CENTER FOR BUSINESS AND POLICY RESEARCH. January California & Metro UNIVERSITY OF THE PACIFIC EBERHARDT SCHOOL OF BUSINESS

Transcription

1 CENTER FOR BUSINESS AND POLICY RESEARCH January 2017 California & Metro UNIVERSITY OF THE PACIFIC EBERHARDT SCHOOL OF BUSINESS

2 CENTER FOR BUSINESS AND POLICY RESEARCH Del Norte Siskiyou Modoc Humboldt Trinity Shasta Lassen Tehama Plumas Mendocino Glenn Butte Sierra Nevada Lake Colusa Sutter Yuba Placer Sonoma San Francisco Marin San Mateo Napa Yolo Solano Contra Costa Alameda Santa Clara Sacramento San Joaquin El Dorado Amador Stanislaus Calaveras Merced Alpine Tuolumne Mariposa Madera Mono Santa Cruz San Benito Fresno Inyo Monterey Kings Tulare California & Metro Forecast is published by the Center for Business and Policy Research University of the Pacific Eberhardt School of Business San Luis Obispo Kern San Bernardino Santa Barbara Web Stockton Sacramento Pacific.edu/CBPR Ventura Los Angeles Staff Dr. Jeffrey A. Michael, Director Dr. Thomas Pogue, Associate Director Nahila Ahsan, Research Analyst Jesse Neumann, Economic Research Analyst Neriah Howard, Student Researcher Anjul Shingal, Student Researcher Sydney Stanfill, Student Researcher Santa Barbara Ventura Santa Barbara Los Angeles Orange San Diego Riverside Imperial UNIVERSITY OF THE PACIFIC EBERHARDT SCHOOL OF BUSINESS

3 California & Metro January 2017 Published quarterly by the Center for Business and Policy Research at the University of the Pacific Eberhardt School of Business. Copyright 2017 Center for Business and Policy Research. All rights reserved. This forecast was prepared based upon assumptions reflecting the Center s judgments as of the date it bears. Actual results could vary materially from the forecast. Neither the Center for Business and Policy Research nor The Regents of the University of the Pacific shall be held responsible as a consequence of any such variance. Unless approved by the Center for Business and Policy Research, the publication or distribution of this forecast and the preparation, publication, or distribution of any excerpts from this forecast are prohibited.

4 Contents California Highlights... 5 Forecast Summary California Forecast Tables California Forecast Charts Fresno MSA Merced MSA Modesto MSA Oakland MSA Sacramento MSA San Francisco MSA San Jose MSA Stockton MSA

5 FORECAST HIGHLIGHTS Highlights of the January 2017 California Forecast Real Gross State Product is forecast to grow 2.6% in 2017, followed by a gradual decline in growth rates to 2% in 2020 as the risk of recession increases. The California unemployment rate has reached its low point in this cycle and is projected to stabilize at about 5.4% for the next two years and will gradually increase to 6% by Non-farm payroll jobs will grow 1.6% in 2017, a decrease from the past four years when job growth was between 2.5% and 3%. The pace of job growth statewide will stabilize around 1% in 2018 and beyond. Health Services has become the largest employment sector in the state and is projected to add an additional 40,000 positions over the next 12 months, less than the 65,000 jobs added in recent years. Due to the anticipated decrease in federal health funding, growth in Health Services jobs will decline further to 25,000 new jobs per year in 2018 and Professional Scientific & Technical Services is a high-paying sector that has fueled the recovery. Growth in this sector will slow to about 20,000 jobs over the next year compared to over 50,000 in some recent years as Silicon Valley growth cools. Growing tourism and a gradual shift in consumer spending from retail to restaurants has fueled rapid growth in the Leisure & Hospitality sector. However, this sector s growth is slowing to 30,000 new jobs over the next 12 months and will cool further to 15,000 new jobs by 2020 as increases to the higher minimum wage lead to slower hiring. State & Local government employment will be one of the slowest growing sectors, projected at 1% or less job growth over the next several years as state and local governments grapple with slower revenue growth and rising pension costs. About 25,000 new Construction jobs are anticipated in each of the next three years, about a 3% annual growth rate. Despite this expected growth, there will still be fewer Construction jobs in 2020 than before the recession. Single-family housing starts are growing slowly, falling just short of 50,000 units in We project an increase to 60,000 units in 2017 and 73,000 units in 2018 as the state s growing housing shortage revives interest in new homes. Multi-family housing starts have surpassed pre-recession levels, but growth has stalled with about 45,000 new multi-family units produced in 2015 and We expect modest multi-family growth to 51,000 units in 2017 and up to 60,000 units by Center for Business and Policy Research 5

