Analysis. Answers. pg
Analysis. Answers
Beacon Economics, LLC!
The US Economic Outlook Focus on California
October 2013
Christopher Thornberg Founding Partner, Beacon Economics
Analysis. Answers. pg
Bernanke was right! things are improving.
2
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Analysis. Answers. pg
GDP: Picking up after a bad couple quarters
3
-2
-1
0
1
2
3
4
5
6
2011
I II III
IV
2012
I II III
IV
2013
I II
Gross domestic product
2012 2013 2013 Avg I II III est
Gross domestic product 1.95 1.10 2.50 2.10 Final Private Demand 2.66 1.03 2.10
Personal consumption 1.39 1.54 1.21 1.24 Durable goods 0.56 0.43 0.45 0.30 Nondurable goods 0.25 0.43 0.28 0.50 Services 0.58 0.69 0.48 0.44 Private domestic investment 0.49 0.71 1.48 1.21 Structures 0.24 -0.80 0.40 0.39 Equipment 0.25 0.09 0.16 0.15 Intellectual property products 0.11 0.14 -0.04 0.21 Residential 0.38 0.34 0.37 0.31 Change in private inventories -0.49 0.93 0.59 0.13 Net exports 0.30 -0.28 0.00 -0.39 Exports 0.32 -0.18 1.11 1.35 Imports -0.02 -0.10 -1.11 -1.73 Government consumption -0.22 -0.82 -0.18 0.05 Federal -0.18 -0.68 -0.12 0.01 State and local -0.04 -0.14 -0.06 0.04
Analysis. Answers. pg
Consumer Update
4
100
105
110
115
120
125
Jan-
09
Aug
-09
Mar
-10
Oct
-10
May
-11
Dec
-11
Jul-1
2 Fe
b-13
S
ep-1
3
Retail Sales
Retail Sales x Auto Gas
ICSC Index
8000 9000
10000 11000 12000 13000 14000 15000 16000 17000
Jan-
10
Aug
-10
Mar
-11
Oct
-11
May
-12
Dec
-12
Jul-1
3
Auto Sales
Auto Sales Gr Retail x
Auto Gas Gr ICSC Retail Gr Q1 15252 2.2% 294077 1.0% 118 2.2% Q2 15471 1.4% 296575 0.8% 119 0.7% Q3 15657 1.2% 299055 0.8% 120 0.9%
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
2100 2200 2300 2400 2500 2600 2700 2800 2900
Jan-
12
May
-12
Sep
-12
Jan-
13
May
-13
Personal Taxes Paid, % Income
Analysis. Answers. pg
Employment and Income
5
0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0%
0
50
100
150
200
250
300
350
Jan-
11
Jun-
11
Nov
-11
Apr
-12
Sep
-12
Feb-
13
Jul-1
3
Payroll Jobs
Change y-o-y %
0%
1%
2%
3%
4%
5%
6%
7%
Jul-1
0
Dec
-10
May
-11
Oct
-11
Mar
-12
Aug
-12
Jan-
13
Jun-
13
Y-o-Y Growth in Real Personal Income
Wages and Salaries
Total Total
3000
4000
5000
6000
7000
8000
2003
20
04
2005
20
06
2007
20
08
2009
20
10
2011
20
12
2013
Not in Labor Force, but want a job (August
readings)
Part Time Employment
13-Aug Change Total 141947 2029 Full Time 115227 1815 PT Economic 7785 -125 PT Non-Econ 18935 339
Analysis. Answers. pg
Q2 Flow of Funds
6
0
10000000
20000000
30000000
40000000
50000000
60000000
70000000
1997
Q1
1998
Q2
1999
Q3
2000
Q4
2002
Q1
2003
Q2
2004
Q3
2005
Q4
2007
Q1
2008
Q2
2009
Q3
2010
Q4
2012
Q1
2013
Q2
Real Household Wealth
Home Equity Other Net Wealth
10
15
20
25
30
35
1996
Q1
1997
Q1
1998
Q1
1999
Q1
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Q1
2013
Q1
Financial Obligation Ratio: % of Disposable Income
Homeowners Renters
Analysis. Answers. pg
US Production
7
46 48 50 52 54 56 58 60 62 64
Jan-
12
Apr
-12
Jul-1
2
Oct
-12
Jan-
13
Apr
-13
Jul-1
3
ISM Surveys
Manufacturing
Non-Manufacturing
180000
190000
200000
210000
220000
230000
240000
Jan-
11
Jun-
11
Nov
-11
Apr
-12
Sep
-12
Feb-
13
Jul-1
3
Advance Orders and Shipments (Durables)
Shipments
Orders: Smoothed
92
93
94
95
96
97
98
99
100
Jan-
12
Apr
-12
Jul-1
2
Oct
-12
Jan-
13
Apr
-13
Jul-1
3
US Production to August
Total Manufacturing
Analysis. Answers. pg
Great Earnings
8
800
900
1000
1100
1200
1300
1400
Jan-
09
Jun-
09
Nov
-09
Apr
-10
Sep
-10
Feb-
11
Jul-1
1 D
ec-1
1 M
ay-1
2 O
ct-1
2 M
ar-1
3
Proprietors Income
400
600
800
1000
1200
1400
1600
1800
2007
I III
2008
I III
2009
I III
2010
I III
2011
I III
2012
I III
2013
I
Corporate Profits after tax, IVA and CCAdj
Analysis. Answers. pg
Bubble? Nah!
