John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP Inland Empire Economic Growth... Building An Expansion

After Losing 8.71 Million Jobs … U.S. Jobs Almost All The Way Back -614,000 Government Jobs +10,077,000 Private Sector (115.7%)

U.S. & CA Unemployment History Cold War Ends Great Recession Prime Rate: 21%

California Job Gains/Losses ,066,400 Defense Cutbacks Dot.Com Great Recession ,315, Up +249,158 Recovery

Highest Unemployment Rates U.S. Metro Areas

Unemployment Falling, But High

Inland Empire

Primary Tier Secondary Tier Economic Development … Increase The Economic Base! How Regional Economies Work

Three Step Growth Process Based On Interaction Of: Population Preferences Dirt Prices Force Decisions

Southern California Population Growth,

People Prefer To Live Near The Coast

As a homeowner, would you prefer to move closer to work if it involved a townhouse or condo? (I-15 & Sr-91 Commuters, 2008) 72.3% No Same question to Renters: 87.5% No Answer stable over 5 years

Importance of Blue Collar Sectors

People forced to move inland for affordable homes Population Serving Jobs Only High Desert & I-215 South are current examples Stage #1: Rapid Population Growth

Commuting Bad, But Stable Over Time 1,650,384Total Jobs 1,156,313Inside IE 494,071Commute Outside County 154,845Between IE Counties 339,226Outside IE 20.6%Commute Outside the IE 16.3%Orange County Commuters

Construction & Real Estate: Finally Some Hope

Share of Underwater Homes Plunging

Direct Investor Purchases of Foreclosures

Notices of Default At Low Levels

Home Price Trends 71.3% 39.8% 40.9% Above Existing Home -34.7% 2014,

Long Term Competitive Price Advantage Still Exists

Inland Affordability Still Strong

Mortgage Credit Easing A little Credit standards on mortgage loans that your bank categorizes as prime residential mortgages have:

Volume Stagnant

Inland Empire’s In-migration From Coastal Counties Has Not Yet Recovered -27,324 Not Bringing Skills, Wealth, Income & Spending

Why Low Volume Less Foreclosures Buyers Want or Need High Prices Continued Wall Street Acquisition of Large Share of Foreclosures Credit Hurt By Foreclosures Higher FICO Scores FHA Lowering Conforming Mortgage Ceiling From $500,000 to $350,000 Fear

Permits: Finally A Little Hope

Construction & Mining Job Growth

Assessed Valuation Finally Growing (6.2% for SB County) 6.3% Inflation

Firms Prefers The Coastal Counties

Stage 2: Strong Industrial Growth

Industrial Construction

Logistics Flow of Goods

Port Container Volumes

Fulfillment Centers

E-Commerce Growth Rates Year Over Year by Quarter

Logistics Job Growth 18.8% of All Inland Jobs in % So Far in 2014

Manufacturing: Could Be A Major Growth Source

California Just 1.1% of U.S. Manufacturing Job Growth

Manufacturing Non-Job Growth!

Health Care

Inland Empire Underserved

Meeting Standards of Care

Public Health Factor Rankings of 58 Counties, th 38 th

Health Care Demand Set To Explode People Without Health Insurance (2012) 828,431 (19%) People Will Age, Already Those 55 & Over 926,696 (21%) Population Growth Will Resume ( ) 1,075,807 (33%) Inland Health Care Workers Handle More People Than CA (28%)

Health Care Job Growth … Modest!

Stage 3.-Office Based Firms Follow Their Workers

Skilled Workers Skilled Workers Migrate Inland For Better Homes

Higher End Homes $560,458 $418,634 $479,341 6 UPLAND EASTVALE $475,498 $473,351 $435,873 CORONA $443,870 TEMECULA $350,479$397,927 $347,075 $329,924 Loma Linda

Office Absorption Finally Starting to Recover High-End Jobs Follow Workers into the Area

Office Vacancy Rates Improving But Still Very High 17.9% 24.0%

Office Based Job Growth

Primary Tier Secondary Tier How Regional Economies Work

2014 Retail Sales Head For 6.6% Above Pre-Recession Peak 15.2% Inflation

Job Growth: Population Serving & Lower Paying

Where Will IE Be In Its Job History? ,733 of 143,108 lost or 57.1% ,833 of 143,108 lost or 85.1% 21,275 Jobs To Go 33,839

Job Growth By Market Area, July YTD

Forecast: Review 2014 Better Than 2013 Construction Returning Logistics Strong Manufacturing Weak Health Care Set To Take-Off Office Sectors Modest Pop. Related Group Gaining Govt & Education Crawling Unemployment Drops to 8.5% Growth Looking Normal 21,802 Jobs Below Pre-Recession