Outlook Southwest Regional Economic Forecast Conference June 14, 2018

Size: px

Start display at page:

Download "Outlook Southwest Regional Economic Forecast Conference June 14, 2018"

Preston Fisher
5 years ago
Views:

1 Outlook 2018 Southwest Regional Economic Forecast Conference June 14, 2018 Robert A. Kleinhenz, Ph.D. Economist/Exec Director of Research UCR Business Forecast

2 Outline U.S. Economy California So Cal/Local Outlook Local Real Estate Conclusion/Looking Ahead

3 U.S. Economy

GDP~ 2017: 2.3% --- 2018: 2.5 to 2.8% 4 3 Gross Domestic Product YTY % Change 2.8 Contributions to Change in GDP Sector 2015 2016 2017 2 Consumer 2.5 1.9 1.

4 GDP~ 2017: 2.3% : 2.5 to 2.8% 4 3 Gross Domestic Product YTY % Change 2.8 Contributions to Change in GDP Sector Consumer Investment Net exports Government Total GDP % Chg * * Does not add up due to rounding Beacon Economics 4

5 Consumer Spending: Flywheel of Economy Real Consumer Spending by Type (Y-o-Y Growth to January 2018) 8% 6% 4% 2% 0% -2% -4% -6% -8% Services Goods

6 Real Disposable Personal Income Growth 6% YTY % Change 4% 2% 0% -2% %

7 Lower Saving Rate, Growing Wealth 7% 6% 5% 4% 3% 2% Consumer Savings Rate Q1 Real Average Wealth per Household (FOF, Thous.) 1993Q1 1996Q1 1999Q1 2002Q1 2005Q1 2008Q1 2011Q1 2014Q1 2017Q1 Home Equity Other Net Wealth

8 Credit Card Use Accelerating, but 10% YTY % Change Outstanding Credit Card Balances 5% 0% -5% -10% % -20%

9 No Debt Overhang Fin Obligations as % of Disposable Personal Income Fin Obligations as % of Disposable Personal Income Household Debt to Income Ratio

10 Business Spending Up 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% Fixed Investment Structures Equipment Intellectual Property

11 International Trade Deficit: Pros/Cons $ Millions (Yr.=2009) 3,010 Ex-Goods Ex-Svcs Im-All 2,510 2,010 1, Deficit: ,

12 Tax Cuts and Spending Increases Mean ,000-1,200-1,400-1,600 Much Larger Federal Budget Deficit

13 Macro-Economy at a Glance Sector CONSUMERS BUS. INVESTMENT GOVERNMENT NET TRADE Steady solid growth Outlook Acceleration, energy drag over Flat/Up Slightly Imports & Exports up, Imports larger Slight NET Negative SUMMARY Domestic Spending Up

14 Full Employment, Slower Job Growth 18% 16% 14% 12% 10% 8% 6% 4% 2% Unemployment Rate Yr-To-Yr % Change in Jobs U-6 Headline Rate, U

15 Plenty of Job Openings, Not Enough Workers 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% JOLT Job Openings Rate in % Sector Level (000s) Rates 17-Apr 18-Apr 17-Apr 18-Apr Total 6,108 6, Tot Priv 5,564 6, Educ Health 1,151 1, Prof Bus Svc 1,021 1, Leis Hosp Retail Govt Mfg Trans Util Fin Activities Construction Wholesale Info

16 Labor Force Growth Constrains Potential GDP Growth 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Labor Force Growth 67% 66% 65% 64% 63% 62% 61% 60% LF Participation Rate

17 Inflation Historically Low But Rising Kyser Center for Economic Research Beacon Economics 17

18 Economic/Fiscal Policy-Other Issues Tax Cuts/Budget Hikes: larger deficit Immigration: reforms enable economic growth International Trade: consumers or producers? Infrastructure: $4.5 trillion needed Health Care: spending reform, not insurance reform

19 Monetary Policy Rock-bottom federal funds rate Adjusting to labor market, inflation, GDP Market rates less tied to FFR than in the past Yield curve dynamics FFR increases push up short end Balance sheet activities push up long end Liquidity keep long end market rates low

20 Financial Markets 5.0% Fed Funds Rate 10 Year Yield 30 Year Mort 4.0% 3.0% 2.0% 1.0% 0.0%

21 State Economy

22 CA & US at Full Employment 16% 14% 12% 10% 8% 6% 4% 2% 0% Unemployment Rate, Seasonally Adjusted CA: 4.2% US: 3.9% Lowest on Record (1976+)

23 Cove r CA Among Fastest Growing States

The Big Slowdown 4% 3% 2% State and National Job Growth Location 2017 14-15 15-16 16-17 Los Angeles MD 4,441,600 2.2% 2.6% 1.