9
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
1995
.02
1996
.04
1997
.06
1998
.08
1999
.1
2000
.12
2002
.02
2003
.04
2004
.06
2005
.08
2006
.1
2007
.12
2009
.02
2010
.04
2011
.06
2012
.08
Implied Equity Premium Over Treasuries
800 900
1000 1100 1200 1300 1400 1500 1600 1700 1800
Jan-
10
May
-10
Sep
-10
Jan-
11
May
-11
Sep
-11
Jan-
12
May
-12
Sep
-12
Jan-
13
May
-13
S&P Stock Price Index
Analysis. Answers. pg
Business Investments
10
150
170
190
210
230
250
270
290
310
330
2002
I IV
III
II 20
05I
IV
III II
2008
I IV
III
II 20
11I
IV
III II
Real Tech Investments: US $bil
Information processing equipment
Software
Research and development
0.5
0.6
0.7
0.8
0.9
1
1.1
1.2
1.3
1987
Q4
1989
Q4
1991
Q4
1993
Q4
1995
Q4
1997
Q4
1999
Q4
2001
Q4
2003
Q4
2005
Q4
2007
Q4
2009
Q4
2011
Q4
Capex Ratio
Analysis. Answers. pg
Housing Markets
11
3.00
3.50
4.00
4.50
5.00
5.50
6.00
6.50
7.00
7.50
3,000
3,200
3,400
3,600
3,800
4,000
4,200
4,400
4,600
4,800
5,000
Jan-
12
Mar
-12
May
-12
Jul-1
2 S
ep-1
2 N
ov-1
2 Ja
n-13
M
ar-1
3 M
ay-1
3 Ju
l-13
Sep
-13
Home Sales
SF Sales SAAR Months Inventory
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
150,000
160,000
170,000
180,000
190,000
200,000
210,000
Jan-
12
Mar
-12
May
-12
Jul-1
2 S
ep-1
2 N
ov-1
2 Ja
n-13
M
ar-1
3 M
ay-1
3 Ju
l-13
Sep
-13
Home Prices
Median Price Y-o-Y Gr Core Logic
Analysis. Answers. pg
Interest Rates and Affordability
12
0 1 2 3 4 5 6 7 8 9
Jan-
00
Feb-
01
Mar
-02
Apr
-03
May
-04
Jun-
05
Jul-0
6 A
ug-0
7 S
ep-0
8 O
ct-0
9 N
ov-1
0 D
ec-1
1 Ja
n-13
Annual Interest Rates
10 Year Treasury
Conventional Mortgage
AAA Corporate
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
Jan-
87
Nov
-88
Sep
-90
Jul-9
2 M
ay-9
4 M
ar-9
6 Ja
n-98
N
ov-9
9 S
ep-0
1 Ju
l-03
May
-05
Mar
-07
Jan-
09
Nov
-10
Sep
-12
Estimate Monthly Payments as Share Median income with Tax
Adjustment
Analysis. Answers. pg
Residential: Regional Take
13
Y-o-Y NY-New York 3.4% DC-Washington 5.9% MA-Boston 6.2% IL-Chicago 7.6% TX-Dallas 8.5% MN-Minneapolis 9.4% CO-Denver 9.7% OR-Portland 12.2% WA-Seattle 12.4% FL-Tampa 12.5% FL-Miami 13.7% MI-Detroit 16.8% GA-Atlanta 18.4% AZ-Phoenix 18.9% CA-San Diego 20.4% CA-Los Angeles 20.8% CA-San Francisco 24.8% NV-Las Vegas 27.5%
0
100000
200000
300000
400000
500000
600000
Jan-
02
Jul-0
3 Ja
n-05
Ju
l-06
Jan-
08
Jul-0
9 Ja
n-11
Ju
l-12
State Median Prices
California
Case Shiller: Aug-Aug
0
10000
20000
30000
40000
50000
60000
70000
80000
Q1-
94
Q1-
96
Q1-
98
Q1-
00
Q1-
02
Q1-
04
Q1-
06
Q1-
08
Q1-
10
Q1-
12
Foreclosures
California
Analysis. Answers. pg
Where are those jobs?
14
1 Idaho 2.98% 2 Texas 2.79% 3 Colorado 2.71% 4 North Dakota 2.62% 5 Mississippi 2.52% 6 Utah 2.25% 7 Montana 2.00% 8 Washington 2.00% 9 Nevada 1.96% 10 Arizona 1.96% 11 New Jersey 1.92% 12 Georgia 1.90% 13 California 1.76% 14 Florida 1.72% 15 South Carolina 1.70% 16 Minnesota 1.69% 17 Missouri 1.69% 18 Oregon 1.67%
Change in Payroll Jobs
94
96
98
100
102
104
106
108
Jan-
03
May
-04
Sep
-05
Jan-
07
May
-08
Sep
-09
Jan-
11
May
-12
Inde
x =
100
in J
an-0
3
Payroll Employment
United States California
96
98
100
102
104
106
108
Jan-
03
May
-04
Sep
-05
Jan-
07
May
-08
Sep
-09
Jan-
11
May
-12
Inde
x =
100
in J
an-0
3
Household Employment
United States California
Analysis. Answers. pg
Unemployment
15
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Jan-
90
Jan-
92
Jan-
94
Jan-
96
Jan-
98
Jan-
00
Jan-
02
Jan-
04
Jan-
06
Jan-
08
Jan-
10
Jan-
12
State Unemployment UnEm Ch 06-13 Orange County 10.1 5.4 Solano 13.6 5.3 Los Angeles 10.0 5.0 Inland Empire 12.6 4.6 East Bay 11.5 4.2 Bakersfield 8.9 4.0 San Diego 8.4 3.7 Napa 8.1 3.3 San Francisco 7.2 3.2 San Luis Obispo 7.3 3.0 Visalia MSA 9.5 2.8 Fresno 7.1 2.8 Sacramento 5.9 2.5 Monterey 6.4 2.5 Ventura MSA 6.4 2.5 Sonoma 6.5 2.4 Santa Barbara 6.6 2.1 San Jose 5.3 1.4
Analysis. Answers. pg
Regional Growth
Analysis. Answers. pg
Real GSP Growth
17
GDP Growth by State (2012) (%)
Rank State Growth - USA 2.46 1 N Dakota 13.38 2 Texas 4.82 3 Oregon 3.95 4 Washington 3.63 5 Minnesota 3.55 6 California 3.47 7 Utah 3.42 8 Indiana 3.30 9 Tennessee 3.28
10 W Virginia 3.27 11 N Carolina 2.68 12 S Carolina 2.68 13 Arizona 2.60 14 Florida 2.43 15 Maryland 2.43 26 Illinois 1.91
100 110 120 130 140 150 160 170 180 190 200
1997
19
99
2001
20
03
2005
20
07
2009
20
11
Index 1997 = 100
United States California
Share Growth Cont All industry total 3.5%
Manufacturing 11.6% 8.0% 0.895% Information 8.3% 8.3% 0.656% Retail trade 6.6% 5.5% 0.360% Real estate 16.1% 2.1% 0.349% Finance insurance 5.6% 6.2% 0.342% Wholesale trade 5.4% 4.8% 0.255% Professional, science 9.3% 1.8% 0.172% Construction 2.9% 6.0% 0.172% Administrative 3.2% 5.4% 0.169% Accommodation 2.7% 4.8% 0.128% Mining 1.0% 10.2% 0.099% Utilities 1.5% 6.0% 0.086% Transportation 2.4% 1.8% 0.044% Health care 6.2% 0.5% 0.032% Education 0.9% 2.4% 0.021% Arts, entertainment 1.4% 1.5% 0.020% Other services 2.2% 0.3% 0.007% Management 1.2% 0.2% 0.003% Agriculture 1.2% -4.7% -0.063% Government 10.3% -1.0% -0.106%
Structure California Economy
Analysis. Answers. pg
Where / what are those jobs?
