Keil: Health is the IE's only growing sector

Lowe Institute: The Inland Empire added 14,700 nonfarm jobs over the 12 months ending January 2026 — close to 1 percent growth, but a misleading headline number. Health alone added 27,000 jobs; every other sector combined lost roughly 12,000. Construction was the biggest loser at -5,500, followed by Professional and Business Services at -3,750. The seasonally adjusted unemployment rate actually fell 0.1 percentage points to 5.4 percent from December, though the decline came from a shrinking labor force outpacing a shrinking employment count.

Chief Economist Manfred Keil frames the structural problem with a metaphor he introduced at the February State of the Region conference: the IE economy is "a house with a view sitting on three stilts." The three stilts — Health, Local Government (public education), and Logistics — together account for roughly half of regional employment. Logistics has been in a freight recession since mid-2022. Annual data revisions just released cut Local Government employment estimates by nearly 20,000 jobs for December 2025 alone, removing what had been assumed to be the second growth pillar. That leaves Health.

Keil warns that if federal cuts to MediCal payments are not offset by state action, the IE should expect a full-blown employment recession in 2026. The Federal Reserve is unlikely to cut rates more than once for the rest of the year given gas prices and the Iran war's impact on inflation, so construction and durable consumption will not get a stimulus boost. Lack of diversification, Keil notes, is the structural problem — the same kind of single-sector dependence that hit aerospace in the 1990s and housing in 2008.