1% 1% 0% California United States Oakland MD 1,164,300 3.3% 3.3% 2.4% San Francisco MD 1,117,900 4.9% 4.0% 2.

24 The Big Slowdown 4% 3% 2% State and National Job Growth Location Los Angeles MD 4,441, % 2.6% 1.3% Orange County 1,619, % 2.6% 2.2% Inland Empire 1,454, % 3.6% 3.8% San Diego MSA 1,454, % 2.7% 2.1% 1% 0% California United States Oakland MD 1,164, % 3.3% 2.4% San Francisco MD 1,117, % 4.0% 2.4% San Jose MSA 1,099, % 3.1% 2.6% Sacramento MSA 970, % 3.4% 2.2% Fresno MSA 345, % 3.5% 2.8% Ventura County 304, % 1.3% 1.3%

25 Gross Product Q4-17: YTY % Changes -- CA (3.4%)

26 California Taxable Sales (+4.9% in 2017) Millions $180 $160 $140 $120 $100 $80 $60 $40 $20 $0

27 Riverside County/IE Region

28 Metro Areas Vary in % Job Gains San Jose MSA Stockton MSA RV-SB MSA Fresno MSA Sacramento MSA Oakland MSA San Diego County Orange County SF MD Sonoma County LA County Ventura County Bakersfield MSA Year to Year % Chg. (Apr-18) 0% 1% 2% 3% 4%

29 Largest Absolute Gains in So Cal MSA Apr-18 YTY Change Jobs (Seasonally Adjusted) LA County 59,100 RV-SB 45,100 San Jose MSA 38,700 San Diego County 31,700 Orange County 28,800 Oakland MSA 26,500 Sacramento MSA 23,500 San Francisco MD 19,100 Fresno MSA 9,200 Stockton-Lodi MSA 7,800 Ventura County 3,800

30 RV-SB Among Fastest Growing MSAs YOU ARE HERE

Unemployment Rates (Seas. Adjusted) (%, SA) 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.

31 Unemployment Rates (Seas. Adjusted) (%, SA) Unemployment Rates Riverside County NSA April % April % California Inland Empire Los Angeles Orange County

32 Riverside County Employment Industry Q3-17 (000 s) 1-Yr. Chg Total Nonfarm % Trade, Transportation, and Utilities % Education and Health Services % Leisure and Hospitality % Prof, Sci, and Tech % Construction % Manufacturing % Financial Activities % Other Services % NR/Mining % Information % Source: QCEW Beacon Economics 32

33 Riverside County Establishments Industry Q3-17 (000 s) 1-Yr. Chg (000s) Total Nonfarm Education and Health Services Trade, Transportation, and Utilities Prof, Sci, and Tech Construction Leisure and Hospitality Financial Activities Other Services Manufacturing NR/Mining Information Source: QCEW Beacon Economics 33

34 Key Industries LOCAL SERVING largest number of jobs Health Services Retail Trade Leisure & Hospitality-Food & Beverage Government, Including Education EXPORT-ORIENTED sources of new growth Goods Movement: Trans/Warehouse, Whsl Trade Manufacturing: IT, Aerospace, Bio, Metals Mfg Prof, Scientific & Tech/Info Tech; Biosciences Education and Knowledge Creation Tourism & Entertainment-Hotels, Arts, Recreation Agriculture

35 Worker Incomes Rising Riverside County Median Earnings (25+ Yrs) % Change All Workers 25+ Yrs $32,397 $35, % Less than high school $19,540 $21, % High School diploma $27,472 $30, % Some college $36,045 $36, % BA $51,317 $52, % Graduate degree $70,296 $75, %

36 HH Income Yr Chg Total: 715, % Median Household Income Less than 25k 20.2% -1.8% 25-50k 22.1% -1.9% 50-75k 17.7% -1.1% k 21.9% 0.8% % 3.9% Thousands ($ s) Riverside San Bernardino California Source: ACS Beacon Economics 36

Taxable Sales (Seasonally Adjusted) Q1-07 = 100 140 120 100 80 60 40 20 0 Riv County (2017Q4: +5.

