Despite robust economic growth, the San Fernando Valley’s middle class is shrinking — a “cautionary note” to an otherwise optimistic economic forecast on the region released Wednesday.

The Valley’s share of the population with incomes between $15,000 and $100,000 has declined since 2010 while the population with annual incomes greater than $100,000 has been growing substantially, according to the forecast, released by California Lutheran University’s Center for Economic Research and Forecasting.

“Many hundreds of thousands of employees in retail trade, leisure & hospitality and education & health services are finding it increasingly difficult to live in the Valley,” according to the report.

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Against that backdrop, CERF Executive Director Matthew Fienup told a crowd gathered at Larsen’s Steakhouse in Woodland Hills Wednesday that there’s a “hollowing out” of the Valley’s middle class, which he called a “cautionary note” to an otherwise roaring regional economy that’s outpacing the rest of Southern California.

One of the challenges that the Valley will increasingly face is how to build communities that can employ and house individuals of various income levels, according to Fienup’s report, which came just a few days after recent housing data showing that the median cost of a single-family home in the the 818 was $675,000. And despite a recent cool-off in the real estate market, that was still an 8.9 percent increase from last year, according to the report from the Southland Regional Association of Realtors.

“We don’t care much about high housing prices if incomes are also high,” Fienup said. But he added that one of the biggest risks for the Valley’s economy is employers’ inability to house their workers because of soaring housing prices.

It’s a similar context on the state level, according to the report, which lamented California’s exodus of younger, working-age adults.

“We still hold to our earlier forecast that negative net domestic migration is accelerating as more and more individuals flee the state in search of greater economic opportunity somewhere else,” the report noted.

Still, the Valley’s economy continues to outperform its neighbors — Ventura, Los Angeles and Orange counties, Fienup told the audience.

From 2014 to 2018, the Valley’s gross domestic product, the measure of goods and services produced in an economy, increased at an average annual rate of 4.3 percent, according to the report.

“Growth this rapid would be enviable almost anywhere in the country,” according to the report. “The Valley’s growth compares especially favorably to the broader Los Angeles metropolitan area’s economy, which includes both L.A. and Orange counties.”

For comparison, Metro L.A.’s economic output has increased at about 3 percent from 2014 to 2018. Ventura County, which competes with the Valley for business in several industries, including manufacturing, information and technology, financial activity and professional and business service, is losing to its neighbor, Fienup said. Ventura County’s economy had an average annual growth of zero percent over the past five years, the report said.

Fienup said in the last year’s forecast, economists warned that economic growth for the Valley, Metro-L.A. and the state appeared to have cooled. But after the Bureau of Economic Analysis related data this fall, which altered that history, the new data showed the slowdown that began in 2015 and runs through 2017 has now been revised for the Valley, showing a “brilliant” outlook for the Valley’s economy, according to the report.

The Valley has witnessed “considerable” economic gains across every sector of the non-farm economy over the past year, according to the report. Industries like utilities, information and technology, and financial activities were among the fastest growing.

Information and technology, which includes software engineering, internet development and motion picture production remain a driver of strong economic growth.

In addition, Valley’ has seen strong job creation in recent years compared to its neighbors. As job growth inched down across the Los Angeles metropolitan area and the broader state economy in each of the past three years, the Valley has enjoyed accelerating job growth, or 2.4 percent increase in 2017 and 2.6 percent last year, significantly outpacing Metro L.A. and the state, the report said.

The utilities and construction sectors saw the strongest single year gains, with jobs growing by 8.4 and 6.7 percent respectively. Meanwhile, non-durable manufacturing and wholesale trade saw declines at -0.8 and -0.4 percent, according to the report.

Still, fast job creation failed to make up for the hole left in the Valley labor market during the Great Recession and the weak economic recovery that followed, Fienup said.

This year, the Valley economy is forecast to grow by 4.1 percent, according to the report.

“At an average growth rate of approximately 4 percent over the next two years, we anticipate that the San Fernando Valley economy will continue to significantly outpace Greater Los Angeles, California and the nation,” according to the report.

“The divergence of GDP and jobs data gives us reason to worry about the continued hollowing out of the middle class in California and the continued exodus of younger, working-age adults. We still hold to our earlier forecast that negative net domestic migration is accelerating as more and more individuals flee the state in search of greater economic opportunity somewhere else.”

The event was organized by the university and the San Fernando Valley Business Journal.