18
Aug-13 California 14671.8 1.5%
Napa 65.6 4.0% San Jose 936.2 2.9% San Luis Obispo 105.3 2.8% Santa Barbara 173.2 2.4% Solano 122.2 2.3% Orange County 1434.7 2.2% San Francisco 1024.7 2.1% Ventura MSA 284.6 1.8% Fresno 287.1 1.7% Bakersfield 247 1.7% Los Angeles 3947.1 1.7% Visalia MSA 110.1 1.4% Monterey 123.3 1.1% San Diego 1278.4 1.1% Sonoma 174.8 0.9% East Bay 990.8 0.8% Inland Empire 1162.7 0.6% Sacramento 827.6 0.2%
Aug-13 Total Nonfarm 14671.8 1.5% 223.9 Construction 616.5 5.0% 29.1 Natural Resources 29.3 -3.3% -1 Durable Manu 782.1 -0.1% -1.1 Non-Durable Manu 471.2 0.0% -0.1 Wholesale Trade 700.4 3.1% 21.2 Retail Trade 1566.3 0.2% 2.8 Logistics 499.6 2.3% 11.4 Information 432.3 -0.4% -1.8 Finance 533.5 1.5% 7.9 Real Estate 259.6 2.6% 6.7 Prof Sci Tech 1141.9 2.0% 22.5 Management 207.8 3.1% 6.2 Admin Support 961.2 3.0% 27.8 Education 352.3 2.9% 10 Health Care 1574.7 1.7% 26.4 Accommodation 1406.1 4.0% 54.7 Arts Entertainment 271 4.4% 11.5 Other Services 510.4 0.5% 2.7 Federal Gov 243.4 -2.1% -5.2 State Gov 478.4 0.0% 0.2 Local Gov 1634.2 -0.5% -7.4
Analysis. Answers. pg
Spending
100
110
120
130
140
150
160
Q1-
06
Q4-
06
Q3-
07
Q2-
08
Q1-
09
Q4-
09
Q3-
10
Q2-
11
Q1-
12
Q4-
12
Taxable Sales Q2-13 Y-o-Y Gr Los Angeles 35514153.2 5.7% Orange County 14373082.4 5.1% Riverside 7495948 7.5% San Diego 12371533.1 4.4% Alameda 6771873.1 7.4% Santa Clara 9383569.1 5.3% San Bernardino 7692308.6 5.4% Sacramento 4969777.1 4.3% Fresno 3146743.2 6.7% Placer 1932337.7 10.4% Sonoma 1989531.3 9.1% San Luis Obispo 1295664.9 11.7% San Francisco 4127592.1 3.6% Solano 1628350.5 7.1% Yolo 958991.6 11.8% San Mateo 3569110.6 2.9%
Analysis. Answers. pg
Center of R&D World
20
-
1
2
3
4
5
6
7
8
9
Q1-
07
Q3-
07
Q1-
08
Q3-
08
Q1-
09
Q3-
09
Q1-
10
Q3-
10
Q1-
11
Q3-
11
Q1-
12
Q3-
12
Q1-
13
U.S
. $, Q
uart
erly
B
illio
ns
Venture Capital Funding !"#$%&'()*+,-.))/000%1)
232)456"78)
93&6:) ;+<==>?@) ,+-?@A)
B3CD6'8) ;-<0E>?=) ,-0?=A)
FG3&8H5"3:37() ;.>E?I) J>?.A)
!9)B8'KGH8%) ;+@@?0) .I?@A)
L8#G6)6"#)M"&?) ;+I+?>) ,.@?EA)
L8#?)N8KGH8%)6"#)MO$GP?) ;-E@?=) ,>@?IA)
!"#$%&'G6:)M"8'7() ;-E>?J) ,=>?0A)
43"%$Q8')R'3#$H&%)6"#)B'K%?) ;--+?J) +=I?0A)
S8&D3'TG"7)6"#)MO$GP?) ;@>?>) -00?=A)
B8QGH3"#$H&3'%) ;EJ?.) ,I.?+A)
98:8H3QQ$"GH6U3"%) ;>>?0) ,I.?.A)
V8&6G:G"7)6"#)NG%&?) ;>.?E) ,>@?+A)
W86:&5H6'8)B8'KGH8%) ;-@?0) -EI?-A)
43QP%?)6"#)R8'GP58'6:%) ;-.?E) ,.+?.A)
XG"6"HG6:)B8'KGH8%) ;J?+) ,@=?EA)
Y&58') ;E?I) ,J?-A)
F$%G"8%%)R'3#$H&%)6"#)B'K%?) ;0?-) Z)
M:8H&'3"GH%)!"%&'?) ;0?0) ,-00?0A)
Analysis. Answers. pg
Hotels: Busy
21
50
55
60
65
70
75
80
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Hotel Occupancy Rates
California
Los Angeles-Long Beach, CA
50 55 60 65 70 75 80 85 90
Jan-
05
Feb-
06
Mar
-07
Apr
-08
May
-09
Jun-
10
Jul-1
1 A
ug-1
2
Hotel Occupancy Rate %
