Economic Recovery: Wherefore Art Thou? Jon Haveman Chief Economist, BAC Economic Institute November 8, 1 The Great Recession 1- Punch of Credit Crisis and Consumer Retrenchment 6 GDP Growth (SAAR) and % of Peak GDP to Q3-1 % - - -6-8 -1 GDP Growth GDP as % of Peak (Q-'7) GDP per Capita as % of Peak GDP Relative to Potential -1-1 Q1-6 Q3-6 Q1-7 Q3-7 Q1-8 Q3-8 Q1-9 Q3-9 Q1-1 Q3-1 Q1-11 Q3-11 Q1-1 Q3-1 Source: Bureau of Economic Analysis 1
Change in Payrolls (Thousands) 6 5 3 1-1 - -3 - Jul-9 Nov-9 Mar-1 Jul-1 Source: Bureau of Labor Statistics Progress on Jobs National Change in Payrolls To October Nov-1 Mar-11 Jul-11 Nov-11 Mar-1 Jul-1 Change in Payrolls by Sector Jan-3 to Dec-7 Dec-7 to Dec-9 Dec-9 to Present Total Non-Farm 7,71-8,663,181 Education/Health,116 796 1,58 Admin Support 71-1,151 833 Leisure/Hospitality 1,377-617 737 Prof/Sci/Tech 1,1-375 56 Manufacturing -1,16 -,77 76 Retail Trade 61-1,19 16 Transport/Warehouse 339-369 9 Finance/Insurance 19-39 75 Real Estate 118-196 Federal Gov't -33 7-16 State Gov't 15 9-79 Information - -83-19 Construction 786-1,836-131 Local Gov't 678-383 US Employment Growth Index = 1 at Onset of Recession 11 15 1 95 9 85 Total NonFarm Employment Growth 96.8 (Down 3.%) 6 1 18 3 36 8 5 6 Months Since Onset of Recession 199 1 7 Source: Bureau of Labor Statistics
California: Regional Recoveries Millions 15.5 15. 1.5 1. 13.5 State Labor Markets To September 1 1 1 8 6 (%) Sept. Peak to Current (%) Inland Empire 1,15-9.9 Orange County (MD) 1,396-8.5 Oakland (MD) 971-7.7 Los Angeles 5,59-6.9 CALIFORNIA 1,38-5.7 13. San Diego 1,58 -.3 1.5 San Francisco (MD) 983-1.9 1. Jan-98 Jan- Jan- Jan- Jan-6 Jan-8 Jan-1 Jan-1 San Jose 99-1.3 *Total Non-Farm Employment (Thousands) Total NonFarm Unemp Rate Source: California Employment Development Department CA Employment Recovery Total NonFarm Employment Growth Index = 1 at Onset of Recession 15 1 95 9 85 8 9.5 (Down 5.5%) 6 1 18 3 36 8 5 6 Months Since Onset of Recession 199 1 7 Source: Bureau of Labor Statistics 3
1 US Unemployment Unemployment Rate To October 156. Labor Force to October 1 155. 8 15. (%) 6 Millions 153. 15. 151. 15. Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Source: Bureau of Labor Statistics Jul-11 Jan-1 Jul-1 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Source: Bureau of Labor Statistics Jul-11 Jan-1 Jul-1 National Unemployment Number of Unemployed Persons by Duration of Unemployment (Thousands) Dec-7 Jul-9 Oct-1 Less than 5 weeks,716 3,15,63 5 to 1 weeks,385 3,587,851 15 to 6 weeks 1,181,895 1,836 7 weeks and over 1,37,951 5, Total 7,69 1,583 1,31 Average Duration in Weeks 16.6 5.. Source: Bureau of Labor Statistics
National Housing Markets Case-Shiller US National Values to Q-1 18 Index = 1 in Q1-16 1 1 1 8 6 Q1-87 Q1-88 Q1-89 Q1-9 Q1-91 Q1-9 Q1-93 Q1-9 Q1-95 Q1-96 Q1-97 Q1-98 Q1-99 Q1- Q1-1 Q1- Q1-3 Q1- Q1-5 Q1-6 Q1-7 Q1-8 Q1-9 Q1-1 Q1-11 Q1-1 Source: Standard and Poor s / U.S. Census Case Shiller Index (National) Thousands 7,5 7, 6,5 6, 5,5 5,,5, 3,5 3, National Housing Recovery Jan- Existing Home Sales SAAR To September Jul-1 Jan-3 Jul- Jan-6 Jul-7 Jan-9 Jul-1 Jan-1 Inventory to Sales Ratio 1 1 1 8 6 Jan-1 Months Supply of Existing Single- Family Homes to September Feb- Mar-3 Apr- May- Jun-6 Jul-7 Aug-8 Sep-9 Oct-1 Nov-11 Source: National Association of Realtors Note: Includes Single-Family Homes, Condos & Co-Ops Source: National Association of Realtors 5
