Although business activity in the Inland Empire continues to outpace the nation in its recovery from the COVID-19 pandemic, the rate of recovery has slowed as the regional economy draws closer to pre-pandemic levels of activity. According to the new Inland Empire Business Activity Index released today by the UCR School of Business Center for Economic Forecasting and Development, the area’s business activity should reach pre-pandemic levels by the end of this year. Over the next two quarters, local business activity is forecast to rise between 3% and 6%.
The Inland Empire's economy has nearly rebounded to pre-pandemic levels. Business activity in the region expanded by 4.5% in the third quarter compared to a 2.1% growth rate in U.S. GDP over the same period. The IE’s growth rate has declined from 8% in the second quarter of this year and 7% in the first, showing a clear slowdown as momentum stabilizes.
“This slowdown is to be expected as we move closer to pre-pandemic conditions with respect to economic output,” said Taner Osman, Research Manager at the Center for Forecasting. “The bigger issue for the coming year is likely to be the labor market, which still has some way to go before reaching pre-COVID levels and is going to continue to struggle with an adequate supply of workers.”
The report highlights that while overall economic output is nearly restored, the labor market tells a different story. According to the findings, the Inland Empire’s labor market has added back 185,600 jobs since hitting bottom in April 2020, regaining roughly 83% of the total jobs lost due to the pandemic. However, total payroll employment remains 2.3% below the peak reached in February 2020. That deficit represents 36,700 jobs that have yet to return.
Comparisons with broader state and national data show the Inland Empire is performing relatively well. California’s overall employment remains 5.6% below its pre-pandemic peak, while the nation is 3.3% below the levels seen in February 2020. This indicates that the Inland Empire is recovering faster than both the state and the country, even though the region still faces lingering challenges.
According to the report, the effects of the pandemic on business closures are expected to lessen significantly in the coming year. The greater challenge ahead will be rooted in the supply of labor, with housing costs standing out as one of the most significant barriers. “While the Inland Empire is less costly than many parts of the state, compared to the national average, home prices here are pretty sky high, which will exacerbate labor supply issues and restrain needed growth in the workforce,” said Osman.
The forecast emphasizes that as businesses move into 2025, attention must turn toward policies and strategies that strengthen the labor force. Without adequate growth in the supply of workers, the ability of the region to sustain higher rates of expansion will be constrained. Businesses may face difficulties in filling positions, which could ultimately slow hiring, reduce productivity gains, and limit the broader pace of recovery.
Despite these concerns, the overall picture for the Inland Empire remains one of resilience and above-average growth. The steady upward trajectory, combined with fewer anticipated business closures, suggests that the regional economy will continue to move toward stability and renewed strength. The Inland Empire has demonstrated that it can weather severe economic shocks and emerge ahead of both state and national benchmarks, underscoring its vital role in California’s economic landscape.