ccfc schniepp presentationobamacare website fiasco: the key website to enroll in insurance has been...

Economic Outlook for California

“ Returning to Normal . . . sort of ”

Mark Schniepp

Director

November 5, 2013

Top Stories   Treasury debt ceiling and failure to pass a budget   That forced the gov’t shutdown … which had little

impact on you, me, the stock market or the general economy . . .

  Not much worry re: the economy……. Stock market at / near top and interest rates falling again . . . .

  QE 3 still underway   Fed keeps buying $85 B/month in treasuries/MBS   Consensus is that tapering won’t begin until March 2014   Interest rates rise in 2014-2015

55

60

65

70

75

80

85

90

95

100

105

Oct-08 Apr-09 Oct-09 Apr-10 Oct-10 Apr-11 Oct-11 Apr-12 Oct-12 Apr-13 Oct-13

Rasmussen Consumer Confidence Index October 2008 - October 30, 2013

index October 2001=100

8

9

10

11

12

13

14

15

16

Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

New Auto and Light Truck Sales / U.S. millions of vehicles (SAAR) September 2009 - September 2013

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Unemployment Rate / U.S. percent

September 2009 - September 2013

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Consumer Price Inflation / U.S. percent September 2007 - September 2013

1.5

1.8

2.1

2.4

2.7

3.0

Mar-13 May-13 Jun-13 Aug-13 Sep-13 Oct-13

Daily 10 year U.S. Treasury Bond Yield March 28, 2013 - October 30, 2013 percent

12,500

13,000

13,500

14,000

14,500

15,000

15,500

16,000

Nov-12 Dec-12 Feb-13 Apr-13 May-13 Jul-13 Sep-13 Oct-13

Dow Jones Industrial Average October 30, 2012 - October 30, 2013 index

The index is currently at or near an all time record high

Finance.yahoo.com / October 25, 2013

As markets continue to hit new highs, some big investors are ringing the warning bells. Are you getting worried? -------------------------------------------------------------- Responses = 96,413 Yes, and I’m selling…. No, I’m riding the rally ….. I’m sitting on the sidelines ……

27%

47%

26%

More Top Stories • Obamacare News . . . .

 Obamacare website fiasco: The key website to enroll in insurance had been largely inoperable all through October

 Wave of health Insurance cancellations and premium increases . . . . .

“Changes from health care reform continue to take effect in 2014. Because of the requirements of the new laws, we can no longer offer your current individual health plan…”

“So you need to choose a New health benefit plan…”

CNBC News Poll / October 29, 2013

Were you forced to make any changes to your own health insurance coverage because of Obamacare? --------------------------------------------------------------

Responses = 83,690

Yes No I don’t know yet

62 % 23 % 16 %

Finance.yahoo.com Poll/ October 30, 2013

If you’re 26 or older and your health insurance is about to double (because you’re not insured thru your job) what would you do? --------------------------------------------------------------

Responses = 76,201

Take the penalty Buy insurance now anyway Wait until I get sick to buy

46 % 18 % 36 %

More Top Stories • Obamacare News . . . .

 Obamacare website fiasco: The key website to enroll in insurance has been largely inoperable all through October

 Wave of health Insurance cancellations and premium increases . . . . .

• In the wake of these embarrassing incidents, we clearly need a new commitment to business integrity and virtuousness, . . .

  starting with more honest company slogans

Finance.yahoo.com / August 29, 2013

Fast food workers went on strike, calling for $15-an-hour minimum wage. The federal rate is $7.25. What's your take? -------------------------------------------------------------- Responses = 93,260 I agree… it should be more than doubled It should be increased slightly It should stay the same or minimum wage

should simply be abolished

14%

41%

45%

24%

30%

36%

42%

48%

54%

Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13

Is the Economy Getting Better ? American Research Group Survey

percent January 2012 to October 2013

Worse

Better

20%

30%

40%

50%

60%

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13

Is the Economy Still in Recession ? American Research Group Survey

December 2011 to September 2013 percent

Yes

No

Discontent •  In general, the sentiment of people is soured by

two principal issues, and the failure of the federal and local governments to deal with fiscal issues