San Francisco/San Mateo, CA
San Jose-Santa Cruz, CA
0
1000000
2000000
3000000
4000000
5000000
6000000
Jan-
07
Sep
-07
May
-08
Jan-
09
Sep
-09
May
-10
Jan-
11
Sep
-11
May
-12
Jan-
13
Airport Traffic
LAX SFO
Oakland San Diego
Analysis. Answers. pg
Revenues Up: Prop. 30 & Economy
22
State Government Revenues - $000s (Comparison to Actuals)
Fiscal 2011-12
Fiscal 2012-13
Change (%)
Fiscal 2013-14 YTD
YTD Change (%)
Pers. Inc. Tax 50,699,022 67,314,600 32.8 12,680,261 11.6
Corporate Tax 8,051,423 7,620,406 -5.4 1,095,781 1.5
Sales/Use Tax 19,438,408 20,073,343 3.3 5,349,742 17.3
Other 5,285,031 5,070,023 -4.1 1,058,436 1.5
Total 83,473,884 100,078,372 19.9 20,184,220 11.9
Analysis. Answers. pg
Even Beating Expectations
23
State Government Revenues - $000s (Comparison to DOF Budget)
2012-13 Budget
2012-13 Actuals Diff. (%)
2013-14 Actuals
Difference from
Budget (%)
Pers. Inc. Tax 66,073,435 67,314,600 1.9 12,680,261 1.0
Corporate Tax 7,224,338 7,620,406 5.5 1,095,781 -3.8
Sales/Use Tax 19,985,405 20,073,343 0.4 5,349,742 2.1
Other 4,796,667 5,070,023 5.7 1,058,436 -9.1
Total 98,079,845 100,078,372 2.0 20,184,220 0.5
Analysis. Answers. pg
PIT Up as Incomes Rise
24
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
$ M
illio
ns
Personal Income Taxes
0
1
2
3
4
5
6
7
8
9
10
Perc
ent
Income Growth
California United States
Analysis. Answers. pg
CORP Lags Despite Better Profits
25
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
$ M
illio
ns
Corporate Taxes
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
0
500
1,000
1,500
2,000
2,500
Adj
. Clo
se P
rice
($)
$ B
illio
ns
U.S. Corporate Profits and Equity Market
Analysis. Answers. pg
Judicial Funding Increases
Expenditure Item)2012-13 Enacted)
2013-14 Enacted)
Change (%))
Judicial Branch ) 3,929,728) 3,975,565) 1.2)Commission on Judicial Performance ) 4,133) 4,198) 1.6)Judges' Retirement System Contributions ) 424,907) 459,768) 8.2)
o :"2@$+','&.+).1)KL)@&88&.+)M$+$#,8)B"+C)1.#J)• !"7#$@$)D."#')• D."#'().1):77$,8)• N,*$,()D.#7"()H$(."#-$)D$+'$#)
o KOP)@&88&.+)M$+$#,8)B"+C)• 3.)("77.#')'#&,8)-."#'()• G+-<)-4,+2$()'.)7#.@.'$)$1Q&-&$+-&$(),+C)#$C"-$)6.#I8.,C)1.#)'#&,8)-."#'()
26
4.9%
Judicial Branch Other Expenses
Analysis. Answers. pg
What about Prop 30?
!"#$%&'%())*%#+),$%-.)/%012%o :)*,8,+-$C)*"C2$'A)6&'4)@.+$0)1.#)$C"-,'&.+)!"3%-.)/%01%456789:%+)$";.%<;%o F$-,"($)6$),#$),)4&24)',E)(','$J)R$),#$+S')o F$-,"($)#&-4)7$.78$)6&88)@./$)."').1)(','$J)34$0)6."8C)4,/$),8#$,C0)!"3%-.)/%01%4567%+)$";.%<;%o F$-,"($)&')@,I$()"()@.#$)#$8&,+').+),)"+#$8&,*8$)(."#-$).1)&+-.@$J)
!"#78"()&+);)0$,#(T)U4)+.V))o R$)+$$C)#$,8)#$1.#@J)1,&#$#)',E$().+)*#.,C$#)*,($()o F$-,"($)6$)/.'$C)&')&+)6&'4."'),+0)'#"$)$E7$+C&'"#$)#$1.#@(J)34$))
7$+(&.+)(0('$@)&()*#.I$+),+C)C$(7$#,'$80)+$$C()Q&E&+2)
Analysis. Answers. pg
In the Long Term?
