Business activity in the Inland Empire jumped considerably in the latest numbers – and on an annual basis, continues to outpace the nation. According to the new Inland Empire Business Activity Index released today by the UCR School of Business Center for Economic Forecasting and Development, the region’s economy officially transitioned from recovery to expansion in the fourth quarter of 2021 (the latest data available) and growth is forecast to continue throughout 2022.

The Inland Empire’s strong showing is particularly significant given the unique set of challenges that local economies have faced since the onset of the pandemic. After months of uncertainty and business closures, the region has been able to demonstrate a steady recovery that has now moved into an expansion phase. This means that instead of merely regaining ground lost during the pandemic-driven downturn, the Inland Empire is charting new growth, creating jobs, and reinforcing its role as one of California’s most resilient economic hubs.

Business activity in the Inland Empire expanded by 6.4% in the fourth quarter compared to 4.5% in the third. At 7%, U.S. GDP outpaced the region in the fourth quarter but still lags the Inland Empire in total growth for the year (5.6% vs. 6.1%). Notably, the IE’s growth rate has declined from 8% in the second quarter and 7% in the first, but this is to be expected as the region’s economy moved steadily towards pre-pandemic conditions throughout 2021. This pattern reflects a natural transition as the economy stabilizes: high initial rebounds gradually give way to more sustainable, long-term growth rates.

The short-term outlook for the Inland Empire remains positive, with local business activity forecast to rise between 3% and 3.5% in 2022. A slower pace of growth does not signal weakness; instead, it indicates a shift into a more balanced economic environment where gains are steady and supported by a broader range of industries.

“Now that the region is again in expansion mode, as opposed to recovering losses from the pandemic-driven recession, growth will moderate,” said Taner Osman, research manager at the Center for Economic Forecasting and one of the Index authors. “That isn’t a detriment; the point of concern continues to be the prospect of workforce shortages and the ability to meet the labor market’s demand.”

According to the report, the prospect of future labor shortages, which are caused largely by California’s high cost of living relative to other parts of the nation, will continue to limit the region’s growth over the long run. This challenge highlights an important structural issue for the Inland Empire: while business demand and economic opportunity are expanding, the ability to attract and retain workers may be constrained. Over time, this imbalance could place upward pressure on wages while creating difficulties for employers who rely on a consistent labor force.

The new report also calls out the surge in e-commerce purchases, an effect of the pandemic that shows little sign of slowing and bodes well for the Inland Empire’s economy. Online shopping has become embedded in consumer behavior, creating new and lasting demand for industries that are central to the region.

“A major component of e-commerce operations is transportation and warehousing, which has long been one of this region’s mainstay industries and one that should continue to benefit from consumers’ discernable preference for online purchasing,” said Osman. The Inland Empire’s established logistics infrastructure, including its warehousing facilities, transportation networks, and proximity to major ports, positions the region as a national leader in supply chain management. As a result, e-commerce growth is expected to continue fueling local business activity and employment.

Together, these factors paint a clear picture: the Inland Empire is no longer in recovery, but firmly in a period of expansion. With steady growth, strong industry sectors, and ongoing consumer trends supporting demand, the region is poised to remain a key driver of economic vitality in California and beyond.