6 FORECAST SUMMARY California Outlook Since the election, there has been an upswing in business and consumer confidence. The stock market rose sharply in anticipation of corporate tax cuts and increased business investment in an environment of reduced regulation. These developments, along with fiscal stimulus from increased military and infrastructure spending, are the scenario described in our pre-election forecast in fall 2016 where we said a Trump election would most likely stimulate growth in In subsequent years, these effects will fade and some of the sideeffects such as higher interest rates, a strong dollar, reduced government spending in healthcare and other areas will dampen growth. The prospect of lower immigration and the risk of a trade war could further depress growth beyond 2017, particularly in California. Although our 2017 forecast for California has not changed dramatically, there is uncertainty about the California economy due to the new administration. We project 2.6% growth in Real Gross State Product (GSP) in 2017, slightly up from Growth in non-farm payrolls slowly decelerates to 1.6% growth, breaking a five-year stretch of job growth over 2% for California. The unemployment rate is projected to be stable at about 5.4% throughout the year. Real GSP growth is projected to decline to 2% by 2020 compared to our pre-election forecast of 2.4%. Taken together, this slower growth over several years following 2017 means we project that California s economy will be about $30 billion smaller than our pre-election forecast, a total decline of about 1%. Job growth is forecast to be just below 1% after 2018, and the unemployment rate will gradually rise from 5.4% in 2018 to nearly 6% in 2020 under this scenario. This quantitative forecast of the California economy was made prior to the inauguration. As such, it does not fully incorporate the new administration s evolving economic policies, and also does not fully capture an elevated risk of recession most likely spurred by disruptions to the global economy. After the first full week of the Trump administration, our concern of recession spurred by global conflict and disruption of the movement of goods and people has increased. The Table 1. California Annual Forecast Summary Real Gross State Product (% change) Non-Farm Payroll Employment (% change) Unemployment Rate (%) Housing Starts (thousands) California & Metro Forecast January 2017

7 FORECAST SUMMARY forecast does assume about 2/3 of the healthcare expansion funded by Obamacare is rolled back starting in 2018, as reflected in healthcare job growth falling to below 1% after growing in excess of 3% annually over the past 5 years. California s election results include the passage of a $9 billion school bond and the extension of increased income taxes on the state s high-earners through The school bonds provide a boost to the homebuilding industry which faced the prospect of a large increase in school impact fees that could have stalled the recovery in homebuilding. We anticipate housing starts to exceed 100,000 units in 2017 for the first time in over a decade, although we have lowered our projections for home construction in this forecast as demand growth is slow and the industry struggles with high costs and supply constraints. Proposition 64 also passed, legalizing recreational marijuana starting in Our preliminary calculations show there could be up to 50,000 jobs statewide in the legal cultivation, processing, distribution, and retailing of cannabis products as the industry evolves. How and where the legalization process plays out is still very much in question as the state will be developing the details of the regulatory framework this year, and many local governments have not been friendly to the industry with many locales banning marijuanarelated businesses despite the passage of Prop. 64. In addition, there are continuing uncertainties about banking and how the Trump administration will approach states that have legalized marijuana. THE REGIONAL OUTLOOK The changing policy environment to the surprising election of President Trump will have disparate effects across different regions of the state. Inland regions are most exposed to negative effects through larger reliance on government spending, most notably a rollback in healthcare spending expected with the repeal of Obamacare. In contrast, the Bay Area will be less impacted by Obamacare and will receive greater benefits from tax cuts to high-income earners and tax and regulatory policies that will benefit corporations, the financial sector, and highincome earners. Table 2 illustrates the importance of expanded spending on healthcare and government since 2013 on personal income in the metro areas covered by the forecast. In the Bay Area, less than 20% of personal income growth was from government or healthcare sources, while all areas in the Central Valley were over 40% and most over 50%. Stockton and Merced are at the top of this list because they received an additional boost over this period from new or expanded state corrections and highereducation facilities. However, it is clear that Central Valley regions will feel macroeconomic effects of a reduction in federal healthcare spending combined with growing pension costs that will reduce new Table 2. Share of income growth from government transfer payments, and wages from government and healthcare jobs. Merced 58.2% Stockton-Lodi 54.3% Fresno 54.3% Sacramento-Roseville 48.7% Modesto 41.6% San Francisco-Oakland combined 19.0% San Jose 15.7% Center for Business and Policy Research 7