28
0
0.2
0.4
0.6
0.8
1
1.2
2004
20
05
2006
20
07
2008
20
09
2010
20
11
2012
Perc
ent
Population Growth
United States Califonria
-) [:6%T6) .=?>A)+) \(3QG"7) ++?+A).) S8D)23'T) -@?IA)>) N8:6D6'8) -@?-A)E) S3'&5)N6T3&6) -I?@A)=) \8%&)]G'7G"G6) -I?0A)I) S8D)L8^GH3) -=?EA)@) B3$&5)46'3:G"6) -=?>A)J) ]8'Q3"&) -=?+A)-0) W6D6GG) -E?JA)!!" #$%&'()*&$" !+,-."-+) LG%%G%%GPPG) -E?=A)-.) \G%H3"%G") -E?=A)->) !3D6) -E?EA)-E) L6G"8) -E?>A)-=) LG""8%3&6) -E?>A)-I) V53#8)!%:6"#) -E?.A)
_"G&8#)B&6&8%)93&6:) ->?IA)
2011 Taxes Fees Paid as share PI
!"H3Q8)A)LG7'6U3")
_"#8');-0<000) ,0?E.)
;-0<000)&3);-J<JJJ) ,-?@=)
;+0<000)&3);+J<JJJ) ,-?=+)
;.0<000)&3);.J<JJJ) ,-?-0)
;>0<000)&3);>J<JJJ) ,-?0J)
;E0<000)&3);I><JJJ) 0?>-)
;IE<000)&3);JJ<JJJ) 0?->)
;-00<000)&3);->J<JJJ) 0?--)
;-E0<000)&3);-JJ<JJJ) ,0?>+)
;+00<000)&3);+E0<000) +?=J)
YK8');+E0<000) ,0?0I)
07-12 Net Domestic Migration by Income
Analysis. Answers. pg
Growth Patterns
29
2010! 2060 Est! State Total ! 37,309 ! 52,694 !
So Cal ! 21,176 ! 28,087 ! South CV ! 3,365 ! 6,758 ! Bay Area ! 7,493 ! 10,024 ! North CV ! 2,744 ! 4,373 ! No Cal ! 1,158 ! 1,701 ! Central Coast ! 1,373 ! 1,751 !
Diff! State Total ! 15,384 !
So Cal ! 6,911 ! 44.9%! South CV ! 3,393 ! 22.1%! Bay Area ! 2,531 ! 16.5%! North CV ! 1,629 ! 10.6%! No Cal ! 543 ! 3.5%! Central Coast ! 378 ! 2.5%!
2012 Ch 11-12 NI NIM NDM
California 37,826,160 255,853 269,379 96,463 (109,989)
Los Angeles 9,911,665 50,829 74,712 31,403 (55,286)
San Diego 3,147,220 21,899 24,402 9,496 (11,999)
Orange 3,071,933 24,813 20,970 8,805 (4,962)
Riverside 2,244,399 23,897 16,797 3,433 3,667
San Bernardino 2,065,016 11,668 18,495 3,320 (10,147)
Santa Clara 1,828,597 21,716 14,525 8,640 (1,449)
Alameda 1,540,790 14,570 9,970 5,992 (1,392)
Sacramento 1,439,874 8,990 9,772 2,916 (3,698)
Contra Costa 1,069,803 8,428 5,226 2,337 865
Fresno 946,823 7,545 9,931 1,258 (3,644)
Kern 855,522 6,683 9,028 1,101 (3,446)
Ventura 834,109 3,894 5,554 1,389 (3,049)
San Francisco 820,349 7,226 3,194 4,265 (233)
San Mateo 736,362 8,382 4,377 2,315 1,690
Analysis. Answers. pg
The Disappointing Recovery
Beacon Economics
65%
66%
67%
68%
69%
70%
71%
72%
Q1-
98
Q4-
99
Q3-
01
Q2-
03
Q1-
05
Q4-
06
Q3-
08
Q2-
10
Consumer Spending as % GDP
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
22.0%
1969
I 19
74I
1979
I 19
84I
1989
I 19
94I
1999
I 20
04I
2009
I
Taxes as share income
11000
11500
12000
12500
13000
13500
14000
14500
15000
15500
2000
I 20
01II
2002
III
2003
IV
2005
I 20
06II
2007
III
2008
IV
2010
I 20
11II
2012
III
US GDP
Hypothetical Actual
Analysis. Answers. pg
What’s wrong with the economy?
31
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1998
I 19
99IV
20
01III
20
03II
2005
I 20
06IV
20
08III
20
10II
2012
I
Net Trade % GDP
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
1999
I IV
III
II 20
06I
IV
III II
2013
I
Construction as % of GDP: Real
17.0%
17.5%
18.0%
18.5%
19.0%
19.5%
20.0%
20.5%
21.0%
21.5%
22.0%
2005
I 20
06I
2007
I 20
08I
2009
I 20
10I
2011
I 20
12I
2013
I
Government Direct Spending % GDP
Analysis. Answers. pg
Trade
32
-60000
-50000
-40000
-30000
-20000
-10000
0
100000
120000
140000
160000
180000
200000
220000
240000
260000
Jan-
10
May
-10
Sep
-10
Jan-
11
May
-11
Sep
-11
Jan-
12
May
-12
Sep
-12
Jan-
13
May
-13
Nominal Trade to July
Exports Imports Balance
75
80
85
90
95
100
105
110
115
Jan-
99
May
-00
Sep
-01
Jan-
03
May
-04
Sep
-05
Jan-
07
May
-08
Sep
-09
Jan-
11
May
-12
$US Broad Index Real
Analysis. Answers. pg
The World? Turning a corner.. We hope.
33
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
1.4
GDP Growth (SA)
United Kingdom United States Euro area
0
2
4
6
8
10
12
14
16
Jan-
11
Mar
-11
May
-11
Jul-1
1 S
ep-1
1 N
ov-1
1 Ja
n-12
M
ar-1
2 M
ay-1
2 Ju
l-12
Sep
-12
Nov
-12
Jan-
13
Mar
-13
May
-13
China Industry Value Added: Y-o-Y Growth
Analysis. Answers. pg
Tech Industry: A Global Tick Up?
34
$14.1 Bil.
$26.2 Bil. $25.9 Bil.
