Southern California Regional

Economic ForecastLisa M. Grobar, Ph.D.

Director, CSULB Economic Forecast Project

Office of Economic Research

Employment Growth Returns to the Region!

-10

-8

-6

-4

-2

0

2

4

07Q1 07Q2 07Q3 07Q4 08Q1 08q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4 10Q1 10Q2 10Q3 10Q4 11Q1

Percent

Quarterly Employment Growth Rates

-10

-8

-6

-4

-2

0

2

4

07Q1 07Q3 08Q1 08Q3 09Q1 09Q3 10Q1 10Q3 11Q1

LA OC RSB V

Percent

-8%

-6%

-4%

-2%

0%

2%

4%

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Regional Economy: Annual Data

2010: County Trends

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

Los Angeles Orange R/SB Ventura

2008 2009 2010

Forecast Summary

2010 - Better, but not good2011 - Positive job growth!2012 - Healthy economic

growth

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Total Nonfarm Employment Growth forecast

This recovery is entirely in the private sector

Sector Change in Jobs in 2011

Education & Health Services 26,032Leisure & Hospitality Services 22,149Professional & Business Services 21,943Durable Manufacturing 3,452Wholesale Trade 3,116Transportation, Warehousing & Utilities 2,022Other Services 1,764 Financial Activities 889 Retail Trade 380

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Construction and Mining Employment Growth

forecast

-6%

-4%

-2%

0%

2%

4%

6%

8%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Federal Government Employment

forecast

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2001 2002 2005 2006 2007 2008 2009 2010 2011 2012 2013

State & Local Employment Growth

forecast

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Regional Professional & Business Services Employment Growth

forecast

Professional & Business Services

• Los Angeles and Orange County– significant growth in Professional,

Scientific & Technical Services• Region

– rapid growth in Administrative & Support Services

– Temporary help services are growing rapidly in the region

Professional & Business Services Average Pay

Average Wage (2009) $61,473

A. Professional, Scientific, and Technical Services $82,252

Accounting, Tax Preparation . Bookkeeping & Payroll $64,494

Engineering Services $107,173Computer Systems Design $88,052Management Consulting $78,588B. Administrative & Support

Services $32,517Temporary Help Services $26,325

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Leisure & Hospitality Employment Growth forecast

Los Angeles: Tourism Indicators

County Feb. 2010 Feb. 2011LAX Traffic (thousands) 3,960 4,121Hotel rooms sold (thousands)

1,767 1,950Occupancy (%) 64.4 71.0Avg. Room Rate $112.32 $128.51

16

Source: Los Angeles Convention and Visitor’s Bureau

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

2000 2001 2005 2006 2007 2008 2009 2010 2011 2012 2013

Durable Manufacturing EmploymentGrowth

forecast

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Regional Transportation, Warehousing & Utilities

forecast

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Retail Employment Growth

forecast

Regional Taxable Sales Growth

-20%

-15%

-10%

-5%

0%

5%

10%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Percent

forecast

Regional Economy Summary

• The regional recovery is finally underway

• 3 of 4 county areas now seeing positive job growth

• The region will see 1.3 % job growth this year

• A return to healthy job formation in 2012-13 with job growth close to 2%

Economic OutlookLos Angeles County

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Total Nonfarm Employment Los Angeles County

forecast

Los AngelesFastest Growing Sectors, 2011

% change

Feb. 2011Information 4.8 9,200Leisure & Hospitality 3.4 13,200Education & Health 3.1 16,200Professional & Business

2.3 12,300

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Information Employment Growthforecast

Information• This sector has benefited from film

industry incentives designed to keep production in California

• $100 million annually through 2009-2014

• Motion pictures employment in LA up 12.1% from year-ago levels (15,000 jobs)

Economic Outlook Orange County

-8%

-6%

-4%

-2%

0%

2%

4%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Orange County Total Nonfarm Employment Growth forecast

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Orange County Construction Employment Growth

forecast

-15%

-10%

-5%

0%

5%

10%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Orange County Finance Employment Growth

forecast

Economic Outlook Riverside/San Bernardino

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Riverside/San BernardinoTotal Nonfarm Employment Growth

forecast

Riverside/San Bernardino• This area’s recovery will be aided by

strong growth in the wholesale and transportation, warehousing & utilities sectors

• In 2011 these 2 sectors alone will add over 3,000 jobs

• Other areas of strength will include health and professional & business services

-15%

-10%

-5%

0%

5%

10%

15%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Riverside/San BernardinoWholesale Employment Growth

forecast

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Riverside/San BernardinoTWU Employment Growth

forecast

Economic Outlook Ventura County

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Ventura CountyTotal Nonfarm Employment Growth

forecast

The Housing Market

The Regional Housing Market

• Starting this year we will present data using the “Case-Shiller index.”

• This index is based on a “repeat-sales” methodology

• Index gives a more accurate read on price appreciation/depreciation than median home price

0

50

100

150

200

250

300

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Case-Shiller Index: LA/Orange

Source: Standard & Poor’s

-30

-20

-10

0

10

20

30

40

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Housing Price Appreciation

Rate of Housing Price Appreciation

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

07Q1 07Q3 08Q1 08Q3 09Q1 09Q3 10Q1 10Q3 11Q1e

Percent

Notices of Default

County 2010:Q1 2011:Q1 % change 2010-2011Los Angeles 15,797 13,957 -11.6%

Orange 5,270 4,652 -11.7%Riverside 8,474 6,769 -20.1%San Bernardino 6,736 5,514 -18.1%Ventura 1,643 1,437 -12.5%

Source: DQ News.com

LA County Housing Affordability Index

0%5%

10%15%

20%25%

30%35%

40%45%

2003 2004 2005 2006 2007 2008 2009 2010

Source: CA Association of Realtors

% of Households that can buy

OC County Housing Affordability Index

0%

5%

10%

15%

20%

25%

30%

35%

40%

2003 2004 2005 2006 2007 2009 2009 2010

Source: CA Association of Realtors

% of Households that can buy

The Deflationary Spiral

What Can Interrupt this Deflationary Cycle?

• Government policy/incentives (?)• Expectations of Rising Interest

Rates• Further improvement in

fundamentals, particularly the job market

Housing Market in Near Term• The end of a deflationary cycle is hard

to predict because it depends on a shift in expectations

• Anticipated rate increases by Fed in early 2012 may also help potential buyers to “get off the fence.”

• Most likely result is that we will continue to “bump along the bottom”for some time

Los Angeles/Orange CountyForecast of Housing Appreciation

[year-to-year percentage change in Case-Shiller Index]

-30%

-20%

-10%

0%

10%

20%

30%

40%

93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13