Southern California’s Economy 2012 … Finally Recovery Underway! John Husing, Ph.D. Economics & Politics, Inc.

After Losing 8.74 Million Jobs … U.S. Job Creation Is Crawling Back 30% of Jobs Regained

V Pattern of Likely Recovery U x x

So. California Job Growth/Destruction

Inland Empire Job Growth/Destruction (110,000) (100,000) (90,000) (80,000) (70,000) (60,000) (50,000) (40,000) (30,000) (20,000) (10,000) 0 10,000 20,000 30,000 Source: CA Employment Development Department Wage & Salary Job Creation/Destruction Inland Empire,

Job Growth Comparison: November 26,600 19,500 13,100 12,600 1,800 1,400 75,000 San Diego Co.Inland EmpireOrange Co.Los Angeles Co.Ventura Co.Imperial Co.So. California Source: CA Employment Development Department Average Job Change, California Markets California Markets, November,

Still Tough Unemployment Rate U.S. Unadjusted 8.2%

There is Some Good News Locally

Industrial Vacancy Rate Declining Again! 11.9% 6.8% Inland Empire 2.7% 11.9% 6.8% 7.0% 5.3% Orange Co. 5.4% 7.0% 5.3% 3.4% 3.1% L.A. Co. 2.1% 3.4% 3.1% 12.0% 10.7% San Diego 6.0% 12.0% 10.7% 500,000 sq. ft. + Facilities … Inland Empire Vacancy = 0.0% /

Quarterly Industrial Absorption, million Sq.Ft.

Change In Container Flows -25.4% 15.3% e ImportExport Source: Port Import Export Reporting Service (PIERS), collected from Vessel Imported & Exported Container Volume, e Ports of Los Angeles & Long Beach (mil. teus)

Fourth Highest Total Container Volume

2. Ports On West Coast Nearest Asia Los AngelesLong Beach

8,000-Container Post-Panamax Ships 3. Deep Water Ports As Ships Draw Over 50 feet of Water

Issue: Panama Canal Diversion Suez

International Trade % Dollar Down: U.S. Goods Cheaper 2002 $1, $2, $ $117

Manufacturing

Manufacturing Orders: Aggressive to Neutral to Growing

Export Container Volume 2011 YTD 6.8% All-Time Record

Manufacturing Decline Has Stopped

Blue Collar Job Losses Have Ended or Are Close to Ending e (100,000) (75,000) (50,000) (25,000) 0 25,000 50,000 75,000 ManufacturingLOGISTICS Construction Source: CA Employment Development Department Blue Collar Employment Change Southern California, e

Why Blue Collar Jobs Important 13.2% 18.6% 20.3% 29.2% 29.0% 30.8% 36.5% 33.7% 58.4% 48.5% 46.2% 44.6% 41.9% 36.7% 34.6% 34.0% ImperialSan BernardinoRiversideLos AngelesSo. CaliforniaVenturaOrangeSan Diego High School or LessPercent Bachelors or Higher Source: 2010 Census Educational Levels, Adults 25 & Over Southern California Counties, 2010

Policy Conflict: Environment vs. Blue Collar Jobs

Public Health Asthma & Cancer Blue Collar Sectors Bring Rising Asthma & Cancer Risk From Airborne Toxics

California Solution Single Issue Regulatory Agencies & Processes CA Air Resources Board South Coast Air Quality Management District CA Environmental Protection Agency CA Water Resources Control Board CEQA & More

Two Results 1. Air Quality Is Improving

Blue Collar Blue Collar Work Is Much of Our Workforce’s Best Chance Middle Class To Reach The Middle Class 2. Downward Pressure On Blue Collar Jobs

Few Training Barriers Few Training Barriers To Beginning Employment Mining ($65,268)Blue Collar Wholesale Trade ($51,156) Blue Collar Manufacturing ($47,933)Blue Collar Logistics ($45,851)Blue Collar Construction ($41,076)Blue Collar Gaming($37,827) Retail Trade($28,824) Agriculture ($24,552) Hotel/Motel($16,026) Eating & Drinking($16,026) Alternative Jobs to Blue Collar

Results Of Job Suppression Unemployment Higher Than It Needs To Be Underemployment A Constant Difficulty Leading to the Middle ClassLack of Access to Jobs Leading to the Middle Class Health Issues of Poverty Divorce Spousal Abuse Drug & Alcohol Abuse Suicide Lack of Timely Medical Care Public Health Issues!

Clean Air, Asthma & Cancer Are Health & Social Justice Justice Issues Health & Social Lack of Blue Collar Jobs & Poverty Are Health & Social Justice Justice Issues Public Policy Dilemma

Concentrating Solely On The Environment After Years Of Focus on Concentrating Solely On The Environment Forgotten Priority! Blue Collar Job Creation Is Our Forgotten Priority!

Housing Is Still An Issue Economy

Share Underwater Mortgages 20% 19% 18% 17% 18% 27% 26% 25% 24% 23% 33% 32% 31% 30% 29% 28% 55% 54% 51% 49% 47% 45% 44% 4Q20091Q20102Q20103Q20104Q20101Q20112Q20113Q2011 Inland EmpireSan DiegoLos AngelesOrange Source: CoreLogic Exhibit 10.-Share of Mortgages Underwater So. California Markets, 4th rd 2011

How Many Mortgages Underwater? 3rd-2011 Underwater Avg. Decline/Qtr.QuartersYearsYear Inland Empire370,96015, Los Angeles353,4279, San Diego167,1552, Orange98,0694, How Much Potential Average Quarterly Competition for New Homes From Underwater Homes? When Will Underwater Homes Reach Zero At Current Rate of Decline?

Home Sales Volumes Lack of Foreclosure Sales Has Been An Issue e 0 20,000 40,000 60,000 80, , , , ,000 Los Angeles Orange San Diego Inland Empire Source: Dataquick All Home Sales Trends Southern California, e IE 63,497 LA 57,636 SD 25,605 OC 21,600

Is There Any Good Housing News? Last Foreclosure Sold!

Demand > Supply & Price Above Lows $0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 Los Angeles Orange San Diego Inland Empire Source: Dataquick Price Trends by County Southern California, ytd OC $493,000 SD $363,000 LA $330,700 IE $185,

Long Term Price Competitive Advantage Still Exists

Soaring Housing Affordability Easily Remains At or Near Record Levels % 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% Source: CA Association of Realtors Housing Affordability, So. California Share of Families Afford Median Priced Home, % 69% 33% 10-11% 15%

BUT...

Oil Prices Soaring Again $0 $15 $30 $45 $60 $75 $90 $105 $120 $135 Source: Federal Reserve Bank of Dallas Exhibit 6.-West Texas Intermediate Crude Oil Prices Monthly Average

Congressional Madness

European Debt Crisis

Fear Caused Consumers Confidence It Has Recently Begun Rising

Construction Job Depression -42.6% -216,122

Housing Slowdown Hurts! Office Market

Office Vacancy Rates Have Soared! 23.8% Inland Empire 7.3% 23.8% 18.3% Orange Co. 6.9% 18.3% 16.6% L.A. Co. 9.7% 16.6% 20.2% San Diego 9.4% 20.2%

Forecast 2012 Better than 2011 Foreclosures A Major Continuing Issue Complete Recovery ?? We Need A Housing Solution!