8 FORECAST SUMMARY hiring in state and local governments. All of the Central Valley areas in our forecast posted strong job growth in 2016, either at or exceeding the state average. In-migration and population growth began moving up in the Sacramento and Modesto areas in 2016 similar to moves seen first in the Stockton area in 2015 and These spillover benefits from the Bay Area will continue, but will be largely, if not entirely, offset by the anticipated pullback in healthcare funding and sluggish government employment beyond Thus, we are projecting job growth at 1% or below in most inland metro areas in 2018 with unemployment rates edging slightly higher after stabilizing for a year or two near their current levels. Heavy rains across Northern California will provide relief for areas where the drought constrained agricultural production in recent years, especially near Fresno. However, the news for agriculture is not all good. High prices pushed agricultural revenue to record levels in recent years despite drought-related production losses but price declines are now leading to revenue declines. Farmers are also facing rapidly rising costs, particularly for labor, and a stronger dollar that discourages exports. Some of these issues for farm profits, such as higher labor payments, boost other parts of the Valley economy and offset the effects of reduced farm income. If changing U.S. policies spark a trade war, U.S. agricultural exports are also a likely target for retaliatory tariffs and immigration changes could seriously disrupt agricultural labor markets. These changes, along with continued policy uncertainty surrounding water supplies, will usher in a period of substantial change and slow growth for Valley agriculture over the next decade. The outcome will likely be a somewhat smaller but still profitable industry with higher overall wages. While the long-term outlook is for slower growth, several Valley metro areas should continue to outpace the state s pace of employment growth in In addition to drought-busting rains, Fresno will continue to receive a boost from highspeed rail spending that is expected to be near $1 billion in This should result in solid 2% job growth in 2017; however, we project Fresno to slow significantly to 0.5% growth in 2020, the slowest of any of our metro areas. Recent economic data has also been strong in Sacramento. The surge in downtown investment and strong housing demand will maintain job growth at 2.5% in 2017, nearly a full percentage point above the State s projected growth. This is good news for a Capital region economy that has lagged the rest of the state badly. Sacramento will see two large employment changes in 2017 both positive and negative. Verizon is closing a large call center in Rancho Cordova eliminating about a thousand jobs and continuing a downsizing of the telecom industry in Sacramento that used to have a large employment concentration in the region. The good news is that a massive Amazon fulfillment center is being built near the airport and will create thousands of jobs similar to what has been seen near Tracy in recent years. Overall, it will be challenging for Sacramento s government and healthcare centered economic base to sustain recent momentum in the current policy environment unless efforts to attract more investment from Silicon Valley begin to bear more fruit. As a result, Sacramento job growth is anticipated to decline to 1% by 2019 after a strong year in The Stockton metropolitan area has the most negative change compared to our previous forecast. After five years of exceptionally strong job growth, preliminary employment data for Stockton in the second half of 2016 was shockingly bad. We caution that this preliminary data can send false negative signals, but we have not been able to identify any offsetting information to suggest that it is wrong. Thus, we are revising the 2017 employment 8 California & Metro Forecast January 2017

9 FORECAST SUMMARY growth forecast for Stockton down to 1% in 2017 after averaging over 3% for the past 4 years. The job declines are concentrated in Professional and Business Services, an important high-paying sector that is already underdeveloped in the Stockton area despite leading statewide job growth in recent years. Stockton s strong employment growth in recent years has been sparked by a few mega-projects, the large corrections hospital and Amazon s explosive growth in fulfillment centers near Tracy. This slower employment growth for the Stockton area has to be viewed in the context of several years that defied all expectations, especially since the homebuilding industry remains a fraction of its previous size. As the location where the growing Bay Area economy intersects with the Central Valley, Stockton is also positioned to benefit from continued growth in the Bay Area that drives in-migration and continued growth in commuter incomes. The level of forecast uncertainty is especially high at the moment but probably nowhere more than the North San Joaquin Valley areas of Stockton, Modesto, and Merced. In the Bay Area, growth is slowing down in the face of labor constraints, high costs, and a decrease in venture capital funding from the record levels of Recent layoff announcements from some technology companies have spurred some concern of a bubble, but some cost controls as firms mature and talent churn are expected in a dynamic, entrepreneurial economy. Silicon Valley continues to attract a disproportionate level of U.S. venture capital funding and for now, the Bay Area economy seems to be gliding towards a more sustainable pace of healthy growth in several dimensions. Up until 2016, Bay Area population growth remained high in spite of soaring living costs. However, Bay Area out-migration increased in 2016, resulting in slower growth in population and some recent stabilization in housing costs. While slower, we still anticipate job growth in the Bay Area will continue to exceed the state average at about 2% in 2017 and remaining above 1% through 2019 even as population growth drops below 1%. That means the Bay Area will continue to add jobs faster than it grows its local workforce. Since San Francisco and San Jose are already at full employment, commuting will continue to rise and the East Bay s unemployment rate will drop below 4%, while California s unemployment rate stabilizes in the mid 5% range. These forces will also cause the Bay Area economy to continue expanding geographically and increasing integration with inland areas in the Northern California Megaregion such as the North San Joaquin Valley and Sacramento. The Bay Area economy has a low reliance on government and healthcare employment, so it will be less negatively impacted than other areas of the state by changing government fiscal policies, and its financial industry is benefitting from the changing policy environment. The biggest policy risk to the region is changes to immigration policies. Center for Business and Policy Research 9