•  Consider this: •  The federal deficit is highest on record •  Local government budgets are under severe stress;

consequently fees and fines are rising, or public services are being cut

•  High unemployment •  Median household income continues to deteriorate

in the nation and California

36,000

41,000

46,000

51,000

56,000

61,000

66,000

71,000

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Median Family Income / California 1991 - 2013

dollars

$71,000

67,000

70,000

73,000

76,000

79,000

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013

Real Median Family Income / California 1991 - 2013 dollars

$80,000

Disconnect •  There is a disconnect because the economic indicators

are largely positive and back to normal again • And despite: •  tax hikes this year •  Sequestration this year •  higher gasoline prices •  Syria •  recent Fed speak about tapering off QE 3 •  and the end of Breaking Bad

. . . . . . none of these issues has had much effect on Wall Street or Main Street

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2003Q2 2005Q2 2007Q2 2009Q2 2011Q2 2013 Q2

Corporate Profits / U.S. 2003 Q2 - 2013 Q2

trillions of dollars

-900

-600

-300

0

300

600

Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13

Job Creation / US thousands of jobs

August 2008 - August 2013

seasonally adjusted

7.5 million jobs (35 months)

360

370

380

390

400

410

420

430


Real Retail Sales / U.S. billions of 2013 dollars, SAAR September 2008 - September 2013

3.0

3.5

4.0

4.5

5.0

5.5


Existing Home Sales / U.S. September 2008 - September 2013

millions of sales, SAAR

Discontent and Disconnect •  Ambivalence

-- the economic indicators are mostly positive -- but surveys show that most Americans are pessimistic

• Why: because household incomes show little improvement over the last 2 decades

… and the unemployment rate has remained chronically high

6.9 7.2

4.9

8.9

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1981-82 1990-91 2001 2008-09

Unemployment Rate / California 50 months after a Recession

Last 4 Recessions

rate

3.9

4.1

4.3

4.5

4.7

4.9

5.1

1980 1985 1990 1995 2000 2005 2010 2015 2020

Population Age 16 to 24 / California 1980 - 2020

millions of people

32.2

15.6

9.0

23.7

12.6 7.5

0

5

10

15

20

25

30

35

Age 16-19 Age 20-24 Age 25-34

Unemployment Rate / By Age

California U.S.

July 2013 percent

Summary • The recovery is intact, most indicators are rising,

many are back to normal, and the key real estate sector is in recovery

• But unemployment rates are high and will remain high for the next 2 to 3 years

• Real household or family income is not rising • … not until more people are employed • But that’s the catch. Unemployment is likely to

remain chronic, and conventional job creation is unlikely to return to normal

-120,000

-90,000

-60,000

-30,000

0

30,000

60,000


Non-farm Job Creation / California

Augsut 2008 - August 2013 jobs seasonally adjusted

35 months: 727,000 jobs

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

UT CA FL CO ND TX NB RI NV KT NJ AL SC GA WA

Total Employment Growth Rates, by State August 2012 – August 2013

13.4

13.8

14.2

14.6

15.0

Aug-05 Aug-07 Aug-09 Aug-11 Aug-13

Total Non-farm Employment / California millions of workers


6 ½ years since the 2007 peak, and we won’t get back to that peak until January 2016

525

575

625

675

725

775

825

875

925


Employment in Construction / California . thousands of jobs August 2005 - August 2013

1,200

1,250

1,300

1,350

1,400

1,450

1,500


Employment in Manufacturing California thousands

of workers August 2005 - August 2013

3

4

5

6

7

8

1981Q4 1986Q2 1990Q4 1995Q2 1999Q4 2004Q2 2008Q4 2013 Q2

Business Expenditure in Equipment and Software / as % of GDP

1981 Q4 - 2013 Q2 percent

13

15

17

19

21

23

25

27

Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Semiconductor Sales / U.S. billions of dollars September 2005 - September 2013

Future Workforce Trends •  Not as many workers are needed any more, and …… ……. employers are more discerning of who they hire •  Any job that is codifiable, mundane, and/or repetitive,

can be done by robots or microprocessors . . . . • Jobs that demand creativity, innovation, problem

solving, analysis, and entrepreneurialism will provide 21st century opportunities for the workforce

• We need new training in chaotic, ambiguous, self organizing, and unpredictable thinking

• However, we are still training the workforce for the 20th century

What does the Workforce look like ? •  It’s not construction

-- though some recovery of jobs will occur

•  It’s not manufacturing -- outsourcing and automation displaces the workforce -- Regulatory environment unfriendly to industrial sectors

•  It’s not retail, or public sector •  The concentration now, post recession, is on: •  Technology / Biotechnology / Healthcare /

