American Dream fails in Inland Empire

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    Southern California’s Inland Empire has the second-highest unemployment in the country for a metropolitan area with more than 1 million people -- 13.4 percent (September 2011). Only Las Vegas is higher. Job loss and the housing crash have devastated retailers on this commercial strip in Fontana, Calif.

    - Mitchell Hartman/Marketplace

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    Entering the struggling city of Rialto, population 100,000, along Route 66 from San Bernardino, its depressed neighbor to the east. Rialto’s population—which is predominantly Hispanic—grew 36 percent from 1990-2010.

    - Mitchell Hartman/Marketplace

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    The city of Rialto just turned 100 this month, but it’s not in a celebratory mood. Unemployment is over 16 percent, home prices have fallen by 65 percent and sales tax revenues have fallen, causing the city to trim its workforce by approximately 20 percent since the recession began.

    - Mitchell Hartman/Marketplace

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    In the Inland Empire, 45 percent of homes are underwater. Home prices fell 6.3 percent in the latest year (September 2010-2011), the 4th-largest drop for a large metro area. The region has had the third-most foreclosures in the nation (after Phoenix and Atlanta) since 2005.

    - Mitchell Hartman/Marketplace

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    A sign in downtown Rialto announces new homes but few are being built right now. Two planned developments are being stretched out over the next 10 to 20 years.

    - Mitchell Hartman/Marketplace

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    Downtown Rialto is a patchwork of shuttered shops and those still hanging on.

    - Mitchell Hartman/Marketplace

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    At the Patio West Deli in downtown Rialto, owners Claudia Szypusz and Gloria Miller say this is the slowest business has been in the last 30 years. But they believe the worst is now behind them and the economy has bottomed out.

    - Mitchell Hartman/Marketplace

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    With home construction in the Inland Empire at a standstill, public construction projects—some supported with federal stimulus funds—are among the only ones still active. This fire station project is in Fontana, Calif.

    - Mitchell Hartman/Marketplace

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    Rialto assistant city administrator Robb Steel says the city has tried hard to attract industrial jobs and employers, including logistics facilities that truck and warehouse imports from the Ports of Los Angeles to discount stores and malls nationwide.

    - Mitchell Hartman/Marketplace

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    Rialto is home to a huge FedEx logistics center. Warehouse vacancy rates rose to 20% in Rialto during the recession but they are now below 10% as global trade and consumer spending rebound. The typical logistics facility is 1.5 million square feet. Employment in logistics grew by 45 percent from 1990-2010. Much of the hiring is through temporary staffing agencies.

    - Mitchell Hartman/Marketplace

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    A new state-of-the-art logistics center for Sketchers has just opened in Moreno Valley. It will employ fewer workers than a typical warehouse—mostly highly-paid computer operators and technicians. The 1.8 million-square-foot facility cost $250 million dollars to build and employs the latest environmental and energy-saving technology.

    - Mitchell Hartman/Marketplace

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    One of the largest industrial employers in the Inland Empire, California Steel in Fontana has 1,000 highly-skilled workers. It plans to hire 50 more next year. The business is currently being driven by domestic demand in the gas and solar industries.

    - Mitchell Hartman/Marketplace

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    Unskilled workers—many of them undocumented—offer themselves as day-laborers outside a Home Depot in Riverside. Many low-wage workers laid off from warehousing and construction have moved into day-labor during the recession.

    - Mitchell Hartman/Marketplace

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    Sunrise Church in Rialto has boomed in recent decades as the city’s black and Hispanic population expanded. It now has 5,000 members and occupies a 13-acre campus including two large auditoriums, classrooms, offices, and playing fields.

    - Mitchell Hartman/Marketplace

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    Sunrise Church Senior Pastor Jay Pankratz preaches two sermons every Sunday flanked by an electric gospel band and huge video screens. In an adjacent auditorium, Spanish-language services are held.

    - Mitchell Hartman/Marketplace

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    Several miles from Sunrise Church, in a poor section of Rialto, is the Sunrise Mission. Church members volunteer to give out donated food and clothing to the needy on Sundays.

    - Mitchell Hartman/Marketplace

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    Sunrise Church member Albert Grigsby, who is retired from the military, supervises food distribution at the relief mission.

    - Mitchell Hartman/Marketplace

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    The historic Mission Inn in downtown Riverside reminds visitors of the opulence and prosperity of the Inland Empire in former times, when agriculture and a succession of housing booms made fortunes—for some.

    - Mitchell Hartman/Marketplace

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    In the High-Desert community of Victorville, single-family homes are going for a fraction of the prices during the housing boom of the mid-2000s. With foreclosures and short-sales rampant, it’s a buyer’s market.

    - Mitchell Hartman/Marketplace

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    As housing boomed in the Inland Empire during the 2000s, prices also rose further east across the mountain passes in High Desert communities such as Victorville. There’s still land available for development, but little demand for new houses now.

    - Mitchell Hartman/Marketplace

Rialto assistant city administrator Robb Steel heads the economic development department. The building boom is over and new projects will take 10-20 years to build out.

These handwritten signs dot the highway meridians in Rialto and surrounding towns. The only boom in real estate is in distressed properties right now.