Total Inventory (Months) US Shadow Inventory (Months) 6
Lending Standards: Prime Mtgs. (Through Q-1) 1 8 6 - - -6-8 Q1-7 Q-7 Q3-7 Q-7 Q1-8 Q-8 Q3-8 Q-8 Q1-9 Q-9 Q3-9 Q-9 Q1-1 Q-1 Q3-1 Q-1 Q1-11 Q-11 Q3-11 Q-11 Q1-1 Q-1 Loosening Tightening Lending Standards Loan Demand Source: Federal Reserve Billions ($), SA 3 1 39 38 37 36 35 3 33 3 Jan-7 Aug-7 US Consumer Markets Nominal Retail Sales To September Mar-8 Oct-8 May-9 Dec-9 Jul-1 Feb-11 Sep-11 Apr-1 Millions 18 17 16 15 1 13 1 11 1 9 8 Feb-7 Aug-7 Auto and Light Truck Sales to September, SAAR Feb-8 Aug-8 Feb-9 Aug-9 Feb-1 Aug-1 Feb-11 Aug-11 Feb-1 Aug-1 Source: Census Bureau Source: Census Bureau 7
State How Many Underwater? as of Q-1 # Mortgages Underwater Negative Equity Share Nevada 35,53 58.6 Florida 1,8,76.7 Arizona 51,598 39.7 Georgia 579,9 35.8 Michigan 8,7 3.8 California 1,97,1 9. United States Total 1,778,556.3 Local MSAs (Q-11) Oakland-Fremont-Hayward 157,16 9. San Jose-Sunnyvale-Santa Clara 6,38 17.5 San Francisco-San Mateo-Redwood City 33,36 1. Source: First American CoreLogic Debt and Savings Household Debt as % of GDP to Q-1 Personal Savings as % of Income Q-1 13 11 9 7 5 3 1 Q1-8 Q1-8 Q1-88 Q1-9 (%) Q1-96 Q1- Q1- Q1-8 Q1-1 (%) 1 1 1 8 6 Q1-66 Q1-7 Q1-7 Q1-78 Q1-8 Q1-86 Q1-9 Q1-9 Q1-98 Q1- Q1-6 Q1-1 Source: Federal Reserve Board Source: Bureau of Economic Analysis 8
(%) 8 8 8 78 76 7 7 7 68 66 Jan-7 US Production: Stalled Out? Jul-7 Jan-8 Capacity Utilization To September Jul-8 Jan-9 Jul-9 Jan-1 Source: Federal Reserve Board Jul-1 Jan-11 Jul-11 Jan-1 Jul-1 Index = 1 in 7 1 1 98 96 9 9 9 88 86 8 8 Industrial Production To September Jan-7 Jun-7 Nov-7 Apr-8 Sep-8 Feb-9 Jul-9 Dec-9 May-1 Oct-1 Mar-11 Aug-11 Jan-1 Jun-1 Source: Federal Reserve Board 1 Lending Standards: C&I (Through Q-1) 8 % 6 - - Q1-5 Q1-6 Q1-7 Q1-8 Q1-9 Q1-1 Q1-11 Q1-1 Loosening Tightening Large/Medium Firms Small Firms Source: Federal Reserve 9
What comes next? More Slow Growth? Fiscal Cliff? (image of time bomb) Accelerating Recovery? The Fiscal Cliff $6 billion in total (% of GDP) All 1, 3, and 9 tax cuts expire AMT Fix expires Emergency Unemployment Benefits expire $19 billion/year sequestered Note: Still no solution to long-term deficit problem 1
Fiscal Cliff Impacts Fiscal Impact: Recession in first half of 13 From -1.3% to -.% GDP Likely? Not right away 1-3 month stopgap out of lame duck session Potential for a grand bargain? Regardless: slow growth through its influence on uncertainty Potentially significant costs in terms of lost revenue The Cliff is Costly Lower federal transfers Lower federal revenues Lower state income taxes Lower state sales and use taxes Stalling of housing markets Prolonged structural adjustment 11
The Fiscal Austerity Issue Austerity: US cutting spending EU raising interest rates, Greek prescription Now is the time for continued stimulus Plenty of time later for austerity Remember 1937 U.S. Summary Economy appears to be slowing Consumers are coming back Businesses are waiting things out Employment growth anemic Long term unemployment will be a problem for some time to come Household debt overhang is a continued drag on economy will be for some time Great uncertainty comes with Fiscal Cliff 1
