05:48 AM PDT on Tuesday, June 28, 2011

The Press-Enterprise

Circumstances way outside the control of anyone in Inland Southern California ground the region’s economy to a virtual halt in the past few months, leading to what some see as six months of lost recovery.

The year started with encouraging forecasts that the economy would bring new job opportunities to workers in Riverside and San Bernardino counties. But the earthquake and tsunami in Japan and ballooning gas prices combined to hurt supply chains and consumer spending the Inland area was counting on.

Chapman University economist Esmael Adibi said he had expected 3.5 percent economic growth this year, but the 1.9 percent first-quarter growth reported late last week makes it very unlikely that will be achieved.

“All economists had predicted relatively strong growth, but this has been like two lost quarters,” Adibi said.

The good news is that the outside forces that hurt the Inland economy seem to be starting to heal, Adibi said.

Japan, America’s second-largest overseas trading partner, is expected to have some of its industries at or near full strength in the third quarter.

And, he said, President Barack Obama’s decision last week to release oil from the country’s strategic petroleum reserves could help further. If the price of oil goes as low as $80 a barrel in Europe from a peak of about $111 in April, it could drop the gasoline price as low as $3.30 per gallon, Adibi said.

Adibi said there are indications problems are in the process of reversing themselves.

“We think those things are transitory,” Adibi said of gas prices and the Japan disruptions. “But the economy is so fragile — and the consumer is so fragile — that higher gas prices are going to hurt the economy.”

Spurred by private-sector hiring, the Inland region had been adding jobs for more than six months, and it was hoped that by the middle of the year there would be more jobs than there were 12 months earlier, a situation unseen in Inland counties for more than four years.

Instead, the state reported last week that there were 2,400 fewer jobs for Inland residents in May than in April, and an estimated 16,000 fewer jobs than May 2010.

Brad Adams, owner of Sunstone Engineering Group, a Temecula business that manufactures automotive airbag sensor parts, said at first he didn’t know what to expect when the earthquake and tsunami hit Japan in March. Some of Sunstone’s parts can only be used in tandem with items made in Japan.

“But once we got into April it appeared the impact would be substantial,” Adams said. “It was widespread, and pretty consistent. I do think it rippled across different industries.”

Adams said he has heard that Toyota and Honda would be operating at 90 percent of their capacities by August and anticipates business in his industry picking up by next month.

The malaise in the housing markets is rooted closer to home. Mark Schniepp, principal for Goleta-based California Economic Forecast, said housing is a chief reason that the recovery lags in Inland areas.

The latest report on Inland housing found slow sales and declining median prices, in part because there are still too many distressed and bank-owned properties on the books. A healthier housing market tends to energize other sectors of the economy, from companies that make new doors and fireplaces to retailers that sell televisions.

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