Marketing / Financial and Data Analysis

Ventura County Star / August 16, 2012 / front page

For the 21st century

190

200

210

220

230

240

Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13

Employment in Computer Systems Design California thousands

of jobs August 2007 - August 2013

41,000

43,000

45,000

47,000

49,000

51,000


Employment in Computer Manufacturing California

jobs August 2008 - August 2013

43,000

43,500

44,000

44,500

45,000

45,500

46,000


Employment in Pharmeceutical Manufacturing California

jobs August 2008 - August 2013

17,800

18,800

19,800

20,800

21,800


Employment in Data Services / California jobs


Data Processing, Web Hosting, and Related Services

140

150

160

170

180

190

200

210


Employment in Scientific & Technical Services California thousands

of jobs August 2008 - August 2013

1,425

1,450

1,475

1,500

1,525

1,550

1,575


Healthcare Employment / California . thousands of jobs August 2008 - August 2013

seasonally adjusted

Best Jobs 2013 to 2020 / Forbes

10 Computer Science Analysts $ 77,740 22 9 Physical Therapists $ 76,310 39 8 Optometrists $ 94,990 33 7 Occupational Therapists $ 72,320 33 6 Dental Hygienists $ 68,250 38 5 Financial Planner $ 64,750 32 4 Audiologist $ 66,660 37 3 Software Engineers $ 90,530 30 2 Biomedical Engineer $ 81,540 62 1 Actuary $ 88,650 27

Avg Salary Growth

Worst Jobs 2013 to 2020 / Forbes

10 Flight Attendant $ 37,750 0 9 Roofer $ 34,220 +18 8 Mail Carrier $ 53,090 - 26 7 Meter Reader $ 36,500 - 10 6 Dairy farmer $ 60,700 - 8 5 Onshore Oil Rig Worker $ 37,640 + 8 4 Actor $ 34,275 + 4 3 Enlisted Military personnel $ 41,998 0 2 Lumberjack $ 32,870 + 4 1 Newspaper reporter $ 34,530 - 8

Avg Salary Growth

The outlook for California

0.0

0.5

1.0

1.5

2.0

2.5

Aug-12 Nov-12 Feb-13 May-13 Aug-13

Cumulative Job Growth by Region percent change in non-farm employment August 2012 - August 2013

Coastal Southern California

Bay Area

Inland Counties

The Outlook for California •  Technology sector will continue to lead the charge •  Tourism explosive in all major markets •  Manufacturing growing again, but barely •  Job growth characterized by a bifurcated economy

with some convergence between coastal and inland regions by 2015

•  Demographics and microprocessors are largely responsible for the abnormally high unemployment rates which stay high

•  The housing market to lead in 2014

245

285

325

365

405

445

Sep-09 Sep-10 Sep-11 Sep-12 Sep-13

Median Home Selling Price / California . thousands of dollars September 2008 - September 2013

Median Home Selling Price California Counties August 2013

San Diego Orange Los Angeles Inland Empire Ventura North Santa Barbara South Santa Barbara California

County Price $482,470 $664,580 $444,950 $245,330 $444,560 $309,000

$1,104,500 $441,330

% Change From Peak

-22.5 -14.3 -28.9 -37.0 -33.3 -34.3 -29.4 -25.8

+ 23.9 + 17.1 + 29.1 + 27.2 + 29.0 + 32.8 + 13.5 + 28.4

% change

Housing / California • Home prices are sharply rising • There has been a rapid change in the existing

housing market but not yet in the new housing market

•  Delayed due to financing, entitlement, regulatory, and product issues

• This is gradually changing and will become more apparent in 2014 – 2015

• Ditto the housing demand base over the next 10 years

10.0

10.2

10.4

10.6

10.8

11.0

11.2

1990 1995 2000 2005 2010 2015 2020


millions of people

25

50

75

100

125

150

175

200

01 03 05 07 09 11 13

New Residential Units Permitted / California 2001 - 2013

thousands of units permitted

5

15

25

35

45

55

65

Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12 Oct-13

NAHB Housing Market Index / U.S. October 2005 - October 2013

index

The index measures Homebuilder Confidence, based on present and expected sales of new homes, and traffic of potential buyers at model homes

The Recovery in New Housing

•  New Housing just starting to recovery •  Despite backup in interest rates, much more

new housing must be built to offset the last 6 years of under-building

•  Furthermore, home buying population rising •  More new households are forming •  More of the labor force is employed •  Confidence in the economy has improved •  Mortgage rates are still relatively low

