US & CA Economic Recovery Jon Haveman Chief Economist, BAC Economic Ins2tute February 14, 2012 The Great Recession 1-2 Punch of Credit Crisis and Consumer Retrenchment 6 GDP Growth (SAAR) and % of Peak GDP to Q4-2011 4 2 % 0-2 - 4-6 - 8 GDP Growth GDP as % of Peak (Q4- '07) GDP per Capita as % of Peak GDP RelaMve to PotenMal - 10-12 Q1-06 Q3-06 Q1-07 Q3-07 Q1-08 Q3-08 Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11 Source: Bureau of Economic Analysis 1
(%) 11 10 9 8 7 6 5 4 Jun- Jun- US Unemployment Unemployment Rate To January Jun- Jun- Jan - 07 through 11 Jun- Millions 155.0 154.5 154.0 153.5 153.0 152.5 152.0 Jun- 0 Labor Force To January Jan - 07 through 11 Jun- 0 Jun- 0 Number of Unemployed Persons (Thousands) 7 Jul- 09 Jan- 12 Total 7,609 14,583 12,869 Average DuraMon in Weeks 16.6 25.2 40.1 Jun- 0 Jun- 0 Change in Payrolls (Thousands) 600 500 400 300 200 100 0-100 - 200-300 - 400 Jun- 05 Sep- 05 Source: Bureau of Labor StaSsScs Progress on Jobs NaSonal Change in Payrolls To January 5 Mar- 06 Jun- 06 Sep- 06 6 Mar- 07 Jun- 07 July - 09 through 11 Sep- 07 7 Change in Payrolls by Sector Jan- 03 to 7 7 to 9 9 to Present Total Non- Farm 7,712-8,663 3,090 EducaSon/Health 2,116 796 760 Admin Support 701-1,151 679 Leisure/Hospitality 1,377-617 566 Prof/Sci/Tech 1,201-375 418 Manufacturing - 1,126-2,277 396 Retail Trade 614-1,219 389 Transport/Warehouse 339-369 158 Finance/Insurance 192-349 29 Federal Gov't - 33 74-1 Real Estate 118-196 - 18 ConstrucSon 786-1,836-82 State Gov't 105 9-94 InformaSon - 240-283 - 109 Local Gov't 678 20-411 2
US Employment Growth Total NonFarm Employment Growth Index = 100 at Onset of Recession 108 106 104 102 100 98 96 94 92 90 88 95.4 (down 4.6%) 0 6 12 18 24 30 36 42 48 54 60 Months Since Onset of Recession Source: Bureau of Labor StaSsScs 1990 2001 2007 CA Employment Growth Total NonFarm Employment Growth Index = 100 at Onset of Recession 108 106 104 102 100 98 96 94 92 90 88 93.2 (down 6.8%) 0 6 12 18 24 30 36 42 48 54 60 Months Since Onset of Recession Source: Bureau of Labor StaSsScs 1990 2001 2007 3
California: An Uneven Hit 15.5 State Labor Markets To December 14 December 2011 Peak to Current (%) 15.0 12 Inland Empire 1,131-11.5 Millions 14.5 14.0 13.5 13.0 12.5 12.0 93 May- 95 Oct- 96 Mar- 98 Aug- 99 Jan- 01 Jun- 02 Nov- 03 Apr- 05 Jan - 97 through 11 Sep- 06 10 8 6 4 2 0 (%) Oakland (MD) 944-10.2 Orange County (MD) 1,382-9.4 Los Angeles 5,173-8.4 CALIFORNIA 14,199-6.8 San Diego 1,241-5.6 San Francisco (MD) 947-5.5 San Jose 879-4.5 *Total Non- Farm Employment (Thousands) Total NonFarm Unemp Rate Source: California Employment Development Department Employment by Industry California InformaMon ConstrucMon Professional/Business EducaMon/Health Leisure and Hosp. Total Nonfarm Retail Trade Wholesale Trade Government Other Services Fin. AcMviMes Manufacturing - 8-6 - 4-2 0 2 4 6 8 % Change (Annualized Rate) Source: California Employment Development Department 2010 2011 4
Employment by Industry Bay Area EducaMon/Health Professional/Business Wholesale Trade Other Services Total Nonfarm Leisure and Hosp. ConstrucMon Manufacturing InformaMon Transport Warehouse UMl. Government Retail Trade Fin. AcMviMes - 8-6 - 4-2 0 2 4 6 8 % Change (Annualized Rate) Source: California Employment Development Department 2010 2011 Employment by Industry San Francisco (MD) Professional/Business Other Services InformaMon Leisure and Hosp. Total Nonfarm EducaMon/Health Government Fin. AcMviMes Wholesale Trade Manufacturing ConstrucMon Retail Trade - 8-6 - 4-2 0 2 4 6 8 % Change (Annualized Rate) Source: California Employment Development Department 2010 2011 5
Employment by Industry East Bay Wholesale Trade EducaMon/Health Other Services Retail Trade Professional/Business ConstrucMon Total Nonfarm Manufacturing Government InformaMon Leisure and Hosp. Fin. AcMviMes Source: California Employment Development Department - 8-6 - 4-2 0 2 4 6 8 % Change (Annualized Rate) 2010 2011 Employment by Industry San Jose (MSA) ConstrucMon InformaMon EducaMon/Health Retail Trade Total Nonfarm Manufacturing Professional/Business Wholesale Trade Government Fin. AcMviMes Other Services Leisure and Hosp. Source: California Employment Development Department - 6-4 - 2 0 2 4 6 8 10 12 % Change (Annualized Rate) 2010 2011 6
