Inflation still exists mainly due to the lack of affordable housing and due to high oil prices caused by international conflicts, but it’s not bad enough where it warrants cuts. And as prices of goods remain high, wage inflation continued to ravage in 2023. Last year, average rages across the labor market increased 6.01%, which is three times initial projections. Soydemir predicts that wages will continue to rise in 2024 and into 2025, but not as fast.
Historically, unemployment rises when inflation persists, and it seems that wage inflation has only added more fuel to the problem of people unable to find jobs. For the past year, there has gradually been an approximate 2% job loss in San Joaquin Valley for the first time since 2008. In Stanislaus County, every single industry saw job losses in January with the exception of the local government sector (400 hires) and the health care and social assistance sector (200 hires), according to the State of California Employment Development Department. The biggest job loss came within the farming industry with 1,100 jobs let go, mainly due in part to the colder and wetter climate. Not too far behind was the retail industry, which let go of roughly 1,000 workers in the aftermath of the holiday shopping season.
Soydemir predicts that construction, retail, wholesale trade, manufacturing and financial servicing jobs will continue to be negatively impacted throughout the year. He projects there to be a 1.08% decline in retail jobs and a 1.64% decline in construction jobs as long as housing isn’t built due to inflation, which also impacts the consumer markets and the labor force.
Soydemir explained that the Central Valley remains disproportionately impacted by the negative trends because the amount of unskilled workers there are, better described as people without college degrees.
“In fact, when the national economy slows down, we slow down more because of the fact that we have more unskilled workers here. Seventy-three percent of our workers are unskilled and they are on the frontlines. Anytime the economy slows down, they're the ones that can be laid off first,” Soydemir said. “The greater the skill you have, the harder it is for you to be laid out. In fact, when you look at education and health services, those industries don't get affected by recession.”
Mitra added later in the conference that unskilled farm workers are at risk as the industry moves more into automation.
Mitra also discussed housing in her presentation. As Soydemir predicted, there will be a 2.41% decline in home prices in 2024, as the prices seen last year, coupled with the high rates, were not sustainable. When rates are eventually cut, he expects competition to ramp up again and prices to rise as much as 3% in 2025. Because of the high cost of living throughout the state, California’s population has slowly declined from over 39,538,000 residents in 2020 to just over 38,940,000 in 2023. She cited people moving out of state, declining birth rates and deaths of California’s large aging population as how the population numbers have declined.
There is optimism for Stanislaus County’s labor force, though, as there are people moving from more expensive regions like Sacramento and the Bay Area to the Central Valley. Philip Lan, the founder and president of Bay Valley Tech Coding Academy in Modesto, stressed to attendees that the labor force is changing, and that despite many moving from the Sacramento and Bay Area work in technology, the demand for tech workers is at an all-time high and that several startups and established companies are recruiting and opening headquarters in the region.
For those comfortable in their jobs, such as small business owners, or those not wanting to venture too far into the world of tech, Bohlen shared consumer statistics to give the audience an idea of how people are spending their money.
And as it turns out, people are spending a lot. Most spending is driven by everyday household items, while there is still popularity in eating out and indulging in entertainment, particularly in Q4 of 2023.
“A big shift that we see in the holidays is having an experience for a gift instead of actually purchasing something tangible. Last year, the average person spent $958.20, and 2% of that went into entertainment and experiences; 65% were dining out at a restaurant; 43% going to the movies,” she said. “People want to go out, and it’s the same with shopping for groceries and clothes.”
With building slowed and rents high, business vacancies are up. Bohlen explained that the situation has opened the door for discount stores, which can offer folks affordable goods while providing job opportunities.
“Long story short, since 2020, there has been low vacancy and rents are high (4.2% total commercial vacancies across the United States)... And new construction isn’t happening,” she said. “So national retailers in 2023 announced expansions, like Dollar General with 1,000 stores. I know that Dollar General doesn't sound very exciting. However, when you bring Dollar General to a small or rural community, it really starts to help build that ladder of who's going to come next. If that Dollar General does well, Starbucks starts looking and Chipotle starts looking.”
But not everybody is happy with the growing number of establishments like Starbucks around town, which Bohlen acknowledged. For locally owned small businesses to compete with the large national chains, she strongly recommended that folks explore omni-channeling, which is the practice of adding online accessibility to the traditional brick-and-mortar experience.
“What percentage of retail sales total do you think are online? The answer is only 15%. During 2020, there was a big fear that online sales were going to become so easy that we were not going to go back into stores, and that simply wasn't true,” Bohlen said. “There was a spike definitely during COVID (nearly 17% rise), but since then, it has settled to about 14%. And that's because we still need to shop in a store for our daily needs. That's not going to be changing. People are still going to be visiting stores… What we learned is that 50 to 57% of shoppers said they were going to use more than one channel for shopping.
“Buy online, pick up, in store… Omni-channeling is more important than ever, especially important if you own a small business. You can have an online presence, whether it be a website or maybe social media (account). Now not only are you seeing more foot traffic, but you can be shipping goods to all 50 states.”
For local residents who are unskilled, Soydemir recommended that they enroll in school and explore careers that are in high demand. He also recommended that those people take out loans. Also as a way to build security for the future, Soydemir suggested attendees to not accumulate any unneeded debt (i.e. new car loans), be overweight in cash, gradually begin to buy bonds, and to switch from fixed rate loans to flexible rate loans in the coming months.