10 FORECAST SUMMARY Table 3. Central Valley Metro Forecast Summary Metro Area Non-Farm Payroll Employment (% change) Unemployment Rate (%) Sacramento Stockton Modesto Merced Fresno California NOTE: Sacramento MSA includes Sacramento, El Dorado, Placer, and Yolo Counties. Stockton, Merced, Fresno and Modesto MSAs correspond to San Joaquin, Merced, Fresno, and Stanislaus Counties. Table 4. Bay Area Metro Forecast Summary Metro Area Non-Farm Payroll Employment (% change) Unemployment Rate (%) San Francisco San Jose Oakland California NOTE: San Francisco MSA includes San Francisco and San Mateo Counties. Oakland MSA includes Contra Costa and Alameda Counties. San Jose MSA includes Santa Clara and San Benito Counties. 10 California & Metro Forecast January 2017

11 CALIFORNIA TABLES Table 1. Annual Summary Personal Income and Gross State Product Personal Income (Bil. $) Calif. (%Ch) Gross State Product (Bil. $) Calif. (%Ch) Real GSP (Bil. 2009$) Calif. (%Ch) Employment and Labor Force (Household Survey % Change) Employment Labor Force CA Unemployment Rate (%) Non-Farm Employment (Payroll Survey % Change) Total Non-Farm California Mining Construction Manufacturing Nondurable Goods Durable Goods Trans. Warehs. & Utility Wholesale Trade Retail Trade Financial Activities Prof. and Business Services Edu & Health Services Leisure & Hospitality Information Federal Gov't State & Local Gov't Other Indicators Population (thous) (%Ch) Housing Starts Tot. Private (Annual Rate, Ths.) Housing Starts Single Family Housing Starts Multi-Family New Passenger Car & Truck Registrations Retail Sales (Billions $) Center for Business and Policy Research 11

12 CALIFORNIA TABLES Table 2. Quarterly Summary 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income and Gross State Product Personal Income (Annual Rate, Bil. $) Calif. (%Ch) Gross State Product (Bil. $) Calif. (%Ch) Real GSP (Bil. 2009$) Calif. (%Ch) Employment and Labor Force (Household Survey % Change) Employment Labor Force CA Unemployment Rate (%) Non-Farm Employment (Payroll Survey % Change) Total Non-Farm California Mining Construction Manufacturing Nondurable Goods Durable Goods Trans. Warehs. & Utility Wholesale Trade Retail Trade Financial Activities Prof. and Business Services Edu & Health Services Leisure & Hospitality Information Federal Gov't State & Local Gov't Other Indicators Population (thous) (%Ch) Housing Starts Tot. Private (Annual Rate, Ths.) Housing Starts Single Family Housing Starts Multi-Family New Passenger Car & Truck Registrations Retail Sales (Billions $) California & Metro Forecast January 2017

13 CALIFORNIA TABLES Table 2. Quarterly Summary 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income and Gross State Product Personal Income (Bil. $) Calif. (%Ch) Gross State Product (Bil. $) Calif. (%Ch) Real GSP (Bil. 2009$) Calif. (%Ch) Employment and Labor Force (Household Survey % Change) Employment Labor Force CA Unemployment Rate (%) Non-Farm Employment (Payroll Survey % Change) Total Non-Farm California Mining Construction Manufacturing Nondurable Goods Durable Goods Trans. Warehs. & Utility Wholesale Trade Retail Trade Financial Activities Prof. and Business Services Edu & Health Services Leisure & Hospitality Information Federal Gov't State & Local Gov't Other Indicators Population (thous) (%Ch) Housing Starts Tot. Private (Annual Rate, Ths.) Housing Starts Single Family Housing Starts Multi-Family New Passenger Car & Truck Registrations Retail Sales (Billions $) Center for Business and Policy Research 13

14 CALIFORNIA TABLES Table 3. Employment Quarterly 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 California Payroll Employment (Thousands) Total Non-Farm Manufacturing Durable Goods Wood Products Computer & Electronics Transportation Equipment Nondurables Foods Non-Manufacturing Mining Construction Transportation, Warehouse & Util Wholesale Trade Retail Trade Information Prof. & Bus. Services Admin. & Support Prof. Sci. & Tech Mgmt. of Co Financial Activities Real Estate & Rent Finance & Insurance Education & Health Service Education Services Health Services Leisure & Hospitality Other Services Government Federal Gov't State & Local Gov't California & Metro Forecast January 2017

15 CALIFORNIA TABLES Table 3. Employment Quarterly 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 California Payroll Employment (Thousands) Total Non-Farm Manufacturing Durable Goods Wood Products Computer & Electronics Transportation Equipment Nondurables Foods Non-Manufacturing Mining Construction Transportation, Warehouse & Util Wholesale Trade Retail Trade Information Prof. & Bus. Services Admin. & Support Prof. Sci. & Tech Mgmt. of Co Financial Activities Real Estate & Rent Finance & Insurance Education & Health Service Education Services Health Services Leisure & Hospitality Other Services Government Federal Gov't State & Local Gov't Center for Business and Policy Research 15