Where do we stand now? Many signs of progress Consumers have been solid But showing signs of slowing Businesses are doing quite well Cash on hand is off the charts But business investment is slowing Employment growth Trend is posimve StarMng to alleviate long term unemployment problem Public sector providing drag Housing? CA Housing Markets Through 2011-Q3 $600 250 $500 200 Thousands $400 $300 $200 150 100 Thousands $100 50 $0 0 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 Source: DataQuick Median Prices Home Sales 7
Local Housing Markets Sales Volume Median Price 10 11 % Chng 10 11 % Chng Santa Clara 1,646 1,611-2.10% $460,000 $440,000-4.30% Contra Costa 1,488 1,534 3.10% $265,000 $259,000-2.30% Marin 226 280 23.90% $599,000 $517,818-13.60% Riverside 3,696 3,584-3.00% $200,000 $194,000-3.00% San Bernardino 2,605 2,418-7.20% $152,000 $150,000-1.30% Sonoma 460 538 17.00% $310,000 $279,500-9.80% Orange 2,739 2,572-6.10% $410,000 $400,000-2.40% Alameda 1,516 1,584 4.50% $347,000 $328,000-5.50% Los Angeles 6,536 6,591 0.80% $330,000 $305,000-7.60% Solano 601 714 18.80% $198,000 $182,250-8.00% San Diego 3,191 3,311 3.80% $333,000 $315,000-5.40% San Mateo 616 602-2.30% $560,000 $500,000-10.70% Ventura 761 771 1.30% $355,000 $325,000-8.50% San Francisco 491 499 1.60% $617,000 $594,500-3.60% Napa 134 132-1.50% $310,000 $317,500 2.40% Source: DataQuick Thousands of Dollars $1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 Source: DataQuick Median Home Prices Through Q3-2011 Price Declines Peak to Current Bay Area: - 39% Alameda: - 36% 1989Q3 1991Q2 1993Q1 1994Q4 1996Q3 1998Q2 2000Q1 2001Q4 2003Q3 2005Q2 2007Q1 2008Q4 2010Q3 ALAMEDA CONTRA COSTA SANTA CLARA SAN FRANCISCO BAY AREA Contra Costa: - 47% Marin: - 18% Napa: - 42% Santa Clara: - 28% San Francisco: - 19% San Mateo: - 21% Solano: - 49% Sonoma: - 31% 8
State How Many Underwater? as of Q3-11 # Mortgages Underwater NegaMve Equity Share Nevada 328,369 58.3 Arizona 617,876 47.1 Florida 1,911,419 43.9 Michigan 477,104 34.5 California 2,030,292 29.7 Georgia 488,310 30.0 United States Total 10,723,410 22.1 Local MSAs Oakland- Fremont- Hayward 157,146 29.0 San Jose- Sunnyvale- Santa Clara 60,382 17.5 San Francisco- San Mateo- Redwood City 33,036 10.2 Source: First American CoreLogic Foreclosures / 1,000 Homes 16 14 12 10 8 6 4 2 0 Foreclosures Through Q3-2011 Current Rates Bay Area: 2.6 Alameda: 2.6 1995Q1 1996Q2 1997Q3 1998Q4 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 2010Q1 2011Q2 ALAMEDA CONTRA COSTA SOLANO BAY AREA Contra Costa: 4.2 Marin: 1.2 Napa 3.4 Santa Clara: 1.4 San Francisco: 0.7 San Mateo: 1.3 Solano: 6.9 Sonoma: 3.0 Source: DataQuick 9
Summary Economy s Prognosis Uncertainty Forecast: likely moderate 2012, weakness 2013-14 Europe: could be trouble likely not Budget Policy, both short and long run, is crucial Short run smmulus may smll be warranted Must convince bond markets of long run fiscal sanity Employment growth Picking up steam, but will it conmnue (see 2011) Regional Summary Reasonably opsmissc forecast: Employment Recovery = 2013-2014 However, will smll be in a deep hole San Jose recovery is well underway The tech sector has been booming for some Mme East Bay recovery is more difficult Housing and its effect on construcmon and finance San Francisco Ted? Business and tourism services America s Cup won t hurt Regional future: so bright! 10
Venture Capital (%) 60.0 55.0 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 CA and Bay Area Shares of U.S. Venture Capital to Q4-2011 Q1-95 Q2-96 Q3-97 Q4-98 Q1-00 Q2-01 Q3-02 Q4-03 Q1-05 Q2-06 Q3-07 Q4-08 Q1-10 Q2-11 Q4-2011 Value of All Deals (Millions) % of Total US VC Bay Area 3,041 46 California 3,779 58 United States 6,565 Bay Area California Source: PriceWaterhouseCoopers MoneyTree 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 415-336- 5705 11