10,000,000,000
12,000,000,000
14,000,000,000
16,000,000,000
18,000,000,000
20,000,000,000
22,000,000,000
24,000,000,000
26,000,000,000
28,000,000,000
U.S
.$
Global Semiconductor Sales
Analysis. Answers. pg
California Exports
60000
80000
100000
120000
140000
160000
180000
2003
20
04
2005
20
06
2007
20
08
2009
20
10
2011
20
12
2013
est
State Produced Exports 2013 est TOTAL 159583 -1.4% Electric Machinery Etc 28333 1.1% Industrial Computers 20473 -22.0% Optic Photo Etc Medic 17620 -0.4% Nat Etc Pearls Stones 8410 26.1% Aircraft 9738 16.4% Edible Fruit & Nut 10010 9.0% Vehicles 6043 -16.8% Mineral Fuel Oil 5333 -16.2% Pharmaceutical 5185 17.7% Plastics 4299 -0.3% Iron And Steel 2625 -13.2% Chemical Products 2691 14.5% Dairy Prods 1640 12.3% Miscellaneous Edible 1787 10.9% Beverages Spirits 1842 8.2% Articles Of Iron Or Steel 1646 9.0% Aluminum 1567 -3.0% Edible Vegetables 1401 4.7% Organic Chemicals 1462 47.8% Arms And Ammunition 1447 292.5%
Analysis. Answers. pg
SF Housing Construction
200
300
400
500
600
700
800
900
Jan-
08
Jul-0
8 Ja
n-09
Ju
l-09
Jan-
10
Jul-1
0 Ja
n-11
Ju
l-11
Jan-
12
Jul-1
2 Ja
n-13
Ju
l-13
Single Family Starts / Permits
Permits Starts
100
110
120
130
140
150
160
170
180
300 320 340 360 380 400 420 440 460 480
Jan-
12
Mar
-12
May
-12
Jul-1
2 S
ep-1
2 N
ov-1
2 Ja
n-13
M
ar-1
3 M
ay-1
3 Ju
l-13
New Home Sales
New Sales SAAR New For Sales
Analysis. Answers. pg
Why? Ownership Rates Still Falling
37
50000
55000
60000
65000
70000
75000
80000
60% 61% 62% 63% 64% 65% 66% 67% 68% 69% 70%
Q1-
85
Q1-
88
Q1-
91
Q1-
94
Q1-
97
Q1-
00
Q1-
03
Q1-
06
Q1-
09
Q1-
12
Ownership HVS
Share OO Owner Occupied
Year Total
Multi-Family Owner
s
Multi-Family Renters
Single-Family Owner
s
Single-Family Renters
Owner %
2000 103,149 5,503 22,524 64,878 10,244 68.2
2001 104,884 5,897 22,548 66,167 10,271 68.7
2002 107,729 5,638 22,480 68,765 10,846 69.1
2003 109,751 6,106 23,027 69,817 10,801 69.2
2004 110,597 6,182 22,677 70,924 10,814 69.7
2005 111,971 6,528 22,470 72,020 10,953 70.2
2006 112,966 6,478 22,784 71,860 11,844 69.3
2007 114,459 6,927 23,257 72,371 11,904 69.3
2008 115,250 7,065 23,584 72,294 12,306 68.9
2009 115,647 6,846 23,842 72,007 12,953 68.2
2010 115,922 6,996 23,795 71,814 13,317 68.0
2011 117,095 7,093 24,483 71,508 14,012 67.1
2012 119,472 7,279 25,634 71,934 14,625 66.3
Housing Tenure: March CPS
Analysis. Answers. pg
Apartment / Multi Family
38
0
100
200
300
400
500
600
Jan-
08
Jun-
08
Nov
-08
Apr
-09
Sep
-09
Feb-
10
Jul-1
0 D
ec-1
0 M
ay-1
1 O
ct-1
1 M
ar-1
2 A
ug-1
2 Ja
n-13
Ju
n-13
Multi-Family Permits and Starts
Permits Starts
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A##2/*('&.10#F&*$#3(".('&+%&L8LC9&=*))*0$&XZ&*$&15(&15*3'&62"31(38&&G(#5$*B#"))%@&15*.&*.&"&'(#)*$(&?30=&15(&O8CJJ&=*))*0$&XZ&15"1&>(3(&"+.03+('&)".1&62"31(38&W0>(<(3@&15(&.(#0$'&62"31(3D.&?*423(&>".&.0=(>5"1&*$?)"1('&+(B#"2.(&*1&/3('0=*$"$1)%&.1(==('&?30=&$(>)%�$.132#1('&./"#(&15"1&>".&/3(B)(".('8&&&G5*.&62"31(3D.&$(1&"+.03/1*0$&*.&"&+*1&=03(&034"$*#@&150245&15(&/3(B)(".*$4&0?&$(>&./"#(&#(31"*$)%�$1*$2(.&10�$.1*121(&"&.*4$*?*#"$1&/(3B#($1"4(&0?&$(1&"+.03/1*0$8&A$&15(�$.132#1*0$&.*'(@&15*.&62"31(3&78J9,&=*)B)*0$&XZ&>(3(�=/)(1('@&'0>$&?30=&)".1&62"31(3D.&=*$*B./*F(&0?&I8-7J&=*)B)*0$&XZ8&R5*)(&)".1&62"31(3D.&+2=/&*$�$.132#1*0$&"#1*<*1%&"//("3.&10&+(&"$&"+(33"1*0$@�$.132#1*0$&"#1*<*1%&?03&0??*#(&5".&+(($&.)0>)%&*?&*$#0$.*.1($1)%&13($'*$4&2/>"3'8&M("3B10B'"1(@&15(&="3F(1&5".&'(<()0/('&,C8,L,&=*))*0$&XZ8&G5*.&*.&")=0.1&'02+)(&15(&I8I9-&=*))*0$&XZ&15"1&>(3(�$B.132#1('&1530245&15(&15*3'&62"31(3&0?&)".1&%("38&!!!;.F*$4&"$'&(??(#1*<(&3($1.&+015&43(>&+%&-8H:&'23*$4&15(&15*3'&62"31(38&&G5*.&="3F.&15(&15*3'�$.(#21*<(&62"31(3&*$&"&30>&>*15&.)0>*$4&".F*$4&"$'&(??(#B1*<(&3($1&430>158&G50245&*$&3(")*1%@&3($1")&430>15&3"1(.&"3(&.0&)0>&15"1&15(&62"31(3B10B62"31(3&'*??(3($#(.&"3(&3"15(3&=*$03&"$')'&.*=/)%&+(&*'*0B.%$#3"1*#8&&T0$(15()(..@&".F*$4&"$'&(??(#1*<(&3($1.&5"<(&$0>&3*.($&?03&1>()<(�$.(#21*<(&62"31(3.8&&M(1@&15(&.*=/)(&13215&*.&15"1&>*15&<"#"$#%&
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Analysis. Answers. pg
How many units do we need?