Kai Ryssdal: The recession is, officially, over. A lot of experts and some economic indicators agree on that. But the experts and the indicators don't know what they're talking about.

In California's Inland Empire, that's definitely true. The Inland Empire's out in in the desert east of L.A. with 4.3 million people living there, nearly double the population of Nevada. In the decades before the recession, it was the place families went to to pursue the American Dream. There were cheap suburban houses with two-car garages and good jobs in construction and warehousing and trucking. There were so many jobs, in fact, that the unemployment rate fell below 5 percent. Now, it's triple that in many towns, and the dream has turned into something of a nightmare.

Today, in the first of a two-part series, Marketplace's Mitchell Hartman takes a trip to to see what the future might hold.

Mitchell Hartman: Drive an hour east of L.A. on the freeway and you come to the town of Rialto. Population 100,000. Unemployment is over 16 percent. One in 10 of the modest tract houses here have been lost to foreclosure. Home prices have fallen by two-thirds. Main Street businesses -- from restaurants to realtors -- have shut down. It didn't used to be like this.

Robb Steel: Downtown filled up just before the recession.

I met Robb Steel in his storefront office. He's the Rialto city official in charge of economic development. And his department has been busy providing services to the city's growing population -- up more than 35 percent over just the past two decades.

Steel: We had owners that were reinvesting in the buildings and their businesses. And then it just emptied out almost overnight. Consumers can't buy -- can't buy homes, can't buy goods and services that go with homes. All those things have compounded to make this recession probably the most difficult one since the Great Depression.

Hartman: And so stepping out from the redevelopment center you can immediately see that decimation on this main street: there's a closed dry-cleaners, a closed upholsterers, an empty beauty salon...

John Husing: We are in a world of hurt.

That's John Husing, chief economist at the Inland Empire Economic Partnership. And keep in mind: everything he says about the Inland Empire, it looks even worse in cities like Rialto and San Bernardino with their preponderance of lower-income blacks and Hispanics.

Husing: We lost roughly 17-18 percent of all of our jobs, which is a huge hit.

Husing says there used to be a lot of growth here, but the engines that drove it have stalled. First, that's construction, which boomed on cheap land and loose mortgages. Retail, that'slow-wage work at all the new strip malls selling groceries and furniture to the new residents. And then, manufacturing, which benefited from blue-collar workers who came for the cheap housing. Finally, logistics, that's trucking cheap Asian imports from the huge ports of Los Angeles to local warehouses, then on to Wal-Marts and Targets all over the country.

So what's left for for Rialto and the Inland Empire? Let's start with construction. The good news?

Husing: People have not stopped having sex in California. We are still seeing a growing population.

The bad news?

Husing: We're not creating housing for them. We will have gone through somewhere between 8 and 10 years of no housing creation.

Economist John Husing says construction's down by more than half -- that's 70,000 jobs gone missing. And Housing doesn't expect it to revive until 2018. In Rialto, the only housing developments on the drawing board are now being stretched out over 20 years. How about manufacturing?

Next door to Rialto is the city of Fontana -- and one of the largest steel mills still operating in Southern California.

Brett Guge: These rolls of steel are as much as 50,000 pounds.

Brett Guge of California Steel.

Guge: It's going to be stamped, rolled, cut, shaped...

Primarily for the U.S. market. That used to include a lot of new housing, and about 100 workers -- out of a 1,000 total at the mill -- lost their jobs when the bubble burst. Now, business is back thanks to new gas pipelines and solar plants for that. Guge expects to add 50 workers next year. But these aren't jobs for everyone.

Guge: Our mill, like any mill that has survived in the United States, is highly automated, and it takes people who are good problem solvers, who are good communicators, and who have some technical capability.

That could be a problem because this region has one of the lowest education levels in the country. Only 12 percent of residents have a B.A. So what about logistics? Moving all those Chinese imports from ship to warehouse?

On a dusty four-lane highway a few miles from downtown Rialto, tractor-trailers stream into a sprawling FedEx warehouse. The town's tried hard to recruit these employers, and business is up as global trade rebounds and Americans start buying again.

Good news for warehouse worker Rudy Mendoza. I met him at Sunrise Church, a huge evangelical center in Rialto.

Rudy Mendoza: I was laid off for almost a year, I was collecting unemployment benefits, and just when it was about to expire, I got a job, thank God for that.

Mendoza is loading shoeboxes for Converse and taking home less than $20,000 a year. But here's the rub. Sketchers just opened a highly-automated, state-of-the-art facility nearby. Loading and inventory are done by robots. The pay is better than at a typical warehouse, but that means there are fewer workers. At the new warehouse, employees hardly ever touch a shoebox. So workers like Mendoza -- without the skills to move boxes around robotically -- can only hope there'll still be enough work moving them by hand.

I'm Mitchell Hartman for Marketplace.

Ryssdal: We've got some maps where you can see just how bad unemployment is in Southern California's Inland Empire and compare it to where you live -- by state and metro area. And there's a slideshow of some of the towns Mitchell visited for his story -- at the top of this page.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

Rialto assistant city administrator Robb Steel heads the economic development department. The building boom is over and new projects will take 10-20 years to build out.

These handwritten signs dot the highway meridians in Rialto and surrounding towns. The only boom in real estate is in distressed properties right now.


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