37 Taxable Sales (Seasonally Adjusted) Q1-07 = Riv County (2017Q4: +5.3% YTY) Q1-07 Q3-07 Q1-08 Q3-08 Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11 Q1-12 Q3-12 Q1-13 Q3-13 Q1-14 Q3-14 Q1-15 Q3-15 Q1-16 Q3-16 Q1-17 Q3-17

38 Local Real Estate/ Construction

39 So Cal Residential Markets County Q1-17 Q1-18 YTY % Change Price YTY % Change Sales Los Angeles $567,600 $615, % -4.2% Orange $729,400 $774, % -5.1% Riverside $344,600 $379, % 1.3% San Bernardino $284,800 $304, % -5.9% San Diego $556,000 $597, % -4.3% Source: DQ/CoreLogic Ventura $592,300 $623, % 5.6% Beacon Economics

40 Housing Affordability: % of HHs Affording Median Priced Home State/Region/County Q1-17 Q1-18 Los Angeles Orange County Riverside County San Bernardino County San Diego County Ventura California 32 31

41 Apartments $1,400 $1,200 $1,000 $800 $600 $400 Inland Empire Rent and Vacancy Q1-03 Q3-04 Q1-06 Q3-07 Q1-09 Q3-10 Q1-12 Q3-13 Q1-15 Q3-16 Q1-18 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Location Q1-18 YoY Change Bakersfield $ % Inland Empire $1, % Los Angeles (MD) $1, % Orange County (MD) $1, % San Diego $1, % Cost of Rent Vacancy Rate Ventura $1, % Source: REIS Beacon Economics

2004 2005 2006 2007 2008 Multi Family 2009 2010 2017 Q1-18 ALL: + 6.

42 Riverside County Residential Housing Construction 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, Single Family Multi Family Q1-18 ALL: + 6.2% + 7.5% SF: + 9.6% +13.9% MF: % -33.8%

43 Population City Yr Chg Riverside 326, % Moreno 206, % Corona 166, % Murrieta 114, % Temecula 111, % Jurupa 101, % Menifee 90, % Indio 86, % Hemet 82, % Perris 75, % Indexed (Q1-00 = 100) Population Q1-00 Q1-04 Q1-08 Q1-12 Q1-16 Riverside San Bernardino California Source: DOF Beacon Economics 43

44 Office Real Estate So Cal Office Vacancy Rates So Cal Office Rents 30% $40 25% $35 20% $30 15% $25 10% $20 5% $15 Inland Empire Los Angeles Inland Empire Los Angeles Orange County Orange County Source: REIS Beacon Economics

45 Industrial Real Estate So Cal Industrial Vacancy Rates So Cal Industrial Rents 30% $40 25% $35 20% $30 15% $25 10% $20 5% $15 Inland Empire Los Angeles Inland Empire Los Angeles Orange County Orange County Source: REIS Beacon Economics

46 Conclusion

47 Conclusion/Outlook US & CA growth steady, full-employment, job growth harder to achieve Leading industries: health care, construction, leisure and hospitality, trans/whsg Real Estate: Housing shortage not just affordable housing MORE SUPPLY needed NO Recession

48 900 University Ave. Riverside, CA Thank You! 48

Outlook 2018: IE and Southern California So Cal Economic Summit Corona Chamber of Commerce March 29, 2018

Outlook 2018: IE and Southern California 2018 So Cal Economic Summit Corona Chamber of Commerce March 29, 2018 Robert A. Kleinhenz, Ph.D. Economist/Exec Director of Research UCR Business Forecast Outline