National and Regional Economic Outlook. Central Southern CAA Conference

Transcription

1 National and Regional Economic Outlook Central Southern CAA Conference Dr. Mira Farka & Dr. Adrian R. Fleissig California State University, Fullerton April 13, 2011

2 The Painfully Slow Recovery The Painfully Slow Recovery

3 Main Themes National Economy Recovery in Retrospect are we back yet? Recovery Outlook brighter, but cloudy and turbulent Risks and Forecasts Regional Economy Labor Market Housing Property Taxes

4 15,500 15,000 14,500 14,000 13,500 13,000 12,500 12,000 11,500 11,000 GDP Back to pre-crisis crisis but below trend Back to pre-recession but 7.5% below trend Actual Trend 10,

5 Same goes for Consumption 11,500 11,000 10,500 10,000 9,500 9,000 8,500 8,000 Back to pre-recession but 7% below trend Actual Trend 7,500 7,

6 So far, a Painfully Weak Recovery (growth rates from trough to 6 quarters) Past Recoveries Current Difference Real GDP Consumption Residential Investment Employment Real Disposable Income Profits

7 Recovery Outlook: Brighter, but still Cloudy and Turbulent The Bright Profits Business Inv. Production Exports The Cloudy Labor Consumption Banks The Turbulent Housing Fiscal Debt State/local gov. Inventories

8 Recovery Outlook: Brighter, but still Cloudy and Turbulent The Bright Profits Business Inv. Production Exports Inventories

9 Corporate Profits are at Record-High Levels 1,400 (after-tax-profits, billions, level) 1,200 1, Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10

10 Business Investments Growing Robustly (equipment and software, y-o-y growth rate)

11 Exports Have Supported Growth (contribution to GDP, percent)

12 Recovery Outlook: Brighter, but still Cloudy and Turbulent The Cloudy Labor Consumption Banks

13 The Labor Market Has Improved (private payrolls, thousand of employees, changes) Jobs at last Jun-04 Mar-05 Dec-05 Sep-06 Jun-07 Mar-08 Dec-08 Sep-09 Jun-10 Mar-11

14 110 but not Enough (Payroll Index level, Dec 2007=100) Current Recovery

15 When will the Labor Market be Back to Normal? Jobs per Month New Jobs to keep up With Population Growth 120, ,000 Number of Years Never Back to Normal 200, , years 300, , years 400, , years

16 10 Consumer Spending has Recovered (retail sales, y-o-y y y growth) Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11

17 86% but it s s still Unsustainable (consumer spending as % of income) 84% 82% 80% 78% 76% 74%

18 500 Bank Profits Have Recovered (financial profits, billion, level )

19 3.5 but Charge-offs are Still High (financial profits, billion, level ) Historial Average

20 Recovery Outlook: Brighter, but still Cloudy and Turbulent The Turbulent Housing Fiscal Debt State/local gov.

21 Housing Blues The homeless recovery

22 Housing Activity is Dismal (Housing Starts, thousands)

23 7000 Federal Deficit is Terrifying (level, billions of dollars) Government Receipts Government Expenditures

24 30.0 State/Local Gov. are in Terrible Shape (state/local employment, changes, thousands) Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11

25 Economy is Vulnerable to Additional Risks Oil Prices Implication for inflation and growth Eurozone Sovereign debt crisis Implication for financial markets (specially bonds) Japan s disaster Supply interruption, upward pressure on oil Monetary Policy (QE II etc.) Implication for Inflation and financial markets Domestic Municipal Bond Market Large number of states/localities in distress

26 Monetary Policy is Overly Accommodative 2500 (billions and ratio) Monetary Base Monetary Velocity

27 Banks Exposure to Municipal Debt is Large (billions of dollars) Citibank Wells Fargo US Bank State Street JP Morgan

28 Forecasts Year RGDP Consumer Prices Unemployment Rate Payroll Employment Federal Funds Rate

29 Outlook? Hope at Last!!

30 Riverside, San Bernardino, Los-Angeles, Long Beach, Orange County, San Diego

31 Labor Market

32 14.0% CA Unemployment Annual Rate 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

33 Annual CA Total Nonfarm Employment 600, , , , , , , , , ,000-1,000, ,

34 SC LEADING INDICATOR 2.0 SC Employment SC Leading Indicator Source: California State University Fullerton, IEES

35 Monthly Unemployment Rates 16.0% RV-SB Unemployment Rate 16.0% OC Unemployment Rate 15.0% 14.0% 13.9% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% LA Unemployment Rate 16.0% 15.0% 14.0% 12.3% 13.0% 12.0% 11.0% 13.0% 12.0% 11.0% 10.0% 8.9% 9.0% 8.0% 7.0% SD Unemployment Rate 16.0% 15.0% 14.0% 13.0% 12.0% 10.1% 11.0% 10.0% 9.0% 8.0% 7.0% % 9.0% 8.0% 7.0%

36 Monthly Nonfarm Employment 0-20,000-40,000-60,000-80, , , ,000 50, , , , , , , ,000 RV-SB Monthly Non Farm Employment Year-on-Year Change LA Monthly Non Farm Employment Year-on-Year Change ,000 50, , , , , , , ,000 40,000 20, ,000-40,000-60,000-80, , , ,000 SD Monthly Non Farm Employment Year-on-Year Change OC Monthly Non Farm Employment Year-on-Year Change

37 Housing Market

38 70,000 Annual Sales of Detached Homes 60,000 RV OC LA SB 50,000 40,000 30,000 20,000 10,

39 Monthly Sales of Detached Homes 5,500 RV OC LA SB 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11

40 $800,000 $750,000 Annual Median Price of Existing Homes $700,000 $650,000 $600,000 $550,000 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 OC LA RV SB $100,000 $50,000 $

41 Monthly Median House Price $700,000 $650,000 RV OC LA SB $600,000 $550,000 $500,000 $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11

42 30% Monthly Median House Price Year-on-Year Change RV OC LA SB 20% 10% 0% -10% -20% -30% -40% -50% Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11

43 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Quarterly Foreclosures Foreclosures Los Angeles Foreclosures San Bernardino 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4, , Foreclosures Riverside ,000 12,000 10,000 8,000 6,000 4,000 2, ,500 Foreclosures Orange County 4,000 3,500 3,000 2,500 2,000 1,500 1,

44 Property Taxes

45 Property Tax Factors Over 900,000 parcels Categories: Residential, Time Shares, Manufactured Homes, Vacant, Commercial, Agriculture and Other Delinquencies by Property type Proposition 13 Proposition 8 Property Prices Economy

46 Property Tax Factors Estimate our Macro Econometric Model Estimate the regional model Use data Delinquencies by property type: Proposition 13, Proposition 8 Regional employment, unemployment, building permits, other variables Project Ad Valorem Property Taxes

47 Questions? Please Contact: Mira Farka (657) Adrian R. Fleissig (657)