3.0

4.0

5.0

6.0

7.0

2000 2002 2004 2006 2008 2010 2012 2014 2016

Home Mortgage Rate / California mortgage rate

2000 - 2016

-1,000

-800

-600

-400

-200

0

200

400

600

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Job Creation / California 1998 - 2018

thousands of non-farm jobs

4

5

6

7

8

9

10

11

12

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Unemployment Rate / California 1998 - 2018 rate

1,800

1,900

2,000

2,100

2,200

2,300

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

State & Local Gov Employment / California 1997 - 2017

thousands of jobs

-9.0

-6.0

-3.0

0.0

3.0

6.0

9.0

12.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

General Fund Surplus / California FY 2000 - FY 2018

billions of dollars

85

95

105

115

125

2010 2011 2012 2013 2014 2015 2016 2017 2018

California General Fund FY 2010 - FY 2018

billions of dollars

Expenditures

Revenues

forecast

6.2

6.5

6.8

7.1

7.4

7.7

8.0

2008 2009 2010 2011 2012 2013 2014

Total Expenditures California Community Colleges

FY 2008 - FY 2014

billions of dollars

0

200

400

600

800

1,000

1,200

2008 2009 2010 2011 2012 2013 2014

Expenditures on Infrastructure California Community Colleges

FY 2008 - FY 2014

milions of dollars

200

250

300

350

400

450

500

550

600

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Population Growth / California 1998 - 2018

thousands of people

25

50

75

100

125

150

175

200

225

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

New Residential Units Permitted / California 1998 - 2018

thousands of units

-3.0

-1.5

0.0

1.5

3.0

4.5

6.0

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Real Gross Domestic Product Growth / U.S. 1997 - 2017 percent

+ 2.8 + 3.1

What you can expect in 2014-2015 •  More bipartisan divisiveness in Congress •  Rising Stock Market •  World economy grows faster in 2014, broad-based •  Firms on crusade to keep costs contained •  Corporate profits will continue to rise

•  Rising salaries for skilled workers •  Continued recovery of the housing market •  More new housing • Higher home prices •  Economies you can may actually call “normal”

Headwinds •  What the State Legislature will do…… ? •  Regulations •  MS 4 Storm Water Retrieval Act •  AB 32 Global Warming Solutions Act •  SB 375 Reducing Green House Emissions

•  Affordable Health Care Act •  Another Recession ? •  Based on average length of expansions

(last 30 years), we are not due for another recession until 2018

Community College Update Current Enrollment & Future Demand

2.0

2.2

2.4

2.6

2.8

3.0

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Total Enrollment California Community Colleges

Fall 1992 - Fall 2012

millions of students

0

25

50

75

100

125

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Distance Education / FTES California Community Colleges

1992 - 2012

thousands of students

0

10

20

30

40

50

1985 1989 1993 1997 2001 2005 2009 2013

Fees per Unit California Community Colleges

Fall 1985 - Fall 2013

dollars per unit

Recent Enrollment Trends Since Fall 2008 •  Total enrollment down 635,300 students (22 %) •  Tuition up 130 % •  Distance enrollment down 6,600 FTES (6 %) •  Enrollment lower for all age groups and both genders •  Enrollment lower for all racial and ethnic groups,

except Hispanic •  For Hispanic group, enrollment up by 7,300 students

(1 %)

100

300

500

700

900

1,100

1,300

1,500

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Enrollment by Age California Community Colleges

Fall 1992 - Fall 2012

thousands of students

24 and Under

35 to 49

25 to 34

50 and Up

30

35

40

45

50

55

60

65

70

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Enrollment by Age California Community Colleges

Fall 1992 - Fall 2012

percent of all students

29 and Under

30 and up

3.1

3.3

3.5

3.7

3.9

4.1

1985 1990 1995 2000 2005 2010 2015 2020 2025


millions of people

3.90

3.95

4.00

4.05

4.10

2010 2015 2020 2025


millions of people

5.2

5.3

5.4

5.5

5.6

5.7

5.8

5.9

2010 2015 2020 2025


millions of people

10.3

10.4

10.5

10.6

10.7

2010 2015 2020 2025


millions of people

7.5

8.5

9.5

10.5

11.5

12.5

2010 2015 2020 2025

Population Age 55+ / California 2010 - 2025

millions of people

Summary / California

•  Prop 30 has partially delayed major budget cuts to the state’s public education system

•  It appears that education will be safe from any major fall-out through 2018. After that, all bets are off

•  Job creation accelerates in 2014 and 2015 •  State and local government employment to

increase in 2014 •  Technology is the principal engine of growth

2014 Outlook California

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