Logistics, e-commerce spark SJ County comeback

By Reed Fujii

May  27, 2016

San Joaquin County will continue to lead Northern California in employment growth this year and next, says the latest economic forecast from the Center for Business and Policy Research at University of the Pacific.

That’s a far cry from just four years ago when Stockton, the county’s largest city, sought bankruptcy court protection and many predicted “doom and stagnation” for the region, known demographically as the Stockton metropolitan area.

Instead, says the report, Stockton “is in the process of posting its fourth consecutive year of job growth above 3 percent, led by a booming logistics sector that has added more than 6,000 warehousing and trucking jobs in the last year.”

“Overall, it’s a positive outlook,” said Jeffrey Michael, the center’s director.

One major factor is the 1.2-million-square-foot fulfillment center Amazon.com Inc. opened in Tracy in 2013 and that now employs 2,500 people. Amazon announced this week plans to open a second 1-million-square-foot distribution in Tracy.

Michael said those projects and others like it are the reason most job growth is found in the southern half of the county, mostly in Tracy, Manteca and Lathrop. But it is providing opportunity for many residents of Stockton, as well as those from Stanislaus County to the south.

“It’s an industry in transition,” he said of the area’s logistics boom. ”It’s reorganizing itself around some fulfillment centers and new hubs in San Joaquin County.”

There are some positive results in evidence.

We’re starting to see wages start to improve,” Michael said. Although, he noted, “They’ve got to improve a lot more to recover all the income that’s been lost by the average household in this economic cycle.”

And the county’s unemployment rate has come down sharply.

“We do think the unemployment rate — it’s come down so much faster than we forecast — we think it’s approaching its bottom,” Michael said.

From the 8.7 percent unemployment rate for 2015, he expects it to drop to 7.6 percent for this year then ease to about 7.3 percent for 2017 and 2018.

Those are historically low numbers for San Joaquin County, where high-turnover farm and food processing jobs employ a good portion of the workforce.

The Pacific economic forecast also takes a look at how California’s proposed $15 minimum wage would play out, particularly for Central Valley agriculture and movement of people. Now at $10, a new state law would increase it to $10.50 next year, then $11 in 2018, followed by $1 per hour annual increases until it reaches $15 in 2022.

Michael said the change might discourage some people, while encouraging others, from moving into the Central Valley.

“What will higher wages do to people in the Bay Area?” he asked. “Will that make it less likely for them to move to the Central Valley to find a place where their income and living costs are in better balance?

And, “What about that fast food worker in Milwaukee?” Michael asked.

Moving to the Central Valley and earning $15 an hour vs. $8 in Wisconsin, might be attractive, despite the higher cost of living in California.

And the impact on farming might be even more significant.

“The farmers don’t really set their prices; they’re price takers of what’s out there in the marketplace,” Michael said.

California farm labor costs were about 32 percent of gross farm revenue in 2014. At $15 an hour, with other costs and revenues rising with inflation, by 2022 labor could be as much as 45 percent of revenues, the Pacific forecast said.

This would reduce farm profits and could possibly depress farmland values and even impact water policies, as there would be money to pay for infrastructure, such as new dams or the proposed Delta tunnels.

But higher wages could also draw more workers into farm labor, both from within the state and outside, easing a chronic labor shortage in the Valley while potentially making it worse for areas with lower minimum wages.

“Those are potentially positive effects,” Michael said. “It’ll just be really interesting to see how that plays out.”