California: Regional Recoveries Millions 15.5 15. 1.5 1. 13.5 State Labor Markets To September 1 1 1 8 6 (%) Sept. Peak to Current (%) Inland Empire 1,15-9.9 Orange County (MD) 1,396-8.5 Oakland (MD) 971-7.7 Los Angeles 5,59-6.9 CALIFORNIA 1,38-5.7 13. San Diego 1,58 -.3 1.5 San Francisco (MD) 983-1.9 1. Jan-98 Jan- Jan- Jan- Jan-6 Jan-8 Jan-1 Jan-1 San Jose 99-1.3 *Total Non-Farm Employment (Thousands) Total NonFarm Unemp Rate Source: California Employment Development Department Regional Employment Recovery Since Recession Onset Total Non-Farm Employment Growth Index = 1 at Onset of Recession 1 1 98 96 9 9 9 88 86 8 6 1 18 3 36 8 5 Months Since Onset of Recession U.S. California Southern California Source: Bureau of Labor Statistics 13
Relative Employment Recovery Total Non-Farm Employment Growth Index = 1 at Onset of Recession 1 1 98 96 9 9 9 88 86 8 6 1 18 3 36 8 5 Months Since Onset of Recession California Bay Area Southern California Source: Bureau of Labor Statistics Growth Post-Recession 3 1 % -1 - -3 - -5-6 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-1 Mar-1 May-1 Jul-1 Sep-1 U.S. California Bay Area Southern California Source: Bureau of Labor Statistics 1
Within Region Employment Recovery Total Non-Farm Employment Growth Index = 1 at Onset of Recession 1 1 98 96 9 9 9 88 86 8 8 6 1 18 3 36 8 5 Months Since Onset of Recession Los Angeles Orange County Inland Empire San Diego Source: Bureau of Labor Statistics Southern California Unemployment 16 1 1 1 % 8 6 1/1/9 11/1/9 9/1/91 7/1/9 5/1/93 3/1/9 1/1/95 11/1/95 9/1/96 7/1/97 5/1/98 3/1/99 1/1/ 11/1/ 9/1/1 7/1/ 5/1/3 3/1/ 1/1/5 11/1/5 9/1/6 7/1/7 5/1/8 3/1/9 1/1/1 11/1/1 9/1/11 7/1/1 Los Angeles (MSA) Inland Empire San Diego (MSA) Source: California Employment Development Department 15
Southern California Non-Farm Employment Thousands 1, 1,3 1, 1,1 1, 9 8 7 6 1/1/9 1/1/91 1/1/9 1/1/93 1/1/9 1/1/95 1/1/96 1/1/97 1/1/98 1/1/99 1/1/ 1/1/1 1/1/ 1/1/3 1/1/ 1/1/5 1/1/6 1/1/7 1/1/8 1/1/9 1/1/1 1/1/11 1/1/1 5,8 5,6 5, 5, 5,,8,6,, Thousands (LA) Inland Empire San Diego (MSA) Los Angeles (MSA) Source: California Employment Development Department SOUTHERN CALIFORNIA REAL ESTATE MARKETS 16
Local Housing Markets Sales Volume Median Price Sep-11 Sep-1 % Chng Sep-11 Sep-1 % Chng Solano 66 537-11% $195, $, 3% Marin 39 68 1% $68,9 $65, 3% Orange,51,677 7% $5, $5, 6% Ventura 77 816 6% $39, $37,75 7% Alameda 1,38 1,3 -% $38, $379, 9% Sonoma 7 6-6% $37, $335, 9% Napa 1 16 % $315, $35, 1% Los Angeles 6,185 6,188 % $31, $3, 1% San Diego 3,8 3,1 % $315, $35, 11% Riverside 3,33,9-1% $191, $1,5 11% San Mateo 67 655 8% $551, $6, 13% San Bernardino,95, -11% $15, $17, 13% Santa Clara 1,56 1,61 3% $7, $55, 17% San Francisco 399 9 3% $613,75 $75, 1% Contra Costa 1,39 1,3 1% $5, $3, 7% Source: DataQuick Thousands of Dollars $8 $7 $6 $5 $ $3 $ $1 $ Q1 1Q1 Q1 3Q1 Median Home Prices Through Q3-1 Price Declines Peak to Current Q1 5Q1 6Q1 7Q1 8Q1 9Q1 1Q1 11Q1 1Q1 Inland Empire Los Angeles County Orange County San Diego County Los Angeles: -3% Inland Empire: -6% Orange County: -3% San Diego: -3% Source: DataQuick 17
Foreclosures Through Q3-1 Foreclosures / 1, Homes 16 1 1 1 8 6 Q1 1Q1 Q1 3Q1 Q1 5Q1 6Q1 7Q1 8Q1 9Q1 1Q1 11Q1 1Q1 Source: DataQuick Inland Empire Los Angeles County Orange County San Diego County Current Rates Los Angeles:.9 Inland Empire: 6.5 Orange County: 1. San Diego:. (% - Vacancy Rates) 16 1 1 1 8 6 California Vacancy Rate Through Q3-1 65 6 55 5 5 35 3 (% - Ownership) 5 Q1-5 Q1-6 Q1-7 Q1-8 Q1-9 Q1-1 Q1-11 Q1-1 Homeowner Vacancy Rate Rental Vacancy Rate Homeownership Rate Source: Census Bureau 18