16 CALIFORNIA TABLES Table 4. Employment Annual California Payroll Employment (Thousands) Total Non-Farm Manufacturing Durable Goods Wood Products Computer & Electronics Transportation Equipment Nondurables Foods Non-Manufacturing Mining Construction Trans., Warehouse & Util Wholesale Trade Retail Trade Information Prof. & Bus. Services Admin. & Support Prof. Sci. & Tech Mgmt. of Co Financial Activities Real Estate & Rent Finance & Insurance Education & Health Service Education Services Health Services Leisure & Hospitality Other Services Government Federal Gov't State & Local Gov't California & Metro Forecast January 2017

17 CALIFORNIA CHARTS California Personal Income (percent change from one year ago) 10% 8% 6% 4% 2% 0% % -4% -6% -8% 10% California Real Gross State Product (percent change from one year ago) 8% 6% 4% 2% 0% % -4% -6% -8% California Unemployment Rates (percent) 14% 12% 10% 8% 6% 4% 2% 0% Center for Business and Policy Research 17

18 CALIFORNIA CHARTS California Total Nonfarm Employment (Thousands) California Construction Employment (Thouands) California Manufacturing Employment (Thousands) California & Metro Forecast January 2017

19 CALIFORNIA CHARTS 700 California Trade, Transportation, and Utilities Employment (Thousands) California Financial Activities Employment (Thouands) California Professional and Business Employment (Thousands) Center for Business and Policy Research 19

20 CALIFORNIA CHARTS 2700 California Education and Health Services Employment (Thousands) California Information Employment (Thousands) California Federal Government Employment (Thousands) California & Metro Forecast January 2017

21 CALIFORNIA CHARTS 2400 California State and Local Government Employment (Thousands) California Housing Starts (Thousands) California New Passenger & Light Truck Registrations (Thousands) Center for Business and Policy Research 21

22 METROS

23 Fresno MSA Total non-farm employment is expected to grow by 2% between 2016 and Non-farm employment in the first and second quarters of 2017 is expected to increase by 3.2% and 1.9% followed by increases of 1.6% and 1.3% in the third and fourth quarters, respectively. The leading sectors for employment growth for 2017 are predicted to be the Construction & Mining (7.6%) and the Leisure & Hospitality (7.1%) sectors. Employment between 2016 and 2017 is expected to decrease in the Information (-3%), Manufacturing (-2.3%), Federal Government (-2.3%), and Financial Activities (-0.6%) sectors. SHORT TERM OUTLOOK The Fresno MSA s population is expected to reach approximately 997,804 in 2017 and will grow between 1.2% and 1.3%, reaching 1,035,664 in An increase in the labor force between 2016 and 2017 of 1.6% is also expected. The labor force is projected to grow between 1.1% and 1.3% in the following years. The unemployment rate is forecasted to be 9.5% in 2017 and may continue to increase in the following years with an estimated 10.6% in Housing starts for both single-family and multifamily are expected to increase over the next few years as well, where single-family units will outnumber multifamily units Fresno Housing Starts 360 Fresno Payroll Employment (Thousands) % 18% 16% 14% 12% 10% 8% 6% 4% 2% Fresno Unemployment Rate (percent) Fresno Employment Mix Relative to California, 2015 (California = 100) Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 0% Center for Business and Policy Research 23

24 METRO SUMMARY - FRESNO Quarterly Outlook for Fresno January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

25 METRO SUMMARY - FRESNO Quarterly Outlook for Fresno January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 25

26 METRO SUMMARY - FRESNO Annual Outlook for Fresno January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

27 METRO SUMMARY - FRESNO Merced MSA SHORT TERM OUTLOOK Total non-farm employment is expected to grow 0.8% between 2016 and 2017 and will continue to experience growth through The expected leading sectors for employment growth in 2017 are the Financial Activities (11.7%), Construction & Mining (8.4%), and Education & Health Services (4.5%) sectors. The Manufacturing and Federal Government sectors are forecasted to experience declining rates in 2017 of -6.3% and -0.6%, respectively. The Manufacturing sector is expected to see a negative percent change rate in 2018, and the Federal Government sector is expected to experience negative numbers through The population in Merced is expected to reach approximately 275,143 in 2017 and is also forecasted to grow in the next few years reaching 286,215 in The labor force is expected to grow 0.3% between 2016 and 2017 and will continue grow through The unemployment rate for the Merced MSA is forecasted to be 10% in 2017 down from 10.4% in Unemployment will decline each year but may return to 10.1% in In addition, growth in single and multifamily housing starts is also expected in the following years, with an estimated 699 units for single-family and 50 units for multifamily in Merced Housing Starts 70 Merced Payroll Employment (Thousands) % 18% 16% 14% 12% 10% 8% 6% 4% 2% Merced Unemployment Rate (percent) Merced Employment Mix Relative to California, 2015 (California = 100) Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 0% Center for Business and Policy Research 27

28 METRO SUMMARY - MERCED Quarterly Outlook for Merced January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

29 METRO SUMMARY - MERCED Quarterly Outlook for Merced January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 29

30 METRO SUMMARY - MERCED Annual Outlook for Merced January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

31 Modesto MSA SHORT TERM OUTLOOK Total non-farm employment is expected to grow 1.5% between 2016 and 2017 with the highest growth rate seen in 2017Q1 at 2.1%. The leading sectors for employment growth between 2016 and 2017 are in the State & Local Government (4.1%), Professional & Business Services (2.9%), and Financial Services (2.6%) sectors. Declines are expected in the Information (-0.5%) and Trade, Transportation & Utilities (-0.1%) sectors. The Information sector will see declines through The population in the Modesto MSA is expected to reach 552,300 in 2017 and will grow each year reaching 572,400 in Modesto s labor force is expected to grow at a rate of 1.0% for 2017 with expected increased growth rates into Unemployment is estimated to decline to 8.4% in 2017 from 8.5% in 2016 but will rise between 2018 and 2020, reaching approximately 9.3% in Housing starts for both single-family and multifamily units are expected to see increases each year through Of note is the growth of housing starts between 2017 and Modesto Housing Starts 190 Modesto Payroll Employment (Thousands) Modesto Unemployment Rate (percent) Modesto Employment Mix Relative to California, 2015 (California = 100) 19% % % % % 80 9% % 20 5% 0 Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 3% Center for Business and Policy Research 31

32 METRO SUMMARY - MODESTO Quarterly Outlook for Modesto January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

33 METRO SUMMARY - MODESTO Quarterly Outlook for Modesto January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 33

34 METRO SUMMARY - MODESTO Annual Outlook for Modesto January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

35 Oakland MSA SHORT TERM OUTLOOK Non-farm employment in the Oakland MSA is expected to increase 1.9% between 2016 and 2017 and 1.4% between 2017 and The expected leading sectors for employment growth in 2017 are the Information, Financial Activities, and Leisure & Hospitality sectors with 8.0%, 5.3%, and 3.9% growth, respectively. A decline of 1.2% is predicted in the Manufacturing sector. Employment declines are expected in the Other Services sector between 2018 and 2020 and in 2018 and 2019 for the Federal Government sector. The Oakland MSA population is expected grow to 2,841,918 in 2017, a growth of 1.2% between 2016 and The population is expected to grow approximately 1.1% each year, reaching 2,938,118 by Unemployment in Oakland is expected to decrease to 3.9% in 2017 down from 4.3% in The unemployment rate is forecasted to be between 3.6 and 3.8% through The labor force is expected to growth 2% between 2016 and Housing starts are also expected to grow over the next few years with similar rates of single and multifamily units. 12,000 Oakland Housing Starts 1200 Oakland Payroll Employment (Thousands) , , , , , % 10% 8% 6% 4% 2% Oakland Unemployment Rate (percent) Oakland Employment Mix Relative to California, 2015 (California = 100) Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 0% Center for Business and Policy Research 35

36 METRO SUMMARY - OAKLAND Quarterly Outlook for Oakland January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

37 METRO SUMMARY - OAKLAND Quarterly Outlook for Oakland January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 37

38 METRO SUMMARY - OAKLAND Annual Outlook for Oakland January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

39 Sacramento MSA SHORT TERM OUTLOOK Total non-farm employment in the Sacramento MSA is expected to increase 2.5% between 2016 and 2017 and 1.4% between 2017 and The leading sectors for employment growth in 2017 are Professional & Business Services (6.1%), Construction & Mining (5.1%), and Education & Health Services (5.0%), while declines are forecasted for the Information (-5.4%), Other Services (-3.7%), Manufacturing (-1.2%), and State & Local Government (-0.2%) sectors. The Information sector will continue to decline through The population of the Sacramento MSA is expected to be 2,337,264 in 2017, an increase of 1.3% from 2016; the rate of growth will be 1.4% each year through The labor force is calculated to also experience a 2.1% increase in 2016 and will grow between 1.4% and 1.6% in the following years through The unemployment rate is expected to be at approximately 5.3% in 2017 and will stay between 5.3% and 6% in the following years through Housing starts are expected to increase starting 2017 for both single and multifamily units, with more singlefamily units planned Sacramento Housing Starts 1000 Sacramento Payroll Employment (Thousands) % 12% 10% 8% 6% 4% Sacramento Unemployment Rate (percent) Sacramento Employment Mix Relative to California, 2015 (California = 100) Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 2% Center for Business and Policy Research 39

40 METRO SUMMARY - SACRAMENTO Quarterly Outlook for Sacramento January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths) Pct Chg Year Ago Labor Force (Ths) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

41 METRO SUMMARY - SACRAMENTO Quarterly Outlook for Sacramento January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths) Pct Chg Year Ago Labor Force (Ths) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 41

42 METRO SUMMARY - SACRAMENTO Annual Outlook for Sacramento January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths) Pct Chg Year Ago Labor Force (Ths) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

43 San Francisco MSA SHORT TERM OUTLOOK Non-farm employment is expected to grow by 2.2% between 2016 and 2017 and 1.8% between 2017 and Job growth in non-farm employment is expected to be 2.2% in the first quarter of The expected leading sectors for employment growth in 2017 are the Information (5.9%), Financial Activities (4.2%), and Professional & Business Services (3.4%) sectors. Declines are expected in the Other Services (-1%) and State & Local Government (-0.3%) sectors in the next few years. The San Francisco MSA population is expected to reach approximately 1,661,780 in 2017 an increase of 0.7% from the previous year. The population is forecasted to grow between 0.5%-0.6% through The labor force is expected to grow 2.2% between 2016 and 2017 as well as 1.1% between 2017 and The unemployment rate is expected to slightly decline to 3% in 2017 from 3.2% in 2016 and is expected to stay at 2.9% through Housing starts are predicted to decrease in 2017 through 2020; housing starts will mostly be composed of multifamily units San Francisco Housing Starts 1200 San Francisco Payroll Employment (Thousands) % 11% 9% 7% 5% 3% San Francisco Unemployment Rate (percent) San Francisco Employment Mix Relative to California, 2015 (California = 100) Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 1% Center for Business and Policy Research 43

44 METRO SUMMARY - SAN FRANCISCO Quarterly Outlook for San Francisco January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

45 METRO SUMMARY - SAN FRANCISCO Quarterly Outlook for San Francisco January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 45

46 METRO SUMMARY - SAN FRANCISCO Annual Outlook for San Francisco January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

47 San Jose MSA SHORT TERM OUTLOOK Total non-farm employment is expected to grow 2% between 2016 and 2017 and 1.2% between 2017 and The leading sectors for employment growth in 2017 are Construction & Mining (6.2%), Education & Health Services (3.1%), and Professional & Business Services (2.8%). Between 2016 and 2017, a decline of 2.6% is expected in the Other Services sector. Continued and future declines are expected in the Trade, Transportation, & Utilities; Financial Activities; and Other Services sectors. The San Jose MSA population is expected to reach approximately 2,016,755 in 2017 an increase of 0.8% from the previous year. The rate of growth for the population will be between 0.7%-0.8% each year through 2020, reaching 2,062,265 in The labor force will grow by 1.9% in 2017 and then 0.8% in The unemployment rate is forecasted to be 3.6% in 2017 and will remain at 3.5% through Housing starts declines are expected in 2017 and 2018 in comparison to the previous few years but may increase in 2019 and 2020 to over 6,000 units. Multifamily units are expected to outnumber single-family units which also occurred in previous years San Jose Housing Starts 1150 San Jose Payroll Employment (Thousands) % San Jose Unemployment Rate (percent) 250 San Jose Employment Mix Relative to California, 2015 (California = 100) 11% 200 9% 150 7% 100 5% 50 3% 0 Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 1% Center for Business and Policy Research 47

48 METRO SUMMARY - SAN JOSE Quarterly Outlook for San Jose January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

49 METRO SUMMARY - SAN JOSE Quarterly Outlook for San Jose January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 49

50 METRO SUMMARY - SAN JOSE Annual Outlook for San Jose January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

51 Stockton MSA SHORT TERM OUTLOOK Total non-farm employment is expected to grow 1% between 2016 and 2017 and may decline to 0.8% growth between 2017 and The expected leading sectors for employment growth in 2017 are the Trade, Transportation, & Utilities (3.3%), Information (3.1%), and Construction & Mining (2.9%) sectors, while declines are expected in the Manufacturing (-4.7%), Professional & Business Services (-3.4%), and Other Services (-0.2%) sectors. Continued and future declines are anticipated for the Other Services and Financial Activities sectors. The population in the Stockton MSA will increase 1.6% in 2017 to approximately 750,200 and will increase by approximately 1.4% each year reaching 782,700 in Growth each year in the labor force will remain steady over the next few years, with an expected growth rate of 1% between 2016 and The unemployment rate is expected to increase from 8.1% in 2016 to 8.2% in 2017 and will continue to increase each year, reaching 8.9% in Housing starts for both single and multifamily units are also expected to grow each year between 2017 and 2020, with more single-family units planned than multifamily units Stockton Housing Starts 240 Stockton Payroll Employment (Thousands) % 16% 14% 12% 10% 8% 6% Stockton Unemployment Rates (percent) Stockton Employment Mix Relative to California, 2015 (California = 100) Con. Mfg. TTU Info. Fin. Bus. EHS Leis. OTS Gov. 4% Center for Business and Policy Research 51

52 METRO SUMMARY - STOCKTON Quarterly Outlook for Stockton January 2017 Forecast 2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily California & Metro Forecast January 2017

53 METRO SUMMARY - STOCKTON Quarterly Outlook for Stockton January 2017 Forecast 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 Personal Income (Annual Rate, Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts (Annual Rate) Single-Family Multifamily Center for Business and Policy Research 53

54 METRO SUMMARY - STOCKTON Annual Outlook for Stockton January 2017 Forecast Personal Income (Billions $) Total Personal Income Pct Chg Year Ago Wages and Salaries Nonwage Income Per Capita Income (Ths.) Average Annual Wage (Ths.) Pct Chg Year Ago Establishment Employment (Place of Work, Thousands, SA) Total Non-Farm Employment Pct Chg Year Ago Manufacturing Pct Chg Year Ago Nonmanufacturing Pct Chg Year Ago Construction & Mining Pct Chg Year Ago Trade, Trans, & Utilities Pct Chg Year Ago Wholesale Trade Retail Trade Trans, Wrhsng, & Util Information Pct Chg Year Ago Financial Activities Pct Chg Year Ago Prof & Business Services Pct Chg Year Ago Educ & Health Services Pct Chg Year Ago Leisure & Hospitality Pct Chg Year Ago Other Services Pct Chg Year Ago Federal Government Pct Chg Year Ago State & Local Government Pct Chg Year Ago Other Economic Indicators Population (Ths.) Pct Chg Year Ago Labor Force (Ths.) Pct Chg Year Ago Unemployment Rate (%) Total Housing Starts Single-Family Multifamily California & Metro Forecast January 2017

55 CENTER FOR BUSINESS AND POLICY RESEARCH University of the Pacific A national doctoral university, University of the Pacific is recognized for an education combining exceptional professional preparation in a student-centered tradition of close interactions between students and professors. With a core liberal arts college and eight professional schools, more than any university enrolling fewer than 10,000 students, Pacific offers professional opportunities associated with far larger institutions in the environment of a small learning community. Pacific is California s first chartered institution of higher learning, having received its articles of incorporation from the California Supreme Court on July 10, The University enrolls more than 5,600 students on three campuses situated in the Northern California cities of San Francisco, Stockton and Sacramento. President Pamela A. Eibeck Eberhardt School of Business The Eberhardt School of Business offers a Masters in Business Administration (MBA), Master of Accounting (MAcc), Bachelor of Science in Business Administration, Bachelor of Science in Accounting, and Minors in Management, Business Administration, and Information Systems to nearly 700 students. With an emphasis on interactive classes and studentfaculty engagement, the program is committed to developing successful future business leaders through a learning process that is personal, relevant, and professional. In addition to developing well-rounded and highly skilled graduates, the Eberhardt School of Business has demonstrated its commitment to community service and regional economic development through a variety of outreach programs and activities including the Center for Business and Policy Research, Career Management Center, Center for Entrepreneurship, Institute for Family Business, and Westgate Center for Management Development. Dean David Dauwalder Center for Business and Policy Research The Center for Business and Policy Research, founded in 2004 and housed in the Eberhardt School of Business, produces quarterly economic forecasts of California and 8 metropolitan areas from Sacramento to Fresno to the San Francisco Bay Area. In addition to its forecasting program, the Center conducts policy and planning studies on topics such as water, transportation, housing, and economic development for public and private clients throughout Northern California. Jeffrey A. Michael, Ph.D. Director, Center for Business and Policy Research Ph.D., North Carolina State University; M.S., University of Maine; B.A., Hamilton College (NY) Dr. Jeffrey Michael is Director of the Center for Business and Policy Research and Associate Professor in the Eberhardt School of Business at the University of the Pacific. Jeff s areas of expertise include regional economic forecasting and environmental economics including work on the economic impacts of the Endangered Species Act, climate change, and regulation on land use, property values and employment growth. His research has received numerous grants, been published in scholarly journals and received local and national press coverage including the Wall Street Journal, New York Times Magazine, San Francisco Chronicle, Washington Post, NPR, and PBS. Prior to joining Pacific in 2008, Jeff was faculty at Towson University in Maryland where he served as Director of the Center for Applied Business and Economic Research, Associate Dean, and faculty. Jeff received his Ph.D. from North Carolina State University, M.S. from the University of Maine, and B.A. from Hamilton College (NY). UNIVERSITY OF THE PACIFIC EBERHARDT SCHOOL OF BUSINESS

56 University of the Pacific Eberhardt School of Business Sacramento Office: th Avenue Sacramento, CA Stockton Office: 3601 Pacific Avenue Stockton, CA Pacific.edu/CBPR