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
106
108
110
112
114
116
118
120
122
124
2004
03
2004
10
2005
05
2005
12
2006
07
2007
02
2007
09
2008
04
2008
11
2009
06
2010
01
2010
08
2011
03
2011
10
2012
05
2012
12
2013
07
Hou
seho
ld F
orm
atio
n (M
illio
ns)
Tota
l U.S
. Hou
seho
lds
(Mill
ions
)
U.S. Household Formation
U.S. Total Household Formation
2003 2013 2nd Qtr 2nd Qtr
All housing units 121,233 132,754 .Year-round vacant. 11,663 9.6% 13,701 10.3% ...For rent.. 3,646 3.0% 3,614 2.7% ...For sale only 1,256 1.0% 1,460 1.1% ...Rented or sold 1,000 0.8% 1,151 0.9% ...Held off market. 5,762 4.8% 7,476 5.6% ...Occ'l use. 2,060 1.7% 2,449 1.8% ...URE 935 0.8% 1,255 0.9% ...Other 2,766 2.3% 3,773 2.8%
Excess? 809.8
Excess Supply from HVS
Current Completions 770,000
Excess Supply 809,000
Current Pace HH Formation 1,500,000
Pent Up Demand (2012) 850,000
Analysis. Answers. pg
Construction
40
0
200000
400000
600000
800000
1000000
1200000
1400000 Ja
n-06
Ju
n-06
N
ov-0
6 A
pr-0
7 S
ep-0
7 Fe
b-08
Ju
l-08
Dec
-08
May
-09
Oct
-09
Mar
-10
Aug
-10
Jan-
11
Jun-
11
Nov
-11
Apr
-12
Sep
-12
Feb-
13
Construction Spending to June
Public Non-Residential Residential
Analysis. Answers. pg
Where Does the State Stack Up?
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0% CA Share Permits
L8&'3P3:G&6")['86) +0-.?!)P) A45(6)_?B?) ;-I=?=) --?.A)
/$*"0(123/4**56$%23/$*7$"#%$)$" 8-9+,9" :!,-."W3"3:$:$<)W!) ;=+E?@) -?EA);*$<2&=3/$*7$";*$3>)6&*2?"#;" 8@99,A" A:,B."/$*"C)$*D&1D(3E$F%$*G3C)2=(*7?"#;"" 8+H:,H" :A,@."S8D)23'T,\6("8,\5G&8)R:6G"%<)S2,S`) ;>.+?@) E?-A)/$*"I&2J(3#$)%1K$G3/$*"L$)D(1?"#;"" 8M!A,:" !M,-."S2a)S6%%6$,B$b3:T<)S2) ;.@E?>) .?0A)S8D)23'T,S3'&58'")S8D)`8'%8(,c3"7)!%:6"#) ;.=@?+) -?+A)F'G#78P3'&,B&6Qd3'#,S3'D6:T<)49) ;.=0?-) I?@A)\6%5G"7&3",[':G"7&3",[:8^6"#'G6) ;.>@?I) --?JA)N(1";*J2%213N(*J"O2$D<3/$*7$";*$?"#;"" 8:M+,+" AA,B."S2a)S8D6'T,_"G3"<)S`,R[) ;..>?>) +?=A)F3%&3",46Qe'G#78,*$G"H(<)L[,SW) ;..+?+) =?=A)B86f:8,96H3Q6,F8::8K$8<)\[) ;.-+?=) -I?@A)F6'"%&6e:8)93D"<)L[) ;.0I?J) E?=A)F$':G"7&3",B3$&5)F$':G"7&3"<)]9) ;+I@?>) -.?-A)S2a)M#G%3"<)S`) ;+=I?.) ,@?=A)N8"K8',[$'3'6<)4Y) ;+=-?+) -E?>A)
Analysis. Answers. pg
Housing Comparisons
42
United States California San Francisco Los Angels
‘08 ‘10 ‘12 ‘08 ‘10 ‘12 ‘08 ‘10 ‘12 ‘08 ‘10 ‘12
Ownership Share 66.6 65.4 63.9 57.0 55.6 54.0 56.9 54.4 53.0 51.2 49.8 48.4
Vacancy Rates 12.4 13.1 12.4 9.1 9.3 8.4 7.8 8.1 6.1 6.4 6.8 6.0
Percent of Units w/ 1+ Resident per Bedroom 3.2 3.4 3.3 7.9 8.6 8.2 4.9 5.6 5.5 11.2 12.1 11.2
Percent of Households who spend less than 25% of Income on Housing
Homeowners 62.4 62.6 66.1 54.1 55.0 57.0 55.0 55.5 58.0 53.3 53.1 54.9
Homeowners w/ mortgage 49.8 49.6 55.4 34.6 36.4 41.3 35.0 36.7 44.0 34.1 34.3 38.0
Renters 38.6 35.4 36.5 33.6 31.2 31.2 38.9 36.7 36.0 32.1 29.4 29.6
Analysis. Answers. pg
Income Comparisons
43
United States California San Francisco Los Angels
‘08 ‘10 ‘12 ‘08 ‘10 ‘12 ‘08 ‘10 ‘12 ‘08 ‘10 ‘12
Median Household Income ($thousands) 52.0 50.0 51.4 61.0 57.7 58.3 76.8 73.0 74.9 60.3 56.7 57.3
Per Capita Income ($thousands) 27.6 26.1 27.3 29.4 27.4 28.3 40.5 37.7 40.5 29.2 27.1 28.0
Poverty Rate (% of families) 38.6 35.4 36.5 33.6 31.2 31.2 38.9 36.7 36.0 32.1 29.4 29.6
Households w/ Income +$100,000 (%) 21.0 19.9 21.6 28.1 26.4 27.5 38.3 36.7 33.4 28.0 26.0 27.2
Analysis. Answers. pg
State Construction
44
0
2000
4000
6000
8000
10000
12000
14000