Los Angeles MSA Through Q3-1 8 56 7 55 (% - Vacancy Rates) 6 5 3 1 5 53 5 51 5 9 8 7 Q1-5 Q1-6 Q1-7 Q1-8 Q1-9 Q1-1 Q1-11 (% - Ownership) Q1-1 Homeowner Vacancy Rate (HVR) Rental Vacancy Rate (RVR) Homeownership Rate (HR) Source: US Census Bureau Riverside MSA Through Q3-1 (% - Vacancy Rates) 16 1 1 1 8 6 7 7 68 66 6 6 6 58 56 5 5 Q1-5 Q1-6 Q1-7 Q1-8 Q1-9 (% - Ownership) Q1-1 Q1-11 Q1-1 Homeowner Vacancy Rate (HVR) Rental Vacancy Rate (RVR) Homeownership Rate (HR) Source: US Census Bureau 19
Permits and Starts,5, 3,5 3,,5, 1,5 1, 5 Jan- New Private Housing Units Authorized by Building Permits (Trend) Jan-1 Jan- Jan-3 Jan- Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-1, 3,5 3,,5, 1,5 1, 5 Jan- Privately Owned Housing Starts Authorized by Building Permits (Trend) Jan-1 Jan- Jan-3 Jan- Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-1 Los Angeles (MSA) Inland Empire San Diego (MSA) Los Angeles (MSA) Inland Empire San Diego (MSA) Source: U.S. Census Bureau EMPLOYMENT GROWTH DRIVERS
Strengths Relative to CA (1 month % growth to September) Industry Bay Area California Administrative Support 7. 5. Real Estate 5.8.5 Information 3.5 6. Prof. Sci., and Tech.1. OVERALL.6 1.9 W/in Region Strengths (1 month % growth to September) Region/Industry Local Growth Bay Area Los Angeles MSA 1.7 1.8 - Real Estate 7.5 5.8 - Education Services 5. 3.7 San Diego MSA.3 1.8 - Health Care.1 1. - Retail Trade 3.7 1.6 Inland Empire 1..6 - NonDurable Manuf. -.8 - Wholesale Trade 6..5 1
WHAT DO WE KNOW ABOUT JOB OPENINGS? Occupations in demand: Los Angeles MSA Title of Occupation Number of Openings, Jan-Feb 1 Occupation share of total metro areas openings in 1 Computer Occupations,568 1% Health Diagnosing and Treating Practitioners 18,51 6% Financial Specialists 1,636 % Sales Representatives, Services 11,1 % Advertising, Marketing, Promotions, Public Relations, and Sales Managers 11,73 % Other Management Occupations 11,5 % Information and Record Clerks 1,671 3% Secretaries and Administrative Assistants 1,56 3% Business Operations Specialists 1,11 3% Engineers 9,856 3%
Occupations in demand: San Diego MSA Title of Occupation Number of Job Openings, Jan-Feb 1 Occupation share of total metro areas openings in 1 Computer Occupations 1,396 18% Health Diagnosing and Treating Practitioners,5 5% Engineers,197 5% Information and Record Clerks,7 3% Other Management Occupations,719 3% Financial Specialists,98 3% Sales Representatives, Services,3 3% Business Operations Specialists,3 3% Advertising, Marketing, Promotions, Public Relations, and Sales Managers,33 3% Secretaries and Administrative Assistants,73 3% Volume of Job Openings MSA NAME RANK Openings rate, 11 Openings rate, 11 Los Angeles MSA 66.% San Diego MSA 57.% Openings Rate = new job openings as a share of existing jobs 3
Education Gap? MSA NAME RANK Education Gap, 1 Education Gap, 1 Los Angeles MSA 89 7.8% San Diego MSA 51 3.5% Education Gap = percent that demand for education exceeds supply SoCal Summary Real estate markets seem to be clearing slowly Prices are rising Construction beginning again Employment growth is slower than state and most MSAs Enormous education gap Recovery is slowed by Fiscal Cliff
Bay Area Council Economic Institute Ø Regional Analysis Ø Business & Market Analysis Ø Ports & Infrastructure Analysis Ø Economic Impact Analysis Ø Public Policy Analysis Jhaveman@BayAreaCouncil.org 15-336-575 5