State of the Region 2025 Report and Summary

Today I had the opportunity to attend the "State of the Region" at the Ontario Convention Center. The event was co-hosted by the Inland Empire Economic Partnership and San Antonio Regional Hospital. I am including the State of the Region 2025 report which provides a comprehensive analysis of economic and political trends in the Inland Empire, California, and the broader U.S. economy.

State of the Region 2025: Economic & Political Outlook for the Inland Empire

The State of the Region 2025 report provides an in-depth look at economic and political trends shaping the Inland Empire, California, and the national economy. The findings indicate a period of transition, with economic uncertainties, shifting political dynamics, and ongoing challenges in key industries.

National Economic Trends

The U.S. economy grew at an annualized rate of 2.2% in Q4 2024, a slowdown from the 3.0% growth in Q3 but still aligning with long-term trends. Growth was driven largely by consumer spending (+4.2%) and residential investment (+5.3%), but inventory reductions due to supply chain disruptions, including the Boeing strike, dampened overall expansion. The Federal Reserve maintained interest rates in early 2025, despite pressure from the Trump administration to lower them further. Inflation remains above the 2% target, with the Consumer Price Index at 2.9% and the Fed’s preferred measure at 2.5%. While a recession is not expected in 2025, consumer sentiment has weakened, and economic policy uncertainty, particularly surrounding tariffs and trade, could impact growth.

California’s Economic Landscape

California’s economy continues to underperform relative to national growth. The state’s unemployment rate stands at 5.5%, ranking 49th in the country, with job losses concentrated in the tech, film, and construction industries. The exodus of businesses and residents continues, though population levels have stabilized after years of decline. High housing costs, burdensome regulations, and outmigration have contributed to a weakening labor force, with only modest job gains in government and healthcare sectors.

Housing remains a significant issue, with median home prices reaching a record $867,500 in 2024. Despite a slight increase in sales (+4.3% YoY), new housing construction remains well below demand, with building permits falling nearly 10% in 2024. Rising mortgage rates (hovering around 7%) continue to suppress affordability.

Commercial real estate struggles, particularly in the office market, where San Francisco leads with a staggering 36.8% vacancy rate. Other major metro areas, including Los Angeles (23.3%) and San Diego (30%), also face significant office space challenges due to remote work trends and declining demand. However, industrial real estate remains strong, particularly in the Inland Empire, as logistics and warehousing continue to expand.

Inland Empire: Economic Trends & Challenges

Despite broader economic challenges, the Inland Empire has outperformed much of California, benefitting from its strong logistics industry and relative affordability compared to coastal regions. The region’s population is growing again after stagnating during the pandemic, and it remains the 12th largest metropolitan area in the U.S.

Key employment sectors include logistics, healthcare, and government. However, the Inland Empire’s labor force remains less educated than other California metros, with only 25.2% of prime-age workers holding a bachelor’s degree—well below the national average of 37%. This limits the region’s ability to attract high-wage industries.

The logistics sector, a major driver of job growth, is expected to slow in 2025 due to new tariffs and shifting global trade dynamics. President Trump’s 10% tariffs on Chinese goods could reduce imports, impacting port traffic and warehousing activity. Further tariffs on Mexico and Canada could have even more severe consequences, potentially pushing the California economy into recession due to supply chain disruptions.

Housing remains a critical issue in the Inland Empire. Median home prices continue to rise due to limited inventory, and new construction has not kept pace with demand. While mortgage rates may decline later in 2025, affordability remains a concern for residents.

Political Shifts in the Inland Empire

The Inland Empire played a significant role in California’s slight rightward shift in the 2024 election. Former President Donald Trump won San Bernardino and Riverside counties, marking the first time a Republican carried the region since 2004. His success was driven by significant Latino voter shifts, particularly among Hispanic men.

Latino-majority cities such as Coachella, Perris, Rialto, and Moreno Valley saw double-digit swings toward Trump. Overall, Trump flipped 12 Inland Empire cities that previously voted for Biden in 2020, contributing to a broader East-West partisan divide in California, with coastal areas remaining Democratic while inland regions became more competitive.

Down-ballot races also reflected this shift. While Democrats retained a majority of congressional and state legislative seats, Republicans made key gains. Leticia Castillo and Jeff Gonzalez flipped two state Assembly districts, and Republican incumbents held onto competitive seats. Steve Garvey narrowly won the Inland Empire in his Senate race against Democrat Adam Schiff, though he lost statewide.

Looking Ahead: 2025 Economic & Political Outlook

The Inland Empire is positioned for continued economic challenges but may fare better than coastal California due to its affordability and logistics sector strength. However, trade policies, high housing costs, and a weakening labor market could slow growth.

Politically, the region is becoming a battleground, with Republicans making inroads among Hispanic voters. Whether this trend continues will depend on national economic conditions, immigration policies, and local political engagement.

As the Inland Empire continues to evolve, policymakers and business leaders must address workforce development, housing shortages, and economic diversification to ensure long-term prosperity. The State of the Region 2025 report highlights both opportunities and challenges ahead, offering a roadmap for navigating the region’s future.