16000
Jan-
95
Jul-9
6 Ja
n-98
Ju
l-99
Jan-
01
Jul-0
2 Ja
n-04
Ju
l-05
Jan-
07
Jul-0
8 Ja
n-10
Ju
l-11
Jan-
13
Residential Unit Permits
Single Family Multi Family
0
200000
400000
600000
800000
1000000
1200000
1400000
Jan-
95
May
-96
Sep
-97
Jan-
99
May
-00
Sep
-01
Jan-
03
May
-04
Sep
-05
Jan-
07
May
-08
Sep
-09
Jan-
11
May
-12
Non-Residential Values
New Alterations
Analysis. Answers. pg
The big source of uncertainty!
Analysis. Answers. pg
The Deficit: Not an Issue
46
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2006
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Q1
2012
Q1
2013
Q1
Federal Debt Held by the Public and Federal Reserve
Change Y-o-Y Debt Held by Public
2200
2300
2400
2500
2600
2700
2800
2900
3000
3100
3200
2000
Q1
2001
Q1
2002
Q1
2003
Q1
2004
Q1
2005
Q1
2006
Q1
2007
Q1
2008
Q1
2009
Q1
2010
Q1
2011
Q1
2012
Q1
2013
Q1
Real Public Spending, Fed State and Local combined
Analysis. Answers. pg
The Shut Down, Debt Ceiling
o G+C&#$-')?11$-'()• H$('#&-'$C)?E7.#'()W)G@7.#'()
XY$('&-&C$(Z)• 3."#&(@)• B&(4&+2)G+C"('#&$()• !F:)[.,+()• B$C$#,8)Y#.2#,@()XN$,C)!',#')W)
RGFZ)• 5+-$#',&+'0)?11$-'()
47
GDP Income 2013Q2
GDP 16661 Defense 776.3 4.7% 142.4 18.3% Fed Non-Defense 476.3 2.9% 300.7 63.1% State Local 1869.3 11.2%
How much loss of spending?
0 5 10 15 20 25
1976 1977 1977 1977 1978 1979 1981 1982 1982 1983 1984 1984 1986 1987 1990 1995 1996 2013
Days
Customs / TSA / Air Traffic still operating
Analysis. Answers. pg
Debt Ceiling Debate: Worse
• :Y)@,+,2$@$+')• GU5()• D.@@$@.#,'&/$)D.&+)• U'4$#),-'&.+T)• U-')L\J):-'",8)4&'T))
48
What would Lew Do?
Last Downgrade: August 5, 2011
90
92
94
96
98
100
102
1000 1050 1100 1150 1200 1250 1300 1350 1400
14Jul11 14Aug11 14Sep11
S&P
$US Broad
0 0.5
1 1.5
2 2.5
3 3.5
14Jul11 14Aug11 14Sep11
10 Year Treasury
1 Year Treasury Federal Budget GDP Share
2012 Exp $3,892 $16,245 24.0% 2012 Rev $2,449 $16,245 15.1% Diff $1,443 $16,245 8.9%
Analysis. Answers. pg
Social Insurance: Unsustainable
49
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
1970
19
73
1976
19
79
1982
19
85
1988
19
91
1994
19
97
2000
20
03
2006
20
09
2012
Real Public Spending Per Retiree Source: Census, BEA
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Wor
king
Age
/ R
etire
men
t Age
US Support Ratio and Projections Source: Census
1970 2010 2050* Cost / Working Age Person $2,059 $8,795 $29,823 * Based on per capita growth half the rate from 1970 to 2010
Analysis. Answers. pg 50
Per capita expenditure (PPP int. $)
Per capita government expenditure (PPP int. $)
USA $8,608 Norway $4,859 Norway $5,674 Netherlands $4,388 Switzerland $5,564 USA $3,954 Netherlands $5,123 Denmark $3,886 Denmark $4,564 Switzerland $3,640 Canada $4,520 Austria $3,388 Austria $4,482 Germany $3,316 Germany $4,371 Canada $3,183 Belgium $4,119 Niue $3,136 France $4,085 France $3,135 Ireland $3,894 Sweden $3,132 Sweden $3,870 Belgium $3,128 Australia $3,692 United Kingdom $2,747 Finland $3,332 Ireland $2,742 United Kingdom $3,322 Iceland $2,623 Iceland $3,264 Japan $2,540 Japan $3,174 Australia $2,529
Obamacare? Not the issue!
Analysis. Answers. pg
State Pension Problems
51
Adjusted Net Pension Liabilities as % of Revenue Moody’s June 2013 report with updated methodologies
Analysis. Answers. pg
So what does it mean?
52
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Analysis. Answers. pg 53
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