U.S., CALIFORNIA AND RIVERSIDE COUNTY OVERVIEW AND FORECAST

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1 U.S., CALIFORNIA AND RIVERSIDE COUNTY OVERVIEW AND FORECAST Dr. Mira Farka & Dr. Adrian R. Fleissig California State University, Fullerton May 16, 2011 Riverside County, Board of Supervisors

2 Will the real recovery please stand up??!!

3 US Economy: Main Themes Recovery Outlook Out of the tsunami, but cloudy and turbulent Forecasts Past Performance and Future Projections

4 Recovery Outlook: Brighter, Gaining Strength and Breadth but with some clouds and turbulence The Bright The Cloudy Profits Labor Business Inv. Consumption Production Banks Exports Inventories The Turbulent Housing State/local gov. Fiscal debt

5 Recovery Outlook: Brighter, Gaining Strength and Breadth but with some clouds and turbulence The Bright Profits Business Inv. Production Exports Inventories

6 Corporate Profits are at Record-High Levels (after-tax-profits, billions, level) 1,400 1,200 1, Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10

7 Business Investments Growing Robustly (equipment and software, y-o-y growth rate)

8 Recovery Outlook: Brighter, Gaining Strength and Breadth but with some clouds and turbulence The Cloudy Labor Consumption Banks

9 The Labor Market Has Improved (private sector, thousand of employees, changes) 600 Jobs at last Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09 Sep-10

10 but it Will Take a Long Time to Get Back to Normal Jobs per Month New Jobs to keep up With Population Growth 100, ,000 Number of Years Never Back to Normal 200, , years 300, , years 400, , years

11 Consumer Spending has Recovered 10 (retail sales, y-o-y y y growth) Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

12 72% but it s s still Unsustainable (consumer spending as % of GDP) 70% 68% 66% 64% 62% 60% 58% Historical Average 56%

13 500 Bank Profits Have Recovered (financial profits, billion, level )

14 3.5 but Charge-offs are Still High (financial profits, billion, level ) Historial Average

15 Recovery Outlook: Brighter, Gaining Strength and Breadth but with some clouds and turbulence The Turbulent Housing State/local gov. Fiscal debt

16 Housing Activity is Dismal (Housing Starts, millions of dollars)

17 30.0 State/Local Gov. are in Terrible Shape (state/local employment, changes, thousands) Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11

18 0.0% It s the Budget, Stupid (percent of GDP) -1.0% -2.0% -3.0% -4.0% -5.0% -6.0% -7.0% -8.0% -9.0% -10.0% -3.1% -3.4% -3.6% -5.0% -7.6% -7.9% -9.2% Germany Canada Italy France Japan UK US

19 in a Nutshell Recovery will gain strength and breadth. but it will still be slow compared to norm Main drivers: exports, business investments, production Lagging but still helping: labor market and consumption Drags: Housing and Government Lots of Risks Eurozone debt crisis implications for financial market Oil prices implications for inflation and growth Monetary Policy is overly accommodative Domestic Municipal bond Markets large bank exposure

20 Past Forecast Performance 2010 RGDP Consumption Spending Consumer Prices Unemployment Rate Actual Forecasts

21 Forecasts Year RGDP Consumer Prices Unemployment Rate Payroll Employment f f

22 Outlook? A Long Crawl Back!!!

23 NATIONAL ECONOMY CALIFORNIA RIVERSIDE COUNTY

24 Past Forecast Performance FY Total Property Taxes Growth Motor Vehicle Licensing Fees Taxable Sales Growth Actual 1,954,024, % 197,932,854 25,761, % CSUF 1,931,422, % 196,613,969 25,319, %

25 Labor Market

26 16% 14% 12% 10% 8% 6% 4% Unemployment Rate (percent) US CA RV 14.5% 12.4% 9.6% 2% 0%

27 RV Unemployment Worse than Others (annual rate, percent) 16% 14% 12% 10% 8% 6% 4% US CA RV 14.6% 12.8% 12.3% 11.0% 10.2% 9.0% 9.2% 12.3% 13.9% 2% 0% Mar 2009 Mar 2010 Mar 2011

28 3% Nonfarm Payroll Employment (percent change, y-o-y) 1% -1% -3% -5% -4.2% US CA RV -2.0% -3.1% -3.8% -5.5% 1.0% 1.5% -0.2% -7% -7.2% -9% Mar 2009 Mar 2010 Mar 2011

29 RIVERSIDE COUNTY ECONOMY

30 MAIN INDICATORS Southern California Leading Indicator Non-Farm Payroll Employment Housing Prices Taxable Sales

31 CSUF SoCal Leading Economic Indicator Good Predictor for Economic Activity 2.0 SC Employment SC Leading Indicator Source: California State University Fullerton, IEES

32 10,000 5, ,000-10,000-15,000-20,000-25,000 RV Nonfarm Payrolls by Sector (y-o-y changes) Change Change Cons Man Trade Info Fin Prof Ser Educ/Hlth Leis Oth Ser Gov Min/Log

33 Housing Market

34 RV Median Home Price (level) 500, ,000 Median Price Year-Year Change $431,713 50% 40% 400, , , , , , ,000 $171,480 30% 20% 10% 0% -10% -20% -30% 50,000-40% %

35 RV Median Home Price (level) 500, ,000 Median Price Year-Year Change $431,713 50% 40% 400, , , , , , ,000 $171,480 30% 20% 10% 0% -10% -20% -30% 50,000-40% %

36 15% RV Taxable Sales (percent, y-o-y) 10% 5% 0% -5% -10% -15% -20% 8.2% 0.9% -16.6% -25% -30% -24.6%

37 Riverside County Forecasts Year Unemp Rate Nfarm Employ Growth Taxable Sales 1,000s % -7.3% , % % -2.1% , % % 0.9% , % % 1.4% , % % 1.6% , % FY Taxable Sales Growth

38 Ad Valorem Property Tax Forecasts FY Commercial Growth Non-Commercial Growth Total Growth ,667,957 n/a 1,564,058,966 n/a 2,064,726,923 n/a ,520, % 1,467,503, % 1,954,024, % ,167, % 1,483,646, % 1,946,813, % ,462, % 1,476,228, % 1,935,690, % ,111, % 1,538,229, % 2,007,340, %

39 Questions? Please Contact: Mira Farka (657) Adrian R. Fleissig (657)

Surviving the Recovery: Economic Outlook and Analysis. Dr. Mira Farka

Surviving the Recovery: Economic Outlook and Analysis Dr. Mira Farka California State University, Fullerton PIHRA, District 8 Buena Park, CA Nov 10, 2011 The Humpty Dumpty Economy This side of the Wall: