North State Economic Outlook: Tweets, Taxes and Truths Oroville, CA January 18, 2018

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1 North State Economic Outlook: Tweets, Taxes and Truths Oroville, CA January 18, 2018 Robert Eyler, Ph.D. President, Economic Forensics and Analytics, Inc. Professor, Economics Department Sonoma State University

2 Agenda National/Global: Outlook and 2018 Elections State: Continued good forecast, cracks small North State: Labor markets and econ dev Concerns and opportunities for North State 2

3 National/Global Themes Source: Google Images

4 National/Global Themes Source: Google Images

5 The American Economy 5

6 What do the professionals say? Source: Philadelphia Federal Reserve Branch 6

7 What the Federal Reserve Watches: GDP 7

8 Prices that the Federal Reserve Watches 8

9 GDP Output Gap: Testing Truth about Policy 9

10 Equities: S&P

11 The Tax Plan: Truths High income Households Gain and Tax Increases for Middle Class Households by 2025 Small effects on growth Repeal of individual mandate on health care and the state/local loss not good for many in CA Will homeowners leave CA? 11

12 Federal Funds Dot Graph: where is the policy rate headed? Source: Federal Reserve Bank of Cleveland 12

13 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Billions of 2008$ Excess Reserves at U.S. Depository Institutions (Loanable Funds Not Lent) 2008$, Jan Present 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, $22 Billion $1.84 Trillion Month Source: Federal Reserve Board 13

14 Scorecard So Far: Trump Presidency Tax cuts: Yes, but CA not great in wake Banking deregulation: nope Healthcare reform: nope (sort of if you count the individual mandate removed from tax code) Mid-terms to be interesting 14

15 The North State and CA Data 15

16 California Real GDP, (% change, 4-qtr Averages) 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% Source: CA US 16

17 Real GDP, (% change, Annual Averages) 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% US Butte Shasta 17

18 General Forecast Data (% Change), North State Counties (Butte, Glenn, Shasta, Tehama) and CA CA North State Pop Reg Vehicles Households Taxable Sales Real PI/Cap -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: CA Economic Forecast/CalTrans 18

19 Labor Data Review: North State Counties +4,710 workers (2.5% growth) +10,140 workers (5.7% growth) +30,300 workers since bottom (16% growth) +22,890 more residents net employed regionally Government: +4,780 since bottom Labor force is -5,850 from max in 2000s Aging workforce and brain flight to remain issues 19

20 CA Jobs Forecast, Government 1.9% Leisure 6.1% Health and Ed 4.8% Info 5.7% Prof Serv 9.0% Finance 5.4% Wholesale and Retail 2.5% Trans-Util 4.2% Manu 2.6% Construction 5.9% Farm -2.8% Total Wage and Salary 4.6% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Source: CA Economic Forecast/CalTrans 20

21 North State Jobs Forecast with CA, (Butte, Glenn, Shasta, Tehama) CA North State Government Leisure Health and Ed 10.4% Info Prof Serv Finance 8.3% Wholesale and Retail Trans-Util Manu Construction -3.7% Farm Total Wage and Salary 4.6% 4.6% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Source: CA Economic Forecast/CalTrans 21

22 Butte and Shasta Jobs Forecast With CA, CA Shasta Butte Government Leisure Health and Ed 18.6% Info Prof Serv Finance Wholesale and Retail Trans-Util Manu Construction Farm Total Wage and Salary -8.4% 4.6% -15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: CA Economic Forecast/CalTrans 22

23 Glenn and Tehama Jobs Forecast With CA, CA Tehama Glenn Government Leisure Health and Ed Info 20.0% Prof Serv Finance Wholesale and Retail Trans-Util Manu Construction Farm Total Wage and Salary -2.79% 4.6% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: CA Economic Forecast/CalTrans 23

24 Major Factors in These Forecasts Aging population Slower growth of economies Struggle of rural California on economic development foci Opportunities: Medical tourism Expanded agriculture and food/bev manufacturing Agricultural science hub 24

25 What can the North State Do? Infrastructure: Broadband and air travel consistency Logistics expansion: become a hub beyond transportation Housing: if to grow workers, where will they live? Realities: disturbances coming 25

26 Housing Data, Oct 2017: Opportunity 200.0% CA Sacramento County Tehama County Butte County Shasta County Glenn County 150.0% 100.0% 50.0% 0.0% -50.0% Since Bottom Since Top One Year Two Year Source: CA Assoc of REALTORS 26

27 Cannabis: What to Watch in 2018 What we know What we want Workforce and business opportunities: medium- to long-term Slow transition and rollout: taxes, regs to make change slow, focus on large players Challenges for law enforcement: other crimes and DWI/DUI shifts Sources: Google Images 27

28 So What? 28

29 Economic Development Truths North State never to be Santa Clara County, but More ties to education and what students will do Gig economy here to stay: been here, BTW Health care jobs are great, but inward looking Challenges Construction jobs: higher returns elsewhere and lack of local building General reactions to more rapid automation 29

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