2012 Economic Outlook. Marney Cox Chief Economist San Diego Association of Governments December 15, 2011

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1 2012 Economic Outlook Marney Cox Chief Economist San Diego Association of Governments December 15, 2011

2 Three Trends to Watch Job Growth Consumption Expenditures Disposable Income Growth

3 US Payroll Jobs Y-O-Y Change by Month 1.9M Jobs Gained 8.8M Jobs Lost Years Jan 2006 Nov 2011

4 US Payroll Jobs Change During Recession Expansion Recession Starts December M Jobs Months

5 US Payroll Jobs Change During Expansion Recession Recession Expansion Begins July M Jobs Months

6 Why Slow Job Growth? Did Federal Stimulus Expenditures Generate Earnings? Employment Multiplier is zero Job created is offset by a job lost. Government spending moves jobs & resources away from private to public Employment Multiplier is one Each dollar spent adds one dollar to GDP. Government spends on idle resources. Employment Multiplier exceeds one Earnings from newly employed resources create jobs for other idle resources.

US $787 Billion Stimulus Package Less than 10% of Stimulus Funds Spent Generated Earnings Targeted Stimulus (multiplier > 1) $62B - Tax incentives for homes and cars - Education layoff prevention

7 US $787 Billion Stimulus Package Less than 10% of Stimulus Funds Spent Generated Earnings Targeted Stimulus (multiplier > 1) $62B - Tax incentives for homes and cars - Education layoff prevention Discretionary Spending (multiplier << 1) $428B - Jobless benefits - Health care for needy - Medicaid costs - Job training - Affordable housing programs Tax Incentives & Breaks (multiplier = 0) $279B - Renewable energy - Home energy efficiency - Faster depreciation for capital investments - Tax credits for workers

8 US Consumption Expenditures Y-O-Y Change by Month $100 Billion Less Years Jan 2005 Nov 2011

December 2007 During Expansion Expansion Begins July

9 US Change in Consumer Consumption Steep Drop & Slow Rebound During Recession Recession 132% Starts December 2007 During Expansion Expansion Begins July 2009 Debt / Income Ratio - 8% 5% - 3% 66% 1% 8 Quarters 8 Quarters

10 US Why Slow Consumption Growth? Contributors to Slow Growth Household Credit Debt Outstanding Personal Savings Rate 132% Debt / Income Ratio 5% 66% 1% Years Years

11 US Disposable Income Y-O-Y Change by Month $400 Billion Less Per Month Years

12 US Change Disposable Income Slow Rebound During Recession Recession 132% Starts Starts December Debt / Income Ratio - 5.7% - 8% During Expansion Expansion Begins Expansion July 2009 Begins July % 5% - 3% 1% 26 Months 27 Months

13 Attempts to Stimulate Growth Increase Deficit Spending Increase Bank Reserves Lower Interest Rates

US Deficit Spending & Job Openings Attempt to

3 Trillion Deficit Revenues 4.3-U / Opening $1.

14 US Deficit Spending & Job Openings Attempt to Stimulate Growth (1) Federal Federal Revenue Surplus & Expenditures & Deficit Expenditures Unemployed Per Job Opening 6.8-U / Opening $1.3 Trillion Deficit Revenues 4.3-U / Opening $1.3 Trillion Deficit Years Years

15 US Loanable Funds & Loans Attempt to Stimulate Growth (2) Excess Bank Reserves Business Loans Y-O-Y Change $1.3 Trillion Deficit $1.3 Trillion Years Years

16 US Interest Rates & Housing Starts Attempt to Stimulate Growth(3) Federal Reserve Interest Rates New Housing Starts FF Rate $1.3 Trillion Deficit 2.3M Starts 10 Year T- Rate $1.3 Trillion 0.550M Starts Years Years

17 Economic Outlook for San Diego

18 SD Decline in Payroll Jobs Change Y-O-Y by Quarter 80,000 60,000 40,000 20, ,000-40,000-60,000-80, ,000

19 SD Job Change Following 90s Recession Percent of Change in Jobs, First 6 Months of Job Growth Job Growth/Decline 11,600/ ,600/-15,700 Professional Services + 28% + 37% Government + 20% + 23% Education & Health Services + 18% + 19% Finance - 75% - 17% Construction + 7% - 45% Information + 10% - 25% W & R Trade + 15% - 13%

20 SD Venture Capital Funds Resources for High Tech Jobs, M$ per Year $2,500 $2,000 $1,500 $1,000 3Q11 $500 $ '00 '02 '04 '06 '08 10

21 SD Hotel Room Demand & Supply (Room Demand & Supply Index=2000) 20% 15% 10% 5% 0% -5% 74% 72% 70% 68% 66% 64% 62% 60% 58% Room Demand (L) Room Supply (L) Occupancy Rate (R)

22 SD Housing Permits & Prices

23 SD Taxable Sales (Percent Change)

24 SD Per Capita Income Real 2009$, % Growth 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, (P)

25 Monthly Unemployment Rates 14.00% 12.00% October 2011 San Diego 9.7% California (SA) 11.7% United States (SA) 8.6% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00%

26 US Lowering the U-Rate Will Take Time Until U Falls Expect More Stimulus Policies % Unemployed 27 Weeks or More % New LF Entrants of Unemployed 43% Expenditures 20% 9% Requires 1.2M Jobs/Yr $1.3 Trillion Deficit Years Years

income Looming Budget Deficits European Debt Crisis/ Recession San Diego /

27 2012 Outlook Summary Slower Growth in 2012 National / International No Double-Dip, Not Out of Woods Three Problematic Trends Jobs, consumption, income Looming Budget Deficits European Debt Crisis/ Recession San Diego / California Defense Cutbacks? Mid-Year State Budget Correction State/ Local Competitiveness

28 2012 Economic Outlook Marney Cox Chief Economist San Diego Association of Governments December 15, 2011

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2012 Economic Outlook. Marney Cox Chief Economist San Diego Association of Governments April 11, 2012 2012 Economic Outlook Marney Cox Chief Economist San Diego Association of Governments April 11, 2012 Big Picture State of the Recovery Three Key Growth Trends Jobs Disposable